With buy-to-let investment continuing to lead other asset classes, demand is soaring.
More would-be investors than ever before are looking into becoming a buy-to-let landlord, in order to supplement their regular income.
Purchasing properties and building portfolios are giving many people the kind of retirement funds that they would not be able to achieve through a state pension.
However, if you thinking of becoming a landlord, you must be ready to take on lots of added responsibilities and legal obligations. From mortgages to tenants, maintenance to rent guarantee insurance, if you do not know what you are doing, taking the plunge into buy-to-let investment could be a nightmare.
Here are five common mistakes that new landlords make-and how to avoid making them yourself!
Not screening potential tenants-As a landlord, one of the last things you want to happen is for your tenants not to pay their rent. Of course, a good rent guarantee insurance policy will help, but you must do your bit to vet would-be tenants and try and prevent potential issues from arising.
One of the best ways you can achieve this is to utilise a letting agent. A reputable letting agent will use their expertise to screen tenants and assess their rental history.
Having no inventory-An inventory is one of the most important things you can have as a buy-to-let landlord, particularly should your tenancy end in a dispute. Take high-quality photographs of all rooms of your property, write down details and get your tenants to sign a copy, before taking one for yourself. In addition, you should conduct regular inspections of your property. This will give you a chance to compare the condition of the property to when your tenant first moved in.
Failing to keep tenants happy-The happiness of your tenants is imperative in generating a successful rental yield. Keeping your tenants in the property for longer means less hassle, a good relationship and more importantly, financial security. You will be less likely to claim on your unoccupied property insurance by treating your tenants fairly. Respond to queries promptly, fix issues efficiently and give notice when you plan on entering for inspections.
Wrong location (location, location)-Choosing a property in an incorrect location could be catastrophic and will certainly impact on your yields. It is vitally important then to research the area you wish to purchase in. Check out the local amenities-for example, if there is a good school nearby, your property will be desirable for families. Lively bars or clubs will attract young professionals. Be sure not only on location, but on what type of tenants you wish to attract.
Inability to save money-Becoming a buy-to-let landlord and owning a rental property is effectively becoming a business. As with all business, there are capital expenses that are unavoidable. However, you must make sure you fully budget for these costs (mortgages, maintenance etc), alongside unforeseen problems. What happens if the washing machine breaks? Will you have enough money to fix it? By putting a proportion of the rent achieved each month aside for these types of issues, you will much more financially sound.
Make sure you take the time to properly understand your many varied roles and responsibilities as a potential buy-to-let landlord!