Potential Risks to Your Lettings Business

Being a landlord may be very rewarding, but it comes with challenges and potential risks. When considering investment, it is vital that you understand the possible pitfalls.

Two of the biggest issues for landlords are rent arrears and interest rates. The following tips will help you avoid these problems.

Rent arrears

Data from the National Landlords Association (NLA) reveals that 32% of landlords have experienced rent arrears in the past year, from either late payment or non-payment.

Potential Risks to Your Lettings Business

Potential Risks to Your Lettings Business

Shockingly, the average amount of arrears that landlords must face before they can serve an eviction notice is £1,500. When legal fees and other expenses are considered, costs can amount to thousands of pounds.

If your tenants do not pay their rent, you could find it difficult to make your mortgage payments or fund maintenance work when it is needed.

If your tenant has fallen into rent arrears, the following tips could help you manage the situation:

  • Control your budget

It is advised that you only assume you will receive ten rent payments per year, rather than the traditional 12. This way, you can manage your budget and be covered based on receiving less payments.

  • Tenant ID

Rogue tenants are targeting landlords, so it is always important to check a prospective tenant’s ID and request references to ensure you are letting your investment to a genuine individual.

  • Relationship with your tenants

It is important to build a solid relationship with your tenants from the start of the agreement. You could show potential tenants around, answer their questions and give them time, so that they gain trust in you and respect you and your property.

Although you can’t help your tenants if they fall into financial difficulty, following these tips could stop you facing money problems and getting caught out by a bad tenant.

Also, remember to check that your landlord insurance covers rent guarantee.

Interest rates 

As interest rates have been at a record low for several years, it is expected that they will rise soon. Prepare yourself for an increase and ask yourself the following questions:

  • Would an increase in interest rates affect mortgage payments? If so, to what extent?
  • How would your future buy-to-let or remortgaging opportunities be affected?
  • Would your savings or budget plans cope with an interest rate rise? Could you readjust them now in preparation?

By preparing now, you may avoid financial difficulties in the future. Although it is not clear when interest rates will rise, it is always better to get ready in plenty of time.

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