Being a landlord can be a profitable and rewarding enterprise, but it also comes with a fair degree of stress and risk! Make sure you minimise the risk of tenants, legislation and disaster from impacting on your investment by avoiding these common mistakes.
1. Inadequate tenant referencing
Nightmare tenants and rent arrears are an extremely common problem in the rental sector – but they can almost always be avoided with the right tenant vetting processes. It is understandable that you want your property occupied quickly but rushing the tenant referencing process is a recipe for disaster. Taking the time to thoroughly check every potential tenant, getting references, conducting credit and background checks, then securing guarantors where required will pay dividends!
2. Personal design touches
As a landlord, it’s easy to forget that you’re renting the property out – it’s not your home! Remember, the goal is to make the property appeal to as many potential tenants as possible. Neutral colours, simple designs and functional, robust fixtures are likely to provide good value over the long term.
3. Landlord insurance
Landlord insurance is absolutely essential, and something that many landlords forget about. In addition to protecting your property from nightmare tenants, accidents and damage, landlord insurance also provides public liability insurance. That way, if your tenant has an accident in the property and tries to sue you, you will have some protection.
4. Protecting deposit monies
It’s a legal requirement to protect your tenants deposit in one of the three government-backed schemes within 30 days.
5. Formal tenancy agreement
Many landlords operate without a formal tenancy agreement in place. A handshake agreement is not enough, this can open you up to all kinds of risks and disputes with tenants. Having a clear and legally compliant contract is one of the best ways to protect your property, especially when things go wrong.
6. Build-up of rent arrears
Many landlords allow rent arrears to build up, often by 6 months or more. Evicting a tenant can be a lengthy process, which is why it’s vital that landlords stay on top of their rent. Having a legal tenancy agreement in place and setting out a clear process for serving notice on tenants for non-payment will help to protect your returns.
7. Choosing a regulated letting agent
There are lots of letting agencies out there ranging massively in terms of quality, service and price. Currently there is no overarching statutory regulation of private sector letting agents in England or any legal requirement for them to even belong to a trade association! With the industry still unregulated choosing a letting agency that is a member of a redress scheme is really important.
8. Thinking the property will always be rented
Before completing on a property purchase you need to do your own financial due diligence and ensure that you can pay the mortgage (if you’re taking out a loan) in the event that you have a void with no tenant paying rent. Don’t risk potential financial difficulties because you failed to do a simple cash flow analysis and maintain sufficient funds to cover the mortgage payments when there are void periods.
9. Underestimating the cost of repairs or ongoing property maintenance
In order to keep tenants interested in (and paying for) the property, landlords must remember the need to maintain it. Landlords must ensure they’re charging enough in rent to at least help cover a portion of ongoing maintenance costs (i.e. painting, cleaning and carpet cleaning between tenants).
10. Neglecting tenants
The landlord is ultimately responsible for the property they rent out – this never changes and therefore property investment comes with legal obligations that can’t be delegated. Landlords should periodically check in with their tenants or lettings agents to ensure the property is maintained in a good condition. Remember tenants are a landlord’s customers and must be treated as such. Without them property investment doesn’t work! Be considerate to the needs and wishes of tenants, treat them with respect and be attentive to them where necessary; this will all help maximise the chance of rent being paid on time and the property’s condition not deteriorating.
11. Not meeting housing requirements
As a landlord you’re required to make sure the property meets health and safety standards – for example from April 2018 it is illegal to rent out a property is an energy efficiency rating lower than E. If landlords do not take care of their end of the legislation tenants may have grounds to break the terms of the lease agreement, potentially sue the landlord and even to be legally entitled to compensation for damage or injury due to neglect.
12. Delaying an eviction
Not beginning eviction proceedings as soon as legally possible can be a very costly mistake. If landlords run into problems with a tenant and are unsure about their rights or how to proceed, contact one of several eviction service providers as soon as possible.
13. Enforcing lease terms
If a landlord outlined that late rent payments would incur a penalty, charge it. If landlords noted that no pets are allowed but a new tenant has a dog, you should enforce the penalty. If tenants realise that they can be lax about the terms of the tenancy agreement they will likely act accordingly.
14. Write down communications with your tenant
It is essential that you keep written documentation of interactions with your tenants in the event that you ever need to take him/her to court. Note phone conversations and keep copies of emails, voicemails or text messages, etc. to be able to support your allegations.
15. Overpricing the property
In a highly price sensitive market, seeking an inflated rent will likely mean the property remains empty while necessary outgoings continue such as utility standing charges, service charges and council tax.
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