Being a successful landlord is very satisfying and can be very rewarding
both financially and emotionally - after all you are providing a very
worthwhile service to your tenants and the community as a whole.
Success for the DIY landlord demands a certain amount of discipline, a
good working knowledge of the rules and regulations and a systematic
approach.
Following these steps will save you time and trouble - if you do it
properly you'll wonder why you even considered paying an real estate agent to do it
for you!
Follow these guidelines and you should be on your way...!
1. Be clear about the Landlord Strategy - have a plan!
Are you in the bottom, middle or upper part of the lettings market?
If your property are in the area close to university or college and the student
is your market, expect more
problems, more management time, and you will need a good knowledge of the
repairing some minor defects such as leaking water taps or
handle the health issues of the unit. For the financial returns though,
it should
be commensurately higher!
If you go for the middle (working and professional) or upper end
(professionals and company lets) you should have fewer problems, providing
you select your tenants carefully. Made sure they are genuine.
Make sure your property matches your target market in terms of type,
location, condition and facilities.
2. Do your Homework first - know the rules and regulations!
Think of your lettings investments as a business, even if you're doing it
as a sideline to your main job. It requires a certain amount of discipline
and commitment.
Have you got the time to manage your lettings or do you need to pay
someone to do it for you? Distance is a factor, because travel time added
to management time can become excessive.
However, rental property can be efficiently managed using a surprisingly
small amount of time - just follow these steps and the information we give
on this site.
Just like any other business at the start, it's a good idea to have a
Business Plan. Include financial projections, especially if you are using
some form of loan or mortgage finance to purchase your investment
properties.
Remember, you may need certain permissions for your landlord's operation,
from:
The local authority planning, building and environmental health
departments, depending on the type of letting and whether alterations are
involved.
Your mortgage company/bank
Your Insurers
Your landlord or freeholder
You also need to master the basic letting rules and regulations, the
landlord and tenant's legal obligations and some of the laws that
governing lettings - see Landlords Obligations & Tenant's Obligations..
Visiting and reading this site should help - it's designed to take the
effort out of learning about landlord by bringing everything you need
together in one place.
We'll direct you to useful books and other information sources.
It's also a good idea to join your local Landlord's Association (if any). You will
learn a lot by attending meetings and speaking to other landlords.
3. Develop your own Operating Philosophy!
The old saying, honesty is the best policy applies to landlording as much
as to any other business, but perhaps more so. For a start landlording has
a bad image in some quarters (though it's improving) and this has to be
overcome.
Treating tenants with respect while setting out to provide value for money
and a professional standard of service is an approach that the authorities
will generally support.
If you can show that you are a good landlord and follow the rules you are
likely to get full support from the authorities if things go wrong.
4. Do your Research Thoroughly - know the local market!
Don't buy a property just because you like it, you think you could live in
it, or you just plain fall in love with it!
"The market rules" every time, and you must make sure that what you buy
will let. Get to know the area well, speak to residents and local estate
agents, and keep an eye on the local papers to see what's letting locally.
Location, location, location have been said to be the three most important
factors when investing in property. Residential lettings are no exception.
Is there a healthy demand for letting in the area? What type of property
lets best? Which type is most profitable? Is the property near large
employers, a College or a University? Are there good public transport
links? Are there shops, fast food outlets and restaurants, laundry
facilities, tourism and entertainment venues?
What are the long-term trends? Is the area improving, or declining? Are
there any potential problems, trouble spots - flooding, riots, radon gas,
subsidence? Are there any future developments in the pipeline like
shopping centres, roads or transport links which could improve the area?
If it's a town or city, is there a trend to more urban living? What will
be the long-term effects that these and other factors have on rental
demand and property values?
5. Have a Comprehensive Application Form!
A Tenant's Application Form (Tenancy Proposal Form) is crucial
and the most important document after the lease agreement.
The application form records permanently the tenant's declaration as to
identity, accommodation and employment histories, income status,
references, and personal details - Smoker? Pets? Other Occupants, Children
etc.
It also confirms the tenant's understanding of the property to be let, the
type and length of tenancy and basic terms, the likely costs and expenses
to be paid and the rent and deposit required.
6. Screen your Tenants very Carefully!
Always remember this: no tenant at all is 100 times better than a problem
tenant! Landlords are always anxious when they have an empty property, but
don't be too hasty in taking on the first person that comes along.
Always do a credit check. It is not an absolute guarantee but a basic
check is quick and quite inexpensive, and it's a good safeguard against
real problem debtors.
Be thorough in taking up references etc, but don't waste too much time
about it because you may lose an excellent tenant. See the section on
tenant screening and tenant verify
This is one aspect where DIY landlords have the advantage over letting
agents - they can generally deal with applications more quickly, often at
week-ends and outside normal working hours and also make quick letting
decisions.
7. Always have a Written Agreement
It is possible to create such a tenancy legally by oral agreement (must be
confirmed in writing within 3 months if the tenant requests it) and the
conduct of both parties.
But any landlord doing this is asking for trouble, and most tenants would
prefer to know where they stand by having their tenancy agreement in
writing.
Never, ever, under any circumstances allow a tenant into premises (handing
over keys) without the signing of an agreement in front of a witness and
paying the first month's rent and security deposit. If you accept a cheque,
allow time for clearance.
The agreement forms the basis of the landlord-tenant relationship specific
to your property, as opposed to general legislation rules. For example,
you may want to bar pets, to insist on payment by banker's standing order
and insist on notice if the property is to be left empty more than 14 days
etc.
Without the agreement you will find it difficult to prove even the obvious
points - when the tenancy actually started, how long it lasts and what the
rent should be.
No written agreement may also cause real problems if court action is taken
later for eviction etc.
Good agreements are easy to understand (plain English), up-to-date with
current legislation and have taken into account almost all eventualities.
Use a good quality "off the shelf" agreement or have one
prepared by an experienced solicitor - not all solicitors though
have expert knowledge of landlord-tenant matters.
8. Deal Fairly with Security Deposits
Always insist on a security deposit, which is usually equivalent to one
month or two month's rent, and handle this with integrity.
To discourage tenants from using the security deposit as their last
month's rent payment you must stated in your agreement and tell the tenant
orally that the security deposit are not to used as rental for
final month of staying.
Don't make the deposit too high though (no more than two months for
residential property and three month for commercial property) as it may
be seen legally as a premium. This would imply a long-leasehold and could
allow a tenant to assign the lease to another tenant without your consent.
Your Tenancy Agreement should deal with
and fully explain the procedures with deposits. Deposits are always a
source of potential disagreement between landlord & tenant.
9. Keep the Rent near Market Levels
Always try to keep the rent at or near market levels - you owe it to
yourself, your financiers and your potential heirs. Your research of the
local market should give you this.
Ultimately the rent received determines the value of your investment so if
you had to sell the property with a sitting tenant, on a below market
rent, the property value could be adversely affected.
Short-term lets don't warrant the hassle of rent reviews and increases,
but longer term residential lets, say over 2/3 years, should have their
rents reviewed and the agreement should provide for this.
Rent Reviews are particularly important when letting commercial properties
which tent to have much longer leases.
Some landlords feel that good long-term tenants should have the reward of
staying on the same rent, but this becomes a dangerous philosophy as time
goes by.
The rent is no longer a fair return on the investment, the property value
is affected, and may not cover repair costs. Eventually the tenant is
faced with a big rise, which usually then triggers a move.
Don't try for too high a rent though. This usually results in longer void
periods and you lose out more in the end - see Rent Reviews.
10. Use Banker's Standing Order Rent Payments!
Banker's standing orders are the best thing ever invented for landlords!
Without the standing order most DIY landlords just would not have the time
to manage their properties as a side-line to a normal day-job.
Standing order payments have several advantages besides saving time - they
are regular, there's no anxious waiting for cheques coming through the
post and you know straight away if there's a problem.
No landlord should spend time traveling to collect rents, only do it in
emergencies. Some tenants will delight in giving you the run-around in
this situation!
If a payment fails to materialize it means one of two things:
the tenant has ordered the bank to stop the payment, or there
are no funds. You can then act immediately.
11. Be Safety Conscious - you are responsible
Landlords have a serious obligation to provide safe premises,
installations and appliances for their tenants. They must also ensure safe
use of equipment by providing clear operating instructions.
Safety is potentially one of the greatest risks a landlord faces, but it
need not be a problem if it's managed properly.
There are severe penalties for non-compliance - both criminal sanctions
and civil law damages apply. Due diligence (taking all reasonable steps)
is essential.
12. Have Adequate Insurance Cover
Landlords have many potential liabilities and it is vital that
they carry sufficient insurance cover. The landlord is
responsible for insuring the property itself and should insure
their own contents. Landlords are strongly advised to take out
specific landlord insurance covering tenant and third party
risks (public liability).
Tenants should be advised to insure their own contents. Tenants policies
also cover a range of other basic risks.
13. Keep the Property in Good Repair
The old saying, a stitch in time saves nine, was never truer than with
property. A small thing like a leaking gutter or a blocked drain, if left
unattended, can result in horrendous damage.
Landlords with the inclination and good DIY skills have an advantage as
the cost of repairs is high, and good tradesmen are hard to come by,
especially at short notice.
If you use tradesmen on a regular basis you are more likely to get them to
come when you need them in an emergency, but it pays to look after good
people when you find them.
The starting point is buying in good condition. Have the property surveyed
and don't forget the wood survey - a nasty case of rot can be very
expensive to eradicate.
You may be able to buy property cheaper if you are willing to renovate or
develop it, but this requires a fair amount of experience and skill and
usually, money.
Good well maintained property will attract good tenants and will enable
you to set a certain standard. Aim to keep the property maintained and
always respond to problems promptly.
Mid-tenancy inspections (normally 6 monthly, and preferably done by an
independent person) are a good idea to monitor the way the tenant/s is
keeping the property. A report should be completed using the original
inventory/schedule of condition as a basis.
If problems are arising the tenant can then be alerted in writing, warning
that additional costs may be being incurred for damage or cleaning beyond
normal wear and tear.
14. Act Quickly if Problems Arise
If problems arise, act quickly and always carry out what you have said you
will do. Take action immediately so that tenants know you mean business:
If rent payments are missed - find out why and set out a course of action.
Put it in writing. There may be good reasons, in which case allowances can
be made, but don't let the situation last long - you may have to go for
repossession.
If tenants damage your property - you need to inspect the premises from
time to time. We've found that providing a basic cleaning or care taking
service keeps things in order.
If the tenant reports repair work - not responding to tenants' maintenance
problems will not only affect your property, it could bring on problems
with rent payment. Never give tenants an excuse not to pay rent! Having
access for maintenance is also a good opportunity to inspect the premises.
If your tenants are causing problems with the neighbours - again, act
quickly so that they can see you are doing something about it. You may
have to take it up with the local authority and possession proceedings may
be in order.
15. Security - Tenant and Landlord
The property needs to be secure for the benefit of your tenants. If
tenants' possessions are lost due to lack of a reasonable level of
security then they may bring a claim against their landlord.
For personal security, dark allies and walk-ways should be well lit and
doors and gates fitted with secure locks.
16. If you Use Agents, Select them Carefully
If you use an agent to let and/or manage your property be
careful. Not all agents have the necessary skills and
experience, and some of them might be unregistered Real Estate
Agent and charged you excessive. see
Real Estate Agent section for more info.
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