One of the golden rules of buy-to-let
As a buy-to-let landlord with a fantastic new property investment in your portfolio – or maybe you’re one of the new breed of let-to-rent property investors – you probably can’t wait to get a tenant in and start collecting rental income. Before you do, though, heed this word of warning:
“A buy-to-let landlord that doesn’t produce a comprehensive property inventory is a landlord begging to make a loss.”
A six month rental and a massive loss
John Thompson (not his real name) was excited about renting out his first investment property as a buy-to-let landlord. He’d advertised in his local paper, and within a couple of days had agreed to rent his property out. The tenant even offered to pay more than the asking rent, provided a washing machine, television, and wardrobes in the bedroom were included.
John willingly agreed, happy that the television and washing machine would be paid for by the extra rent. And the addition of wardrobes would make the property easier to let to a new tenant – not that John thought he’d need to for a long time.
The deal went sour almost immediately. After just a couple of months, the tenant stopped paying his rent. It was months before John was finally able to evict the tenant. What he found remaining was catastrophic. The wardrobes were ruined, and there was no sign of the television or washing machine.
John went to court to try to retrieve the missing items, damages, and costs. But when asked for the inventory, he couldn’t produce one. In his rush to rent, this first-time buy-to-let landlord had omitted to prepare a property inventory.
The experience had cost John six months rent, a television, a washing machine, and two wardrobes. Fortunately, John had taken the precaution of properly protecting the tenant’s deposit, though this wasn’t even enough to cover the cost of the items he had agreed to supply.
The five most common property inventory mistakes that a buy-to-let landlord makes
The property inventory is one of the most important documents a buy-to-let landlord should produce. Getting it right will protect you in the event of a dispute. Yet time and again we hear of DIY landlords that make one or more of these mistakes:
- Not compiling a property inventory and trusting to honesty
- Compiling an incomplete inventory
- Relying on a previous inventory
- Not checking the property regularly against the inventory
- Not keeping receipts for items in the property
How to produce a watertight property inventory
If you do have a problem tenant, you’ll rely on the property inventory to help make sure you’re not out of pocket. Here’re our tips on producing a comprehensive property inventory and avoid the loss that John suffered:
- Start with a basic list and then add detail. There’s a television in the living room. What makes is it? What size? How much did it cost (keep the receipt for costly items)? How old is it? Is it damaged in any way?
- Repeat this level of detail for every item in the home. If you are leaving cutlery, make a list of what and where knives, forks, and spoons are kept
- Make sure you update the list with every replacement you make
- Take pictures and a video as a visual inventory. This is great if there is a dispute about damage caused
- Check the home against the property inventory at regular intervals
- Make at least two copies of the property inventory (and every time it is updated). These should be signed by both the buy-to-let landlord (or his or her representative) and the tenant
- Finally, when the tenant vacates the property, make sure that any damage or loss of property is assessed against the property inventory
As a buy-to-let landlord, make certain that your property inventory is complete and up-to-date. As a property manager, this is one of the things that we do for our clients, with pictures and videos checked upon every property inspection. Call the team today on +44 1522 503 717 and benefit from property management services that are second to none.
Yours in effortless property management,