7 mistakes you don’t want to make as a landlord
As more buy-to-let landlords have increased their use of investment property managers, standards in the private rented sector have certainly improved. Yet many landlords still make elementary errors. These harm profits and increase risks. These landlord errors are made by first-time and experienced property investors. What are they? Read on…
1. Not vetting prospective tenants properly
This might be the biggest and most costly mistake that a landlord can make. If you don’t fully vet your tenant, you are more likely to have problems further down the line. They’ll be the most amiable and personable people at the viewing an interview. So nice, in fact, that you decide to take them at face value, or shortcut some of the checks you must make. Big mistake. Huge.
When you don’t properly vet applicants, you run the risk of getting a tenant from hell. Before you know it, your property has been turned into a drug den and your tenants are refusing to pay rent. And it’s all your fault.
2. Underestimating maintenance costs
By law, you must keep your properties in a good state of repair. They must be safe to live in. Maintenance costs are unavoidable. Many buy-to-let landlords fail to plan for these costs and consequently struggle financially when maintenance is needed.
Even in new build properties, things can go wrong: washing machines break down, water pipes freeze, and so on. When you are calculating cash flow, remember to allow for maintenance costs. Allow for:
- Kitchen and bathroom refurbishment every 10 years
- Boilers and central heating services every year (2 years at most)
- White goods often need replacing every 5 years
- New carpets every 5 years
- New furniture every 10 years
3. Leaving small maintenance issues unresolved
If your tenant reports a maintenance issue, no matter how small, you should resolve it as soon as practicable. This will ensure that your tenant knows you care about them and your property. Equally importantly, it prevents small maintenance issues from becoming expensive repairs.
4. Neglecting landlord insurance
So many landlords neglect their insurance needs, or simply buy the wrong insurance policy. As a buy-to-let investor, you must have landlord insurance. The typical homeowner’s buildings and contents insurance won’t cover you or your property.
With the wrong cover:
- Damage to your property won’t be covered
- When a tenant refuses to pay the rent, you’ll be out of pocket in a big way
- Injuries to tenants and visitors could cost you millions in court
When you invest in a buy-to-let property, invest in landlord insurance, too. Make sure it provides the cover you need and includes items such as:
- Public liability insurance
- Cover for damage by tenants
- Legal expenses
- Unpaid rent cover
- Equipment breakdown and replacement
5. Being too strict with the rental price
A lack of flexibility on the rental price you charge could cost you more than you bargained for. If demand is low, you may have to be more accommodating to get your house let. It’s always better to have tenants in your property. No tenants, no income.
If an applicant walks away because you refused to drop the rental price by, say £50, and you wait another month before another tenant pays the price you held out for, you are a month short of rental income. During that month, you will have had to pay all the costs and mortgage associated with owning the investment property. It could take months, or even years, to make up the shortfall from that void period.
6. Not evicting fast enough
Unfortunately, when a tenant falls behind with their rent, it’s usually a sign that they’ve got financial problems. If the tenant can’t make good on the rent quickly, you should start the eviction process. If you don’t, it will cost you. Landlords who don’t do this face large and mounting losses, as well as possible court fees. Meanwhile, the non-paying tenant is living rent free in your property.
If your tenant falls behind with their rent, you should be firm, but fair. Let them know that they must get up to date with their rent quickly. If they don’t, start the eviction process. If you don’t act fast, those problems will be transferred to you. You’ve been warned!
7. Entering the property without the tenant’s permission
It may be your property, but it’s the tenant’s home. You have no right to enter unless given permission by the tenant. Not even if you think the tenant has abandoned the property.
Always get the tenant’s permission to visit the property. And if you need to enter because of an emergency, make sure you do so legally.
How can you ensure you don’t make one of these elementary landlord errors?
It’s hard work being a DIY landlord. Time is never on your side, and the law is constantly changing. If you don’t stay on top of landlord regulations, you’re more likely to make mistakes. If you don’t stay on top of your landlord responsibilities and your tenant, you risk making one or all of these elementary landlord errors. And that could be super expensive.