Rookie Errors That Could Erode Your Buy-to-let Profits
When done properly, letting a property can provide a great source of income. However, there are many pitfalls that new landlords fall into. These can cost a lot of money, and eat into buy-to-let profits.
Here are the five most common mistakes landlords should avoid when letting a property:
1. Not Taking a Deposit and Then Securing It in a Tenancy Deposit Scheme
While taking a tenancy deposit for your property is not legally required, there are very few cases when you would not want to do so. Taking a deposit puts money in the bank to cover repairs, cleaning and unpaid rent when your tenant moves on.
If you don’t take a deposit, you will end up footing the bill and, dependent on the level of damage, you could spend a large chunk of your buy-to-let rental income and profit on the repairs.
However, when you take your deposit, you must not simply hold onto the cash. All new tenancies must have their deposits put into a government-backed tenancy deposit scheme by law. These schemes oversee the return of deposits to ensure that any deductions are fair and that disputes are dealt with in a timely fashion.
If you are a landlord in England or Wales, you can register your deposit with any of the following:
2. A Badly Written Tenancy Agreement
Your tenancy agreement is a legally binding document. As such, it should be overseen by someone who knows the ins and outs of landlord-tenant law. Not consulting a solicitor to write your tenancy agreement can lead to all sorts of trouble. For example, if you do not have a written tenancy agreement you cannot claim possession of the property under Section 21.
3. Not Completing a Property Inventory
Returning to the first mistake above, if you want to be able to claim a deduction from your tenant’s deposit for a damaged or missing property, you should have a property inventory. Your property inventory is a record of the condition of your property when the tenant first moved in and throughout their stay in your property.
Property inventories should be completed for both furnished an unfinished property, as they go beyond the condition of items such as wardrobes and white goods. They should also capture the condition of walls, ceilings, fixtures and fittings, windows and doors.
Without creating an inventory when letting a property, you have no legal grounds to secure a claim through your tenancy deposit.
4. Not Carrying out Property Inspections
When you sign your tenancy agreement with your new tenants, you give them exclusive possession of the property. However, you do have the right to gain access under Section 11 of the Landlord & Tenant Act, which states that you have the right to view the condition of your property and carry out repairs, providing you have given your tenant 24 hours’ notice.
When letting a property, you should use this right to regularly check up on your property. This gives you the opportunity to see that the property is being taken care of to the agreed level and if any problems arise you can identify them early and get them fixed. When starting a new tenancy, you will typically want to inspect it every three months, but this can be reduced to every six months if you have long-term tenants whom you have built trust with.
5. Being Lenient with Late Rent Payments
If you are a new landlord, it can be difficult to know how to navigate conflict with tenants. If they come to you and ask for an extension on their rent, it can often seem like the easiest option to simply say yes. However, rent arrears add up quickly and your tenants will soon start falling further and further behind. Allowing one extension can lead to tenants prioritising other bills before their rent in the future, as they will believe that you are an easy touch and with the flexibility to give rent extensions.
Your tenancy agreement will cover your legal right to charge rent and receive payments when they are due. If 21 days pass and you do not receive your payment in full, you can send a letter to the tenant in your property explaining that you will take possession if the rent is not paid. This will help your tenants understand the severity of the situation.
Take the Ezytrac Option to Avoid Landlord Mistakes
Hiring a professional property manager to take on your landlord responsibilities will give you peace of mind. With our experience, you can be certain that you won’t suffer from any of the common mistakes made by rookie landlords. You don’t need any of the hassles of managing your property. You deserve to live your life and focus on making your next investment – not on fixing taps and chasing late rental payments.
Yours in Effortless Property Management,