“How to become a Successful Landlord”

Successful Landlords

STOP  .. RIGHT .. NOW ..

And read further before you take another .. single .. step.

Whether you’ve become a Landlord by accident, or decided to enter this business in a deliberate and planned way (yes, it is a BUSINESS whether you have one, or several properties), becoming a landlord has more responsibility that you can imagine.

Legislation is becoming (for very good reasons) more onerous; Tenants are more aware of their rights. Organisations like Shelter, Which and Citizens Advice Bureau are on the tail of Landlords ensuring that Tenants get the best possible outcomes.

You’ve possibly watched programmes such as ‘Nightmare Tenants and Rogue Landlords’ screened on Channel 5 – with seemingly no end of case studies!

Now I wouldn’t wish to scare you but these situations really do arise in real life – the programmes aren’t made just for show and sensationalism!

In 1991, we bought a very run down property for £21,000 – a terraced 2 bedroom property in the centre of Worthing, West Sussex. We spent several thousand pounds having it refurbished. Once it was ready to rent out, we found a letting agency and put it on the market. Here’s the good part – we still have the original tenants. This means we’ve never had a single void period, we’ve never had a single missed rent either. We’re blessed with extremely good tenants. But not every Landlord is as fortunate.  Equally, we could share some horror stories, but that’s for another time.

Step 1 – Do your Homework

Check which properties are in demand in your area and how much rent you can achieve. The next part may be difficult.  I’m going to suggest you MAKE FRIENDS with local Estate Agents – choose carefully, and you’ll have ‘friends’ for life, who’ll introduce you to all kinds of properties and sellers, especially if you ‘stand on’ and keep your word.  What is unacceptable, is if you do not play fair, or mess them about. Look for those Agents who regularly advertise the kind of property you’re looking for, but don’t expect them to produce properties immediately – they may already be working with long-term Landlords and you’ll have to prove yourself first.

Step 2 – Decide your budget

Use my table to help you to budget for the purchase and on-going costs of ‘running your lettings business’.

Step 3 – Commit

Being a Landlord is not like gym membership – you can’t dip in and out – you have legal obligations to your tenants, and you should deal with issues promptly and efficiently, or they can get out of hand.

If you’re using the services of a Letting Agent (preferably a qualified and professional Agency – look for ARLAPropertymark or NAEAPropertymark), put your trust in them to manage your property, arrange maintenance issues promptly (it keeps your Tenants happy), and to deal with issues in a professional manner.  You, as Landlord, are the Letting Agent’s client, and they will report to you on many areas. Do not think ‘They’re supposed to be managing the property for me!’ They are, but have to defer to you on various matters for your final authorisation (always check your Terms of Business).

Step 4 – Prepare the property

There’s a little bit more to it than just painting and decorating, and making sure all the safety, furnishings and mortgage are covered.

Consider what speciality you’re looking to follow, as the Lettings Sector is likely to be squeezed in the future with various changes in mortgage interest relief, deposits, health and safety aspects, just for starters.

You need to decide who you’re going to let to – i.e. are you looking for really long-term tenancies, (if that’s your objective, students are unlikely to fit the bill as they may head home once their course has been completed), who pays the most money (if money takes precedence over longevity) .  The number of tenants reliant on the Private Rented Sector has grown over the last five-six years and there will no doubt be more Tenants as home-ownership becomes more difficult.

You are running a BUSINESS, and businesses rely on PROFIT.  If you’re running at a loss, then you might as well ask yourself why you’re still doing it.

If you were charging £950 monthly rent, or £11,400 a year, on a £250,000 property (with no VOID periods) your yield would be 4.56%.

But this is only the yield you will get if you are buying the property outright, and the actual return will be different if you are using a mortgage to buy the property.

Capital appreciation is only realised once you sell and prices may go up as well as down.

Step 5 – DIY or Letting Agents?

Weigh up the costs of using a letting Agent, whose fees and commissions are tax deductible, against managing the property and your tenants yourself.

Reasons to use a Letting Agent:

a. You don’t live near the property you’re letting out

b. You don’t have time (you may be working full-time)

c. You don’t have the inclination (how will you deal with a Tenant who won’t adhere to notices you send, or gets into arrears)

d. You don’t know all the legislation involved

e. You don’t know where to start with referencing

f. You’re not used to ‘negotiating’ with a Tenant or Contractors

g. You don’t know how much to charge for rent, when to increase the rent, or whether you CAN put up the rent

h. You’re worried about where to advertise your property

Reasons to DIY:

a. You have time to dedicate to managing your property

b. You can give time for looking after the tenant’s queries, responding in acceptable time-scales

c. You are conversant in Lettings Legislation

d. You don’t want to pay a Letting Agent’s monthly commission or fees

e. You want to learn about all aspects of letting and property management to later build on your portfolio

f. You have access to a professional body e.g. RLA for help and advice

Step 6 – Recognise your Responsibilities, Strengths and Weaknesses

Your responsibilities to your tenant are contractual under the Assured Shorthold Tenancy document supplied by your Letting Agency, your Landlord Membership under e.g. RLA, or from your Solicitor.  You are required by law to undertake your responsibilities at all times, many of which, if not carried out carry fines and/or imprisonment.

Lettings Agents generally offer a menu of services, from Tenant Find Only, Rent Collection and  Fully Managed.

If you really don’t like the thought of chasing a tenant for unpaid rent, then consider the Rent Collection service only.  If you have a friendly relationship with your tenants, imagine how difficult it could become if they suddenly have a change of circumstances and can’t pay their rent.

You may have considerable experience in doing up, or refurbishing property, and love this side of the ‘business’.  Then perhaps managing the property yourself and being able to make property visits to see whether refurbishing is required is a task you’d welcome.

If you don’t know what or where you’d find a stopcock, either choose a Full Management service, or learn very quickly.

Step 7 – Choose your Niche

Letting to the right tenants will stand you in good stead and now is the time to consider your speciality.  Again do your homework on typical rental yields, and considerations you should take account of, before launching into a niche which you don’t understand.

Step 8 – You can read my Ultimate Guide for Landlords

I’ve written my guide to help in your decision-making about whether to go-it alone, or use a Letting Agency.

My Ultimate Guide for Landlords provides helpful tips and is downloadable here. You can unsubscribe at any time. Or simply call my specialist Letting Team on 01273 735237 or contact enquiries@callaways.co.uk