Posted by Admin - 09/08/2016
Making a profit through renting a property should be easy, however, sometimes expensive mistakes are made. Here are our top 10 things to avoid …
- Requesting unrealistic rent
All landlords want to make as much money out of their investments as possible, but if the rent is too high, it’s likely to delay finding a tenant and cause periods where the property is empty. Empty properties cost money – in addition to any mortgage payments, there may be council tax and other bills to pay as well as increased insurance premiums. Landlords can avoid this by setting the rent at a realistic level.
- Wasting money
This includes everything from spending too much on letting agent fees or spending too much on fixtures, fittings and furnishings. Landlords need to keep a tight rein on costs to ensure a profitable rental.
Before a landlord spends money on anything, they should ask themselves if it is needed, adding value or helping the property to let quicker. If the answer to these things is“ no”, then it’s probably better not to spend it.
- Buying the wrong property
A good property isn’t necessarily a great rental investment and buying it from an emotional point of view doesn’t mean it’ll earn enough rent to cover costs. Before purchasing, check out property websites to find the average rent amount for similar properties in size in the same area. The property should offer a 5% yield, otherwise it may not be a worthwhile investment.
- Getting the sums wrong
It’s important that landlords factor in all costs when working out how much rent is required in order to break even or ideally make a profit, but often, things such as letting agent fees, ground rent, annual service charges, insurances, inventory preparation and any other general letting costs are overlooked. Landlords should also expect to spend at least 5% of annual rental income on maintenance and plan for at least a couple of week’s void between tenancies.
- Being too trusting
Referencing and credit checks won’t guarantee a perfect tenant, but it should ensure that they don’t have a history of bad debt and that they earn enough to cover the rent. It can take months and thousands of pounds to evict a bad tenant, so landlords should not miss out this process, even if the tenant seems like they are trustworthy.
- Assuming the Property will take care of itself
Landlords need to keep an eye on any rental property, by ensuring regular internal and external inspections take place. This will not only ensure the tenant is looking after the property but also that there’s no damage, such as a leaking roof or blocked drain that the tenant has either not noticed or reported.
- Forgetting to supply correct information & register a deposit
Landlords must by law, protect the tenant’s deposit. If they do not, a tenant can claim compensation of up to three times the value of the deposit. Also, landlords won’t be able to evict the tenant, even if they’ve broken every term in the lease and/or ruined he property. Even a protected deposit without issuing the tenants with all the Prescribed Information required means you cannot serve notice to leave, so it is imperative that the paperwork is completed correctly. Don’t forget that since October 1, landlords must supply tenants with a copy of the Government’s How to Rent Guide, Gas Safety Record and the Energy Performance Certificate before notice can be served.
- Forgetting about insurance
Public Liability insurance needs to be in place to protect against a tenant having an accident in the rental property, which, the landlord would be liable for. It’s usually included in landlord insurance or it can be added on for an additional fee.
- Omitting a break clause
Landlords may be tempted to lock a new tenant into a long lease, but, just in case they turn out to be the tenants from hell it can be a good idea to put a break clause into the tenancy agreement, which will allow you to end the tenancy early with just two months’ notice.
Without a break clause you would have to wait until the end of their tenancy to evict them even if they’d broken the terms of their lease. A break clause can’t be activated by the landlord with the first six months of an AST, but it can be inserted at any point afterwards.
- Being too personal
It’s easy to get carried away renovating or decorating a rental property, but remember, it is a business, not a home for yourself. That chair you think is super stylish ornament you have fallen in love with won’t get you any more rent, will possibly get damaged and may even put tenants off if they don’t have similar taste.