Earnings-enhancing strategies for DIY landlords and buy-to-let investors
There are two types of buy-to-let investors, though both are making a lifestyle choice.
The first is the investor who manages their properties. These enjoy dealing with the day-to-day routine of property management. They relish in marketing their properties, showing them to prospective tenants, vetting those tenants, and chasing them for rent. They face the challenge of coordinating maintenance and repairs head on and work ceaselessly on developing their network of tradespeople. They’re not fazed by the need to spread themselves ever thinner as they build their property portfolio across several property hotspots.
The second type of buy-to-let investor is the one who hires an investment property manager. The property manager takes on the hassle of day-to-day landlord responsibilities. The investor receives their tenants’ monthly rental payments, minus the property manager’s fee, without the hassle of chasing their tenants.
Whichever type of buy-to-let investor you are, the following four simple strategies will help to increase your profits:
Buy-to-let investment strategy #1: Put in the legwork before you invest
The amount of effort you put into due diligence before you invest will pay real dividends. When investing in property, research is key. This is how you determine the best places to invest in property UK. These locations will benefit from the best property fundamentals: shops, schools, transport links, major employers and major investment.
If you don’t do this legwork, you could find yourself with an underperforming investment in your property portfolio.
Buy-to-let investment strategy #2: Manage your finances
Before you invest, work out your cash flow with a conservative projection. Overestimate your expenses, and underestimate your income. Don’t forget to include items such as:
- Marketing and advertising fees
- Repairs and maintenance
- Landlords insurance premiums
- Service charges
Of course, you’ll also have mortgage interest to pay – allow for an interest rate increase of 1%, to be on the safe side of finances.
Research conducted by the insurer Direct Line in 2016 found that the average void period on a buy-to-let investment property is 22 days. Again, being conservative, allow for your property to be empty for around four weeks per year.
Use any excess cash flow to build a reserve fund for rental properties. It will ensure you are protected against unexpected maintenance bills and void periods.
Buy-to-let investment strategy #3: Plan to find and manage the best tenants
Put in place the strategies to find and manage the best tenants. You’ll need to consider factors such as:
- Where and how to market your property (you’ll want to avoid free tenant search sites)
- How to vet your tenants, checking their backgrounds, credit scores, employment and residential histories
- The clauses and conditions of your tenancy agreement
- Collecting rent
- Reporting, coordinating and monitoring property maintenance
If you let your property to the wrong tenants or fail to manage them properly, you could find yourself with a time-consuming, stressful, and expensive problem. You could suffer damage to your property, late rent payments, or, worst of all, a tenant from hell who knows how to play the game and live rent free for months.
Buy-to-let investment strategy #4: Develop a plan to avoid the void periods
One thing you can be certain of in buy-to-let investment is that you will suffer void periods. It’s how you deal with them that matters. From a cash management point of view, you’ll want to keep periods between tenants as short as possible. However, you’ll also need to use this time profitably. A void period is inconvenient, but also an opportunity to ensure that your property is in tip-top condition.
When you receive notice of leaving from your tenant:
- Start marketing the property immediately
- Arrange a check-out property inspection
- Confirm with your tenant their responsibilities as stated in the tenancy agreement (e.g. carpet cleaning)
- Arrange the maintenance tradespeople you need to conduct work needed (e.g. decorating, cleaning, electrics, etc.)
When the tenant moves out:
- Contact utility companies, get final meter readings and shut off
- Schedule maintenance and cleaning
- Redouble marketing efforts if no new tenant has yet been found
When you find your new tenant:
- Undertake vetting and background checks
- Revise tenancy agreements
- Maintain your property and landlord/tenant relationship
Managing investment property is a time-consuming and often frustrating and stressful occupation. There are no shortcuts to successful property investment and management.
If you’d like to benefit from professional property management that will relieve you of the stress and frustration of being a DIY landlord, leaving you with time for yourself, contact Ezytrac today on+44 1522 503 717. You’ll soon discover how we employ strategies that manage your tenants and buy-to-let property effectively and efficiently.