How to avoid costly errors when you let your investment property
Whatever measures a buy-to-let landlord takes, investing in property that will be inhabited by tenants carries some risks. If you make a mistake in the process of investing in property, it could turn out to be costly. Failing to carry out due diligence, rushing to secure rental income and landing some nightmare tenants, and even financing with a poor mortgage choice are all mistakes that readily spring to mind.
Still, for its ability to transform your financial future, there is little that beats the passive income that property investment could provide. But what are some of the most common mistakes made by buy-to-let landlords? And how can you avoid them?
Underestimating maintenance and repair costs
Whether your investment property is a new build or existing property, you are likely to suffer maintenance costs. Kids have a nasty habit of spilling ink or paint on expensive carpets. If you allow your tenants to keep pets, then doors join carpets and curtains as prime targets for damage.
Our seven tips to prevent tenants from damaging your buy-to-let property gives some useful pointers, including advice on tenant vetting, deposits and lease agreements.
You should also ensure that you have adequate landlord insurance, and make it easy for tenants to report maintenance issues. Our online repair reporting system is set up to do exactly this – and our experience is that easy reporting reduces long-term maintenance costs.
We can also visit the property regularly, ticking off the current state of the previous inspection report. It gives an early warning of wear and tear issues (and is an ideal excuse to keep in touch with the tenant face-to-face – you would be surprised what can be learned from these inspections).
Overestimating rental income
Compounding the mistake of underestimating maintenance expenses, many buy-to-let landlords overestimate the rental income potential of their investment property. You must do thorough rental research as part of your due diligence process.
Compare what local agents tell you are an achievable rent with what tenants are paying for similar properties nearby. Pose as a landlord and a tenant, and phone several agents to ask about the going rental prices. You’ll find that you’ll probably get two prices – a higher quote when posing as a landlord, and a lower quote when posing as a tenant. The realistic rent will be somewhere in between these extremes.
If your property remains unlet for a longer-than-expected period, you should consider dropping the rent. A void period is always more expensive than accepting a slightly lower rent.
When tenants of our properties decide to move on, we carry out pricing research and start marketing the property early. It helps to reduce void periods and achieve maximum rental potential.
Getting a tenant from hell
Some buy-to-let landlords think that cutting out parts of the tenant vetting process saves time and money. It doesn’t. If you don’t track down top-class tenants, you are asking for trouble. A tenant from hell will probably cost you a lot of money in damage to the property, unpaid rent, and even the costs of eviction. There are ‘professional’ tenants who prey on the buy-to-let landlord who doesn’t vet properly. Serial scammers, who search free property listing websites for the easiest targets for their next con-trick.
Our tenant vetting process includes:
- Written application forms
- Conducted viewings
- Credit, employment and rental history checks
Screwing up the tenancy agreement
The tenancy agreement may just be the most important legal document that you provide to the tenant. Off-the-shelf templates don’t cut it in this day of information freedom. You’ll need to seek legal advice, and ensure that all the t’s are crossed, and i’s dotted. There is a strong likelihood that your tenancy agreement will need to be tweaked for each property and tenant, too.
The law is constantly changing, so don’t make the mistake of thinking you can simply roll over the tenancy agreement from one tenancy period to the next, either.
Not evicting fast enough
If your tenant isn’t playing ball (for example, not sticking to the terms of the tenancy agreement or failing to pay their rent), you may be forced to evict. Don’t delay this process, hoping that the situation will right itself. The act of initiating eviction against a nightmare tenant may be enough to encourage them to get their act together. If it isn’t, then you may have to go to court to make sure the tenant is dealt with.
Getting rid of a nightmare tenant sooner rather than later is always the cheapest way to proceed.
Investment property management reduces risks
More than six in ten landlords now use investment property management services such as those provided by Ezytrac. These experienced buy-to-let landlords use our services because we help reduce landlord risk.
Our business is property management, the investor’s business is investing in the best properties. Successful management of a buy-to-let investment property is not simply about collecting the rent on time (although we have systems in place to ensure this happens, too).
You’ll need to be on call to take care of maintenance issues, and know the local tradesmen who will provide the best service at the best price. And before any of this happens, you’ll need to find and vet the best tenants, and ensure that the tenancy agreement they sign is watertight. Finally, if your tenant turns into a nightmare, you should be prepared to evict them and move on. This is where Ezytrac steps in.
You don’t have to become a full-time buy-to-let landlord to benefit from the potential profit and passive income of property investment. Contact one of the Ezytrac team today on +44 01522 503 717, and discover how our investment property managers work with our landlord clients to relieve the stress and pressure of everyday property management.
Yours in effortless property management,
Brett Alegre-Wood