The process of profitable buy-to-let property management
With more than a thousand properties under our management, we have a lot of experience with successful property investors. We’ve analysed the process they follow when building their property portfolios, and see that the most successful take the same steps on their way to creating life-changing passive income. In this article, we examine those steps. It should help you avoid costly mistakes, as you prepare for life as a buy-to-let investor.
1. Know your responsibilities as a landlord
The buy-to-let property market is controlled by a raft of laws. For example, as a landlord, you have legal responsibilities under Section 11 of the Landlord and Tenant Act 1985. You must ensure your buy-to-let property is in a state of good repair, inside and out. It includes water, gas, electricity and sanitation. There are safety certificates that your property must pass.
Increasingly, local authorities are being given powers to oversee the private rented sector. If your property is not up to the standards required by the law, you could face hefty fines and, in some circumstances, be barred from being a landlord.
2. Maximise your rental income
One of the components of maximising buy-to-let profits is knowing how much rent you should charge. To calculate this, you need to know how much your costs are and what rents are being charged in the area where you have invested. In an ideal world, the latter will be more than the former. You’ll have positive cash flow and an extra source of income.
When figuring out how much rent you should charge, don’t make the mistake of only considering your costs and how much profit you want to make. If the average rent for a similar property to your investment property, in the area where you have invested, is £800, it’s unlikely that you will find tenants willing to pay £1,000. So be realistic with your rent expectations, charge the going rate, review your rent annually, and protect your buy-to-let against profit-crushing void periods.
3. Ensure your buy-to-let property attracts tenants
You want to make your property attractive to prospective tenants, and to retain tenants.
Of course, location is paramount to your profitability. Your property investment should benefit from the best property fundamentals – shops, schools, transport links, major employers and major investment.
On a property-specific basis, consider decorative order, white goods, furniture, and how professional cleaning will make a difference to the look and feel of your property. Be a good landlord, communicate with your tenants, and respond swiftly to repair and maintenance reports. All these elements will encourage tenants to continue to pay rent and reduce your void periods.
4. Vet your tenants properly
It is essential that you vet prospective tenants. You don’t know them, and should never work on a gut feeling that an applicant will be a dream tenant. Most serial nightmare tenants are the most charming people you could ever meet. Then they fleece you.
Make the same background checks with all tenants. Seek references from employers and current and previous landlords. Remember, too, that you cannot discriminate. Vetting tenants is a hassle. It’s time-consuming and can be expensive. But if you don’t vet tenants correctly, you are far more likely to get an expensive nightmare tenant.
5. Write a watertight tenancy agreement
The law comes into play again when writing the tenancy agreement. It is the document that you (and your tenant) will turn to should anything go wrong. It lays out your obligations as a landlord and the responsibilities of your tenant.
Clauses contained in it should protect you in the event of damage to your property, as well as how rental reviews are conducted. They will also spell out the circumstances that could lead to eviction.
We’d advise against using a tenancy agreement template. Buy-to-let laws are constantly evolving and being updated, and templates become out of date quickly. Always have a tenancy agreement drawn up with the help of a solicitor experienced in the buy-to-let market.
6. Carry out regular property inspections
With a tenant chosen, you will need to document the condition of the property and its fixtures and fittings in a property inventory. The tenant should sign this when they take possession of the keys. From this moment, you’ll help protect your investment by carrying out regular property inspections.
Inspections give you the opportunity to touch base with the tenant and compare the property against the original property inventory. They act as an early warning signal that problems may be arising. Small maintenance issues can be identified and dealt with before they become costly repairs. This should save you money.
7. Hire an investment property manager
Most property investors want to be just that – an investor. They want to benefit from the extra income that a buy-to-let could produce. What they don’t bargain for is the time and knowledge that managing their property as a buy-to-let requires.
Our investment property management service is ‘cradle to grave’. In other words, we can handle everything for you, from advertising for and vetting tenants, through to chasing and collecting rent, carrying out property inspections, and arranging professional tradespeople to complete maintenance and repair work. Our legal department will take care of tenancy agreements, and we are well placed to help with evictions on the rare occasion they are needed.
Having your property professionally managed is the ideal solution for the investor who wants to take advantage of the lifestyle benefits of passive income from property investment.
Whether you want to be a DIY landlord or hire an investment property manager, the seven-step process of buy-to-let property management outlined above should help you avoid costly errors as you build your property portfolio. Why not contact Ezytrac today on +44 1522 503 717, and discover the positive difference that our investment property management services make to investor success?
Yours in effortless property management,