Five Common Mistakes Made by Landlords
Managing your own property portfolio is highly rewarding. But there are challenges to be faced and overcome. These can be minimised by learning from the mistakes of others so here's our top five 'what not to do's'......
1) Not charging the market rate. This can work both ways. Either charging over or under the market worth. It's a common but understandable mistake. The landlord has a vacant property and wants to get a tenant installed as quickly as possible to maximise cash flow. The temptation to ask a rent below other landlords is obvious. Asking a lower rent will have prospective tenants falling over themselves to sign on the dotted line. Which is all well and good but once the tenancy agreement is signed the landlord is locked into receiving a low rent. Not at all good for business and a mistake which could have far-reaching consequences for the landlords business. An equally unfortunate consequence could arise from asking a rent above that of the market value. Again it's an understandable error especially if the property is in an area which is starved of rental accommodation. The problem comes if the higher rent puts off prospective tenants and the property remains un-let. No tenant=no rent=problems paying the mortgage. Charge the market value and let the property without running the risk of damaging your business.
2) Not screening tenants. It's something many landlords will be familiar with. You have a new property or one which has just become vacant. A friend or family member hears about the house and says: "Paul / Jade / Fred & Wilma are looking for somewhere and your place would be perfect." Now, helping friends and family is fine. But this is your business. If you are inclined to help go through the same screening procedure you would for any other prospective tenant including credit checks, taking a security deposit, and having them sign all the necessary legal documentation. If they don't pass the screening process than a polite but firm 'no' may cause a temporary schism in the family but may prevent bigger problems down the line. In a similar vein don't be in too much of a rush to rent. Always screen prospective tenants thoroughly even if it means leaving the property empty for a little longer than you would prefer. It will pay off in the long run.
3) Not carrying out repairs promptly. Repairs and maintenance is undoubtedly the biggest cause of friction between tenant and landlord. Every landlord will have stories of tenants demanding the earth and ringing to report minor problems at all hours of the night. Unfortunately that pretty much comes with the job. It is in the landlords best interest to maintain a healthy relationship with a tenant and responding quickly to reported problems and repairs is the best way to keep a tenant satisfied and happy to pay their rent. When you are notified of a required repair attend to it immediately yourself or send your go to tradesmen. Don't be tempted to let minor repairs go unresolved, get them sorted straightaway. A failure to do so will cause problems and you could end up losing a valued tenant and suffer an interruption to your cash flow. Not to mention you will be storing up issues which will still need to be sorted out before another tenant is installed into the property.
4) Not being covered by landlord insurance. Make sure your properties are covered by adequate and specialist landlord insurance. It sounds obvious but it is amazing how many landlords neglect this. Ordinary household insurance just won't do. Take out proper landlord insurance from a specialist provider and ensure the cover is high enough in monetary value and comprehensive enough in breadth to cover all eventualities and the complete rebuild of the property. Don't forget to revise the rebuild value every year when renewing the policy.
5) Becoming emotionally attached to a property. This may seem a strange one but when taking on a new property, especially if it is the first in your portfolio, it is easy to become emotionally attached and overspend on the decor. No one is suggesting that you skimp but, unless you are letting to the corporate market, an excessive finish isn't required. To take an extreme example; don't install a cool and contemporary cream carpet in student accommodation. It won't stay cream very long. In short, decorate practically and to a good standard, especially in the kitchen and bathroom, but hold off on the unnecessary luxuries and extravagant touches. Your first property? See our article on 7 tips for new landlords for some helpful advice and information on managing your property portfolio.