Becoming a landlord can be very profitable and rewarding, but it does pay to be aware of the pitfalls you may face along the way. From professionals to ‘accidental’ landlords, it’s definitely a good idea to research what is really involved before taking the plunge.
There are increasingly a number people who find themselves with an empty property. This can be because they have inherited it or possibly because two people decide to move in together leaving one property empty. There is then the decision to made whether to sell it, or perhaps rent it out thus becoming a landlord.
A common misconception is that all that is involved in being a landlord is to find a tenant and watch the rent money roll in, with perhaps the odd repair to do, but in actuality, there is much more to it than that! Here are some of the pitfalls to be aware of;
Lack of Time
It takes up more time than you might think, especially if you are not local to the property you are thinking of letting. Initially, there is getting the property ready for tenants and making sure it is compliant with current legislation followed by finding tenants and making sure the relevant checks are done with regard to references etc.
Out of Date Documents
We find many landlords have been using the same tenancy agreements and notice templates for years often without problem. The issue is that in the unfortunate event things go wrong, you may not obtain possession if these documents haven’t been updated following the myriad of changes to legislation. One key example is what was known as a ‘Section 21’ notice. This must now be in a prescribed format and if it is not, it will fail. Additionally, before a Judge will even consider granting possession, an increasing checklist of requirements must be met.
Not being Financially Secure
Unfortunately, there are bad tenants out there that will not pay their rent and this, in some case can even lead to the need for eviction which in itself can be a costly process both in time and money. There are many reasons for eviction, the most common being non-payment of rent, but it can also be down to any other breech of the tenancy agreement such as being excessively noisy or damaging the property. This is where our Guaranteed Rent scheme provides peace of mind.
Not completing an Inventory
If you do not complete a comprehensive inventory at the start of every tenancy, including a schedule of condition, you make it impossible to prove that a tenant has caused damage to the property or removed goods. Unfortunately, it is down to you as a landlord to be able to provide proof, not the tenant. The inventory and schedule of condition are irrefutable proof of this.
Some landlords mistakenly believe that taken out buildings insurance is sufficient. Rent arrears is one of the biggest problem often faced by landlords. To be safe, landlords should consider buildings insurance, landlords insurance and rent guarantee insurance.
Poor Tenant Screening
The best way to avoid most of these issues, is to make sure you only let your property to good tenants. Though there is no way to guarantee this 100%, by sticking to the process of always checking references, employers and previous landlords, you decrease the chances dramatically of having a bad tenant.
Although there are pitfalls, by being aware of them they can be largely avoided making being a landlord very rewarding and beneficial.
If you don’t have a lot of time to dedicate to being a landlord, but still feel it is something you would like to do, there is always the option of having an agent manage the property for you. Here at Northwood, we have many different levels of property management from just helping a landlord find good tenants for their properties, right up to fully managed where we take care of everything! We also offer a Guaranteed Rent service that gives landlords complete peace of mind and financial security.
If things go wrong you should always seek professional legal advice, which as we all know is rarely cheap. Nevertheless, not seeking such assistance can often prove far more costly. At Northwood we have a cost effective solution from our in-house Legal team which specializes in property Law. It’s included in our Guaranteed Rent service but is also available at a highly competitive rate to any landlord who needs assistance.
Northwood is one of the largest and most recognised estate agents in the U.K. and the leading supplier of Guaranteed Rent to give landlords complete peace of mind.
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