Anybody who thinks that letting out properties is easy money has probably never worked as a landlord, or at least not as a very competent one. The truth is that rental properties are far from being turnkey businesses; whether it’s maintaining them to a safe standard, finding tenants or dodging void periods, landlords have plenty to keep them busy!
Indeed, lazy landlords often end up losing out on plenty of potential profits. Not only do they fail to keep the best tenants, they also inevitably leave themselves open to serious fines.
Still, you can hardly afford to be at the beck and call of your tenants 24-7, and many landlords still have other jobs or businesses which take up most of their time.
So, exactly what are the best ways for a competent landlord to make more money from their property lets? Here are a few secrets to ensure that you can maximise your profits!
The rental market can be a competitive place for both landlords and tenants. If you want to attract the best renters at the best price, it is important to make your property stand out.
Imagine if you yourself were on the hunt for a new place to live, then look at what you have to offer and ask if there is anything which would turn you off.
Start by making sure that what you have is tip-top. If there are ongoing issues such as damp, mould or condensation, anything that makes your property less than perfect, then make fixing them a priority. Savvy tenants will pick up on anything you miss and may even try to argue the rent down to reflect any problems they find.
It is also worth asking if there are any rooms which could do with a new burst of life. It may simply be that your bedrooms have not been decorated in a few years, in which case they could probably benefit from a fresh coat of paint. Alternatively, you could choose to rejuvenate the bathroom or kitchen: two highly valuable rooms guaranteed to either impress tenants or put them off.
Finally, check to see if there is any scope to upgrade your property with a major home improvement project. You could create more living space, additional bedrooms or even separate dwellings through a conversion, extension or renovation project. There may even be hugely valuable additions that will attract wealthy local tenants. In cities like London, for example, properties with parking spaces invite much higher prices.
As a landlord you might think that your properties are your most important assets. In reality, this is only half true. The other half is actually your tenants: this is where your money comes from, after all!
However, not all tenants are equal in terms of quality. Some will look after your property, pay rent on time and stick around for years whilst others… won’t.
To find the ‘right’ tenants, start by thinking about exactly who you want your property to appeal to. An estate agent can tell you what groups in the area are looking to rent. For example, if you live reasonably close to a university campus then you may find that there is a surplus of student renters, or if the area has great transport links and an active nightlife then you could be better off appealing to young professionals.
This might sound needless, since all tenants can pay rent regardless of their background, but choosing a group to focus on can give you a good idea of how to best raise your property’s appeal. Families might care about having social areas like living rooms, while young professionals would be more willing to give these up for the sake of having an extra bedroom, and so on.
Your next step should be to establish a strict vetting process in place. You can tell a lot about a tenant with just a single face to face meeting, so prepare a solid tenant interview checklist!
They should have a reliable income, demonstrated via a bank statement, along with clean habits that will prevent them from damaging your property or annoying the neighbours with late night parties. You can even ask for references, though it can be a good idea to contact them yourself in order to avoid fakes (trust us, they are more common than you might think).
An important thing to note about the vetting process is that you should never, EVER take chances with documentation. This is not just a pointless paper pushing: any tenant who does not have the right to rent, cannot produce a valid form of ID or shies away from allowing a credit check should be raising several red flags.
If you have so much as a reason to suspect that a person does not have the right to rent and then let your property to them anyway, you could face huge fines or even prison time. This means checking everyone: it is against the law to only vet people who you think are not British citizens.
At this point it is also worth pointing out that certain tenants will be willing to pay more than others. Renters with pets or smoking habits for example usually struggle to find accommodating accommodation. Granted, there are certainly risks that come with renting to certain groups (an extra hundred every month can seem like chump change compared to the costs of cleaning up after a dangerous dog), but as long as you are willing to spend more time vetting these tenants then you should have few problems.
Now, it’s a sad truth that tenants come and go. In most cases they will stay at a property for a year, maybe two, and then move on for one reason or another.
What you might not know is that this is one of the biggest drains on your profits as a landlord. Advertising a property and finding new tenants costs time and money. Even worse, you could end up with ‘void periods’ where nobody is living in your properties or paying rent.
In short, it is worth your effort to try and keep tenants for as long as possible.
For starters, avoid taking on tenants who want to stay for less than six months, as more often than not they will simply not be worth your time. A year is a good minimum for tenancy agreements, though you can sometimes convince tenants to stay for longer in exchange for slightly lower rent . Certain groups are also more likely to want long term lettings, such as families, pet owners or those in stable employment.
Once you have found excellent tenants, be sure to keep them happy! Staying on top of repairs and maintenance, giving them a way to contact you and going the extra mile whenever possible will make your tenants more likely to stay on. Every so often, give them a call to ask if there is anything they need, or just send them a card at Christmas.
Another way to encourage tenants to stay longer is to give them more freedom to turn your property into their ‘home’. These days, letting tenants hang pictures on the wall or buy their own furniture can go a long way.
Unfortunately, even the best tenants do not stick around forever. When you know that a tenancy is coming to an end, you should take the initiative and start looking for new tenants well in advance in order to prevent drawn out ‘void periods’ with no rent coming in.
You should begin advertising your property as soon as you know that the current tenants are planning to leave. You could consider having an estate agent market it for you if you do not have the time. While it will be cheaper to do this yourself, an agency can also screen tenants and conduct interviews on your behalf, so it is worth considering whether saving money is worth donating enough time to do all this on your own.
At this point it will be a good idea to let your current tenants know that you are looking for their replacements. Remind them about the state that the property will need to be left in if they want to keep their entire deposit and ask them to leave it looking nice for viewings.
A large part of being a good landlord is keeping on top of any repair and maintenance issues. If a tenant reports a problem it will be your responsibility to get it fixed, the sooner the better. Granted, tenants may sometimes cause the problems themselves, but even in these cases it will still be in your best interest to sort things out as soon as possible (and to take the costs for doing so out of the tenant’s deposit, naturally).
Of course, being able to get jobs sorted quickly and to a high standard will require you to hire top notch tradesmen. You can find the best among your local options by looking through customer reviews, examining past projects and asking questions about the jobs you need done in order to test their knowledge. You should also make it a rule to always, always check that the Pros you hire have the necessary qualifications for their work, particularly when it comes to electrical or gas utilities.
At the same time, you will also need to let your tenants know that you are taking care of them. Make sure that you send them updates on the progress of hiring Pros and do not bring any tradesmen to the property without giving your tenants a minimum of 24 hours’ notice. Do not underestimate how important this is: most tenants will prefer to be there when the Pro arrives. Many a relationship has soured because a landlord failed to consider their tenant’s privacy when booking a tradesman.
Once you have a Pro you trust, be sure to keep their contact information for next time. If you become a regular customer, they may even be willing to offer discounts down the line.
Bricks and mortar may last, but the property market is fluid and constantly changing. A responsible landlord will keep an eye on the state of the market to make sure that they know exactly how much their property is worth and, more importantly, how much they can charge in rent.
Now, if the area has become more highly prized or your utility bills have been rising, it would be perfectly acceptable for you to charge higher rents with future tenants. You could even have your current tenants pay more, provided you do so with enough notice of course.
Unfortunately this is not without its risks. For starters, your current tenants could challenge the rent hike if they think it is unfair. It should also go without saying that being too greedy with rent will almost certainly cause you to price yourself out of the market (and risk disastrous void periods).
You should also keep in mind what we said earlier about how much it can cost to have to put your property on the market again. It may well be that the better option will be to keep your rents stable for the sake of hanging onto the tenants you have on hand.
It is certainly worth keeping an eye on local rental prices via websites like Zoopla. If you are under-charging your current tenants by a significant amount, raising the rent may well be worth the risk. Should you choose to do so, it may be worth adding extra features to the property such as insulation or smart controls. This way, your tenants feel that they are at least getting something more for their money.
The vast majority of landlords only let out one or two properties. Indeed, many have separate day jobs rather than solely relying on their rental income.
What does this mean? Firstly, that landlords do not necessarily spend a lot of time playing the part of landlords. Secondly, landlords do not always have a great deal of experience in managing properties, let alone several at once.
Because of this, many landlords will hire estate agents or specialist firms to act as property managers on their behalf, looking after tenants and fixing any problems as they appear. While this is certainly a valuable service it does not come cheap: in fact, having a property manager can eat up 8-15% of your monthly rental income, regardless of whether or not they actually have to do anything!
As time goes on and you learn more about being a responsible landlord, it may be worth considering doing without this kind of help. You can certainly find tradesmen to fix problems as they appear and it is now easier than ever to find tenants online.
That said, it will still definitely worth having a professional put together your tenancy agreements, as well as your inventory reports. If either of these are done incorrectly they could cause you serious issues down the line.
If you are willing to simply put in a bit more time to look after your properties, you could end up saving a great deal month to month. In short, if you want to keep more of the rent for yourself, all you need to do is become a more hands on landlord!