As a landlord it can sometimes feel like the profits that you actually make aren’t worth all the time and effort you need to put in. Indeed, there are a number of drains on a landlord’s gains: even after buying a property and finding tenants, they still have to deduct the costs of insurance, property managers, mortgage repayments, ongoing property maintenance and more!
In a situation like this it can tempting to try and save money wherever you can. However, it is important to keep in mind that landlords are subject to a range of regulations regarding not only the upkeep of their properties but also what licences they require and even the types of tenants they can take on. Letting your standards slip for the sake of saving a few quid could result in serious civil penalties down the line, or even jail time!
Being a successful landlord takes experience and patience. There are some lessons that you usually only learn as you go along, but to help you out here are a few of the best ways to save money as a landlord without endangering your most valuable assets: your properties and tenants!
As any homeowner or renter could tell you, top tradesmen are worth their weight in gold. In the event of an emergency, you want to have someone on hand who knows that they are doing and will not charge the earth for their services.
Of course, it can be easy to forget about this if you go a long time without facing an immediate need for a Pro. Unfortunately, this can leave you in a pickle when a disaster happens, as you will have little time to compare your options or find the best price. Even if your properties are brand new, it will help to know exactly who you can call when the time comes.
Start by shopping around for local Pros rather than nationwide firms. The reason for this is that larger candidates will often have huge overheads, requiring them to charge more for their services. Local tradies will also be familiar with both local planning laws and nearby retailers, allowing them to get work done quickly and with potential discounts.
Once you have a few candidates, ask them each a few questions in order to test their knowledge. After all, if you ever have to hire your Pro in an emergency, you will want to be confident that they can do the job. With qualified professions like heating engineers or electricians, you will also want to make sure that they have the correct documentation for performing their work.
Of course, the best way to find top Pros is still, as ever, to get a recommendation. In other words, it pays to ask around! If you are lucky, your tenants may even have candidates to recommend.
At this point it is also worth pointing out that certain companies may be willing to offer useful discounts. For example, if a single firm conducts all of your property’s annual safety checks, you may be able to enjoy a group rate.
It is also worth noting that if your local council finds your property in a state of disrepair, the necessary repair work could be organised without your consent (though you will still be left with the bill).
Any successful business owner knows the value of insurance. It may seem like an unnecessary use of funds while nothing is going wrong, but as soon as an emergency threatens your portfolio you will be glad to have a safety net in place.
Insurance is not strictly mandatory, at least not for certain landlords. If however you have a buy-to-let mortgage, your broker will more than likely require you to have insurance in place. After all, it’s their investment too!
You may think that it will be enough to rely on a tenant’s deposit when repairs are necessary. However, whether or not you can actually take money from a deposit depends on the issue in question. If there is a problem for which your tenants are not to blame, the costs will have to come out of your own pocket.
‘Landlord insurance’ is quite similar to home cover, but with added protection for:
Be sure to read through the details of a policy carefully before agreeing to anything. If it does not offer the exact coverage you need, look elsewhere!
Any furniture which you provide for tenants needs to be of a certain quality. For one, it will need to be fire safe, while any portable electrical goods will need to be functional and safe to use.
However, buying new furniture for an entire property can be expensive. If you are short on funds, why not consider buying second hand or even freecycling? People are always throwing out perfectly good furniture, but it is only within the last few years that households in need have been able to take advantage of this. You could furnish your entire property with unwanted pieces, provided they are of an acceptable quality of course.
Keep in mind that your tenants may sometimes want to provide their own furniture. This should be fine, though it could be worth pointing out to them that they will be responsible for their own belongings. In other words, they could not provide their own sofa and expect the landlord to repair or replace it when it gets damaged.
Another thing to keep in mind is that furniture which seems to be past its due date can still be salvaged. Appearances can be deceiving: if the piece itself is solid, why not reinvigorate it with a fresh coat of paint or a reupholstery service? You could even decide to try upcycling!
Many landlords join the profession by investing in property with a buy-to-let mortgage. While you can spend months looking for the best deal to suit you, it is important to remember that this need not be the end of it.
If you keep an eye on the market going forward, you may well spot an opportunity to change to a more suitable deal, such as one which will allow you to pay it off early without additional fees.
Considering that mortgage repayments are one of the most common drains on a landlord’s profits, this is certainly worth considering. However, as we said before, it will be best for you to speak with an independent broker, rather than one with ties to a particular bank or estate agent.
When tenants move into a property, it becomes their home. A landlord cannot make use of it themselves or even turn up without at least 24 hours’ notice. Indeed, ‘tenant harassment’ is even classified as a criminal offence!
However, that is not to say that you should simply leave your tenants to it. Every couple of months it can be a good idea to send a message to your tenants to check if there are any issues at the property. This can be particularly advantageous with young tenants who may not recognise issues which could become expensive to fix down the line.
You may even want to provide your tenants with a list of problems worth contacting you about, such as:
Usually, tenants would contact a property manager when issues appear. However, if you are managing the property yourself then you will need to make sure that your tenants have a way to contact you in the event of an emergency, such as an email address or phone number. Many landlords are also utilising digital property management tools which allow tenants to send messages via a private and reliable online portal.
Considering that the majority of landlords only own one or two properties, it is rare that they will have the time and experience necessary to look after their lets without help. A property manager on the other hand can market a property, find tenants, organise all the necessary documentation and look after maintenance going forward, essentially allowing landlords to sit back and relax.
The downside is that property managers rarely come cheap. Depending on the range of services that you require, you could be asked to give up 8-15% of your rental income. With that in mind, you might wonder why any experienced landlord would still choose to hire a property manager.
One answer is that managing a property alone can be time consuming, especially if, like most landlords, it is not your main source of income. If you have a full time job, you could hardly be expected to leave the office every time your tenants need a leaky tap fixed!
Another is that because many landlords do not actually make a full time job out of letting property, they may not be able to offer the experience required to do the job properly. For example, they may not know what safety checks their property requires, or at what point their let will be classed as a HMO. This, as you can probably imagine, can lead to serious legal and financial trouble.
Of course, it could simply be that they live too far away from their rental property to be an effective landlord!
The good news is that property managers rarely offer an expensive ‘one size fits all’ package. In fact they will usually be able to vary their costs based on the exact services you require. In other words, if you simply need help finding tenants, you would not pay the same rates as a landlord who wanted someone to oversee every aspect of their lets, and so on.
Keep in mind that property managers are most valuable at the start of a tenancy. Tenancy agreements and inventories should be created by an experienced professional so that you can avoid potential loopholes or legal issues down the line. Trying to save money by doing these yourself would be a potentially disastrous false economy!
Whether you are an ordinary homeowner or a landlord, there are a number of home improvement grants which can reduce the daily costs of running your property. This is particularly true when it comes to energy efficiency standards.
New rules on energy efficiency state that a property with an EPC (energy performance certificate) rating of less than ‘E’ cannot even be put on the market, either to let or sell. However, even once your property has passed this threshold it can still be worth going even further.
‘Energy efficiency’ is all about how much it costs to heat your property. The higher your EPC rating, the lower your bills, and so on. You may be thinking that the price of work like insulation installation or fitting double glazing would only be worth it in the long run. While this is at least partially true, what you may not realise is that there are a number of government grants which could let you upgrade your property, and enjoy the benefits, for next to nothing!
The UK government currently has strict targets for reducing the country’s carbon footprint. As such a number of measures have been introduced to help homeowners contribute. For one, smart meters are currently being rolled out (with energy providers obliged to provide them free of charge).
However, suppliers also have their own targets to meet. The government’s Energy Company Obligation (ECO) scheme outlines a number of obligations for suppliers which are largely being met by improving the homes of customers. In other words, if you tell your supplier that you are thinking about work which could help with this, they may be willing to cover a big chunk of the costs.
Having lower energy bills will of course help you to save money month to month. However, it could also help you to attract tenants. They of course will love the idea of spending less on gas and electricity, while features like insulation and smart heating will also make your property far more comfortable to live in.