What every landlord needs to know
Photo by Michael Tuszynski
Becoming a landlord is a business opportunity that many people feel would be beneficial for them. If they can afford to buy a property to rent out, and if the rent is more than the mortgage each month, it’s certainly possible to make a profit. However, there are some important things that every landlord needs to know to ensure that they can make money and buying a property isn’t just an expensive mistake that’s hard to rectify. With that in mind, here are some things to consider.
Buy more than one property
A serious landlord who wants to make property their entire livelihood must have more than one rental property in their portfolio. It doesn’t matter if the one property you own is worth a fortune and you bought it cheap so you can charge a large amount and make a good profit – one bad tenant or a downturn in the market or rising interest rates, and everything could change. In the end, just having one property is a dangerous option – plus, you’re limiting how much you can earn.
It’s far better to have more than one property and spread your risk. If one tenant doesn’t pay their rent, you’ve still got others who will. If one property needs repairs, the profits from the others will pay for it. So, once you’ve bought your first property to rent out from a landlord, make it your priority to buy some more. The best thing to do is speak to experts like those at MGP Property so you can make sure you’re buying the right homes at the right price at the right time, and in that way, you can maximise your profit.
Have strong lease agreements
The lease agreement your tenant signs is a hugely important document that you can’t rush. In fact, it’s best to have a legal expert look over the lease to ensure it’s not only fair, but enforceable should something go wrong. The last thing you’re going to want to happen is for a tenant to get away without paying when they should, for example, because the lease wasn’t worded correctly.
Within the lease itself, you’ll need to clearly outline all the terms and conditions so they’re easy to understand – that gives the tenant the best chance of knowing what they’re meant to do and what they can’t do; a challenging and overly complicated lease agreement probably won’t be read, and that’s how mistakes are made.
As a landlord, you want to make things as easy as possible for your tenants to pay their rent on time and in full, and you want to show them that you’re a fair landlord who’s willing to help when required. Having all these things in the lease and giving the tenant the time to read through and ask questions before signing will certainly help with that.
There’s regular property maintenance to do
It would be great if being a landlord meant buying or perhaps even inheriting a property (or ideally more than one, as mentioned above), finding good tenants, and then leaving things to get on without having to do anything other than collect the rent money each month.
For many first-time landlords, that could be precisely what they think it’s going to be like, but the fact is, it’s far different, and being a landlord is much more hands-on than you might expect.
One of the most important things you’ll need to do is carry out regular property maintenance. Unless you keep on top of this work, your property could start to suffer, and in the end, not only will it cost you more to make repairs, but your tenants won’t be very happy either. They might choose not to renew their lease or even leave earlier than expected, and when your property isn’t well-maintained, finding new tenants will be a lot harder. Plus, as a landlord, your property is clearly your biggest asset, and not taking care of it is going to lose you money – you might even have to sell if things get too bad, and then you might be left with nothing and no income at all.
That’s why it’s a good idea to have a regular maintenance routine in place so that all the necessary checks are carried out, and anything that needs to be put right can be fixed sooner rather than later. You’ll also need to make repairs in a timely manner if your tenant asks you too (assuming the lease says it’s your responsibility, of course), so you need to be prepared for that as well.
