Whether you’ve already got a property that you’re considering renting out, or whether you’re starting from scratch and thinking about buying one, taking the leap and becoming a landlord for the first time can be exciting, nerve wracking and daunting. You’re handing over control of one of the most expensive things you own, most likely to a stranger, and there’s plenty that can go wrong.
There’s a lot of reading material out there and after going over and over all the do’s and don’ts, you might be feeling quite overwhelmed. Let’s go back to basics and breakdown the most important tips for first time landlords to safeguard yourself (as much as you can) against things going wrong.
Take your time with screening tenants
Step one – find your tenants. And screen them thoroughly! With good tenants comes good tenancies, and that’s especially important for your first time. Perhaps avoid tenants with bad credit scores and criminal records initially. Bad credit scores and criminal records don’t necessarily equate to bad tenants but it’s always better to play it safe whilst you’re starting out. For reference, an excellent credit score is anything above 750. Bad credit is anything below 600 and scores between 600 and 750 range from poor to good.
With this in mind, you need to be careful of never illegally discriminating when rejecting potential tenants. There’s things that you can reject a tenant over, such as their income, references, credit history of their current state of employment, but you cannot reject someone over their marital status, being pregnant, their age or any of the ‘protected characteristics’ such as nationality, gender identity, sexual orientation, disability or religion.
Perfect the tenancy agreement
Once you’ve found your tenants, you’ll need to put together a tenancy agreement. You’ll soon realise that a tenancy agreement becomes the holy grail of a tenancy. Putting one together can be a bit of a tedious task but trust me, it’s important that you take your time with it and get it right. If you encounter any issues and disagreements over the course of your tenancy, the tenancy agreement will be the thing you can fall back on and look at to resolve things as it serves to detail everything that was agreed to at the start of the tenancy.
If you look online you’ll find a lot of tenancy agreement templates – just make sure that you’re using one for the right country. You may have to add in things like pets and smoking clauses and other specifics to tailor the agreement to you and your requirements.
Take out landlord insurance
Although there’s no legal obligation to take out landlord insurance, you’ll struggle to get the go-ahead from your mortgage lender to take on tenants without it. There’s quite a lot of cover out there designed for landlords, including property owner’s liability insurance, contents insurance and buy-to-let buildings cover.
A conventional home insurance policy won’t be enough to cover for you rental activities. There’s a few online sites where you can compare landlord insurance so make sure that you get cover that you’re comfortable with at a price you can afford. It’s the safety net you’ll need more than ever when you’re just starting out as a first time landlord.
Take the rent seriously
One of the trickiest – but unfortunately all too common – situations that landlords can find themselves in is not being paid rent. Collecting rent on time needs to be a priority else you’ll soon fall behind with your cash flow. Your rent is your revenue so make sure that you pursue any late payments and enforce late charges.
Don’t feel awkward about putting your foot down a little and making sure your tenants know that the least you expect from them is for them to meet their rent payment obligations. Although you always want to remain friendly, approachable and accommodating, getting rent on time is serious business. Rent arrears can lead to a lot of chasing and could even result in having to issue a court order.
It’s tempting to turn your rental into an irresistible palace that no tenant will want to turn down. That’s great if you can afford to do that, but let’s be realistic. It’s important to find the balance between keeping a property looking fresh, clean and elevated above the competition, and actually adding value.
Some landlords will spend crazy amounts on installing marble worktops, expensive carpets and luxurious curtains, but these things don’t necessarily equate to more value. Plus, who’s to say that your tenants are going to treat these things with as much care as you would? It’s not their money that paid for it all.
Focus your attention on the kitchen and bathrooms as these are the money makers. Keep things neutral to appeal to the masses with just a little splash of luxe and quirkiness. Perhaps look at adding in a few key selling points such as a smart security system, a wine cellar or outdoor storage such as a shed.
Happy tenants, happy landlord
And the biggest pearl of wisdom – keep your tenants happy. It doesn’t take a lot. All tenants really want from their landlord is a good line of communication, repairs and issues to be resolved quickly and a mutual respect. Any more than that and you could come across as overbearing so be sure to also give your tenants space. Your home is now their home.
With happy tenants, comes long and unproblematic tenancies. When tenants are happy in their home, they may also be happy to pay increased rent payments over time if that’s something that you need to do. You’re sure to reap the rewards if you respect your tenants and take your responsibilities seriously.