The 5 Things To Make or Break Your Rental Business
Everyone seems to think it’s easy being a landlord – that all you have to do is sit back and watch the money roll in. But landlords will tell you a different story…
While property is one of the best investments you can make, it’s still a pretty tricky job, especially if you’re doing it alongside your day job.
First up, we have terrible tenants. Now, before we get into this, let’s remember that the majority of tenants – like the majority of landlords! – are great! However, there are a few that really hit the headlines, so let’s take a look at some of the most common tenant issues you could face..
Rent arrears strike fear into the heart of most landlords. Despite what the press and public seem to think – landlords tend not to be absolutely rolling in cash. Their money is very much tied up in long-term property investments, reliant on rental income to cover the mortgage and other expenses. So even one month of missed rent can really throw a spanner in the works.
Rent arrears are just as scary a prospect for tenants – if they’re missing rent, they’re possibly also struggling with energy bills, food bills and other expenses. For many landlords, it’s worth working with the tenant to organise a repayment plan to get them back on track. Sometimes bad things happen and it pays to work with a usually reliable tenant to get them back on the straight and narrow.
However, there are occasions – thankfully rarely! – when rent arrears become a much larger problem, with tenants wilfully not paying their bills, so months upon months of rent is owed, with no intention of any payment being made. This becomes a HUGE issue for the landlord because they have to cover the mortgage while the issue is being resolved and they have to go through the rigmarole of evicting the tenant – which any landlord who has had to do this will say is the very last thing you want to go through.
But it’s not just lack of rental income that you need to worry about. You could even have a great tenant that always pays on time and it’s not until you go to check out the property that you realise they haven’t been taking care of it very well at all.
Some wear and tear is to be expected of course, that’s just what happens when people live in a property. But we’re talking DAMAGE.
This could range from damage caused by pets, poor damage or even reckless and deliberate damage.
Technically, this is what the deposit is for – to cover any damage to the property caused while the tenant was in situ, but sometimes – just occasionally – the damage is so severe that the deposit just doesn’t cover it.
We’ll be launching a series all about the issues you can face with tenants soon (if you want to share your stories, please do leave a comment!) and we’ll be going into more detail on this story in that series. But earlier this year, 70-year-old Glasgow based landlord Tariq Parvez, who has 20 years experience as a landlord, went to his property after it was vacated and found human waste, rotten food, bin bags, broken glass – a level of filth that he estimated will cost him £25k to repair. Even the garden didn’t escape unscathed, filled with rubbish, broken furniture and ripped up carpets.
“I have been a landlord for two decades and I have never seen anything like this before. I am completely speechless and shocked, it was furnished and clean before but now it is totally wrecked.”
Definitely NOT covered by the deposit.
Abuse and Scams
On top of all that, some landlords have even experienced abuse from their tenants, from verbal abuse in response to reasonable requests, to physically threatening behaviour.
And it’s not just poor behaviour by tenants that you have to worry about. Oh no… you also have to worry about scams.
But how can a landlord fall victim to scams?! I hear you cry. Well, sadly, there are a few ways…
- Weed Farms. Yes, you could take on a perfectly great sounding tenant… only to have your property turned into a weed farm. This does untold damage to your property – it causes thousands of pounds worth of damage and will have your property off the market for months. It also upsets the neighbours and the smell can put potential new tenants off, as well as the prospect of people knocking on the door expecting the previous tenants…
- Rent to Rent. Now, this isn’t ALWAYS a scam. Some companies are able to really successfully run rent to rent schemes. However, some see it as a get-rich-quick scheme and, when they hit a bump in the road, they cut and run – leaving you high and dry and out of pocket
- Property Hijacking. It has been known for people to move into your property… pretend to be the owner and pocket the cash before disappearing. Leave you and the ‘new owner’ to figure out between you who actually owns the property. You are especially vulnerable to this if you own the property outright, as there is no bank involved that might flag this as an issue
So how can landlords protect themselves?
You must always always always do your due diligence:
- ALWAYS reference your tenant. Even if it’s a friend or a family member. Even if they’ve been recommended to you. ALWAYS reference. This will flag up any credit issues, that may indicate they’d have a problem paying the rent each month
- Cover yourself too. Make sure you have all the insurance possible for every eventuality. Home Emergency Insurance for… well, home emergencies. Buildings Insurance for any issues with the property that aren’t covered under HEI. Rent Guarantee Insurance for any failure in rental income.
- Get a professional inventory. While this won’t necessarily help in the event of extreme damage, it does make claiming back on the deposit, should you need to, a lot easier!
- Check your credit score. If you do this regularly, say monthly, you’ll be able to spot any potential identity theft that has impacted your credit score
- Inspect regularly. Yes, you need to get the tenant’s permission to do so – this is their home after all – but regular inspections are a good way to check that the property is being well maintained, there’s nothing dodgy going on and it’s a good time to check in with your tenants, find out if there are any little niggles that you can resolve before they become larger problems
- Register for Property Alerts. This is a free scheme by the government to help avoid fraud. This means that if someone DOES try to sell your property fraudulently, you’ll get an alert and can stop it before it goes much further
So there you go – it’s not all rainbows and butterflies for landlords. While property certainly is a great investment – there’s a lot of ways it can go very badly wrong for landlords.
Are these potential pitfalls something that keep you up at night? Are there any we’ve missed?? Have you had a particularly nightmarish experience as a landlord? What did you learn from it? Get in touch via the comments below and tell us all about it!