Tips for Buy-to-Let Landlords: Adam Joseph, CEO, The Happy Tenant Company
We know that being a buy-to-let landlord has become a pricier and more time-consuming business in the past 12 months since the 3% stamp duty surcharge was introduced, the 10% wear-and-tear allowance scrapped and mortgage relief restricted.
However, as an Asset Management Company, we also know that buy-to-let can still be very profitable. Landlords simply need to be more savvy about minimising overheads and dealing promptly with repairs to protect their investment and gain the best returns.
Top Tips from Adam Joseph
Lowering your BTL property maintenance costs: how can landlords keep their maintenance bills low?
- Shop Around – If you’re self-managing, shop around for contractors but always take a reference and ideally use someone who comes recommended. If your property is managed, find out what suppliers your management company uses, what they charge and if desired, whether you can use your own.
Asset management companies, like The Happy Tenant Company, with a high volume of properties under management, will already have established relationships with reputable contractors. For example, we know and trust all our contractors, and because of the constant flow of billed work we supply, we’re able to use our group buying power to secure the best deals for our members across all property service suppliers – including letting agents, maintenance services and inventory clerks. These discounts are then passed on to our landlords in their entirety.
- Maintain – Most importantly, keep your property maintained so that costs don’t build up. It’s a false economy to leave a dripping tap or a loose roof tile – six months later these small things can turn into a much larger problem at a much greater cost to repair e.g. a leaking roof.
- Fees – Agents must be transparent with their fees, so make sure you shop around and see who is offering the best deal. However, remember to check what service you will get for that price – those that appear the cheapest on the surface may not be offering the same level of service, so it’s worth doing a little research.
What are the best ways of guaranteeing rent in your BTL property?
If you haven’t yet bought a property, but are looking to make an investment, one of the most important aspects is location. Being close to public transport, no more than a 10-15 minute walk to the nearest station, for example, is extremely attractive to prospective tenants. Two bedroom properties are the “bread and butter” for any letting agent because they are the most rentable. Studios and one bedroom properties can also be sought after, depending on the area. For example, in London, studios and one beds are in greater demand in Zones 1 and 2 because the location is more expensive. In Zones 4 and 5, a couple may be more likely to rent a two-bedroom property because they can afford the luxury of having a spare room.
In terms of the property itself, the most obvious one is to make sure the property is well presented, both in terms of décor and maintenance. Simple things like knocks in the walls or stains on the carpet show the prospective tenant A) How the landlord looks after the property, and B) How the previous tenants looked after it. This impacts the type of tenant that takes the property on in the future, and sometimes landlords fail to see the synergy between the two.
If, once you have a purchased a buy-to-let property, you want to guarantee rent will come in on time every month, you could first consider taking out a rent guarantee insurance policy. If your tenants pass referencing, the insurance company will offer a service where if a tenant fails to make a rent payment on time, you’ll be fully protected. Additionally, some policies will also offer a comprehensive Legal Expenses service – whereby landlords are covered from any costly legal fees during an eviction process. However, this does not guarantee the rent if the tenant leaves the property, but rather protects against a tenant that won’t leave but has stopped paying rent.
Other options which offer guaranteed rent solutions include housing association lease schemes, rent-to-rent companies or providing emergency housing. Whilst these methods can provide guaranteed rent, there are also other aspects to consider such as: the length of the contract, which is usually longer, the turn-over of tenants, which is usually higher and the rental income, which is likely to be below market value.
Tenant vetting: what are the best, most robust methods for vetting your tenants? What other steps can you take to avoid being scammed or left out of pocket?
There are two ways to reference a tenant:
- A Referencing Agency (also used by letting agents) – Tenant referencing agents carry out checks on the prospective tenant’s credit rating and authenticate the tenant’s personal details. Most offer various levels of service but providing information on CCJs, bankruptcy and credit score is essential.
- The Manual Route – The other route, which should ideally be carried out in addition (the more checks you carry out the more confident you can be about your prospective tenant), is asking for bank statements from the last 6 months, current employer’s details and previous landlord references. Do not just assume letters from previous landlords and employers are legitimate, verify over the phone.
One of the most common “cost-saving” traps that landlords fall into is to try and carry out referencing themselves. Admittedly, on the face of it, it’s not that difficult to do a basic tenant reference once you know what you need – a previous landlord reference (name and number), details of the tenant’s current employer (name and number) and bank statements (evidence of their salary coming in every month and current rent going out every month). If you have this information, it should provide you with a fair bit of security, correct?
Not necessarily. Landlords need to be aware that tenants may provide false documentation so having the skill and experience to spot this is important. As a landlord, you are also now required to check the immigration status of anyone who isn’t from the UK. You need to know what you are looking out for when going through the tenant’s visa from the Home Office, such as its expiry date. Other elements of referencing that you won’t be able to do include looking for any County Court Judgements or bankruptcy charges. This is why we always say, if don’t know how to carry out THOROUGH tenant referencing, don’t try. Hand the job over to a referencing agency or management company. There is, of course, a cost to this, usually between £15 – £25, but at least you will have peace of mind knowing that you have taken the most important measures to protect your investment.