A career in property investment can be a profitable one, especially if you decide to become a landlord. While many people prefer to get a foot on the property ladder and buy a home, there are plenty of others who continue to rent, for any number of reasons. The would-be landlord, therefore, potentially has an income stream coming in for a long time.
Costly mistakes can be made, and a bad decision can scupper the dream of making a landlord’s fortune. Instead of making money in the long-term, and having that comforting nest egg, financial disaster can quickly happen if the first-time (or any time) landlord commits one of the following worrisome errors.
Mistake #1: Buying a money pit
Sometimes you have to pay more to reap the rewards. Spend cheaply on a run-down property, or fail to carry out the requisite checks, and danger awaits. The tenant won’t be a happy one if they are forced to live in a place that falls below standards, and there may be the threat of legal action against the landlord if an accident happens because of the state of the property. Maintenance bills will also be a regular expense. The would-be landlord needs to work with a housing inspector beforehand, making sure the property is both liveable and desirable.
Mistake #2: Not researching the property market
By speaking to letting agents or through an online search, the landlord can check the prices of other rental properties in the area. This is basic research, and without it, the landlord may make a loss on his investment. Underpricing the property is going to attract more tenants, and that’s fine, but more money could be made by matching the rental fees set by other landlords. Overpricing is another problem. If a tenant can rent somewhere cheaper in the same local area, they aren’t going to pay more rent to the overreaching landlord. Research is key.
Mistake #3: Going it alone
A first-time landlord can come unstuck if they try to do everything themselves. They stand a better chance of success by hiring a property management company (check out All County Property Management Franchise as an example), to help them in the day-to-day running of the business. Other people to get on side include a decent financial advisor, a reputable building firm, and perhaps a partner in the property business to shoulder some of the burden. Going it alone can be cheaper, but pitfalls await for the landlord with little experience in running a property business.
Mistake #4: Not vetting tenants
There are good tenants and there are bad tenants. There are those who will respect the property, and there are those who will turn it upside down or consistently fail to pay rent on time. For this reason, tenant referencing is a must. This might include speaking to the previous landlord, the tenant’s bank, and perhaps their employer, for both character and financial references. Failure to do so can result in a bad tenant, further maintenance fees due to negligence, and a lack of income if the tenant fails to pay, or is evicted, leaving the property empty.
It’s never too late to live your dream, and if becoming a landlord is something you have always wanted to do, then it may make financial sense for you to take the plunge. Still, you do need to heed the mistakes above if you are want to achieve success in this business. Otherwise, your property dream will become a financial nightmare!
Thanks for reading.