Property Investing Guide: 7 Biggest Landlord Mistakes to Avoid
While property investing can offer lucrative financial rewards, without experience and guidance, it can be easy to quickly lose money, time, and sleep.
Here are some of the most common mistakes inexperienced landlords make, so you can avoid doing the same!
- Paying too much for the property
Never pay over the odds for the first deal you see, and always take a builder with you to view properties that need work to give you an estimate of the costs involved. Purchasing below market value should always be the goal. If you cannot purchase below market value, always ensure you’re getting a fair deal based on the current market and make sure you have scope to add further value to generate a healthy profit. To succeed in property, the numbers have to stack up. Property is a business, and like all businesses, every penny counts.
- Providing the wrong property for the wrong area
The location is vitally important, and a great location makes the difference between a flyer and a dud. Understand what location means to your investment – the rule of buying the worst house on the best street in town has proven to be true over the years.
Before purchasing a property for investment, do your due diligence on the area and be clear on the type of property your tenant or buyer is likely to want in that area. For example, purchasing a property in a student area and carrying out a high-quality renovation with the plan of selling it to a family is not a good idea. Conversely, buying a flat to rent to a single professional in a city centre is.
- Underestimating the cost of repairs or maintenance
As mentioned above, for your investment to generate a healthy return, getting the numbers right is crucial. This includes factoring in all costs of repairs and maintenance – which many investors underestimate. It’s important to keep your property to a standard that allows you to rent to tenants legally. Additionally, if your properties are maintained well, you’re more likely to attract good-paying tenants.
- Assuming the property will always be rented
This is a poor assumption that many investors make and can be costly if the tenant stops paying or there is a long void period. This is where using a good letting agent is incredibly valuable, as they can find the right tenant for the property, carry out all the relevant checks, and deal with any issues that arise.
- Relying on handshakes instead of written contracts
In the UK property market, a handshake means pretty much nothing. The deal isn’t sealed until the paperwork is signed and the keys are in your hand. Don’t get ahead of yourself if you agree to a price on a property deal – you have only reached the start line. The finish is a long way in the distance.
Your seller can pull out any time up to the exchange of contracts, so never don’t arrange the builder to come in and don’t put the building’s insurance in place until the solicitor confirms that the property is yours. Acting on handshakes rather than contracts could leave you out of pocket.
- Failing to meet health, safety & legal responsibilities
This is arguably the most important aspect of being a landlord and should be taken extremely seriously. Failing to meet health & safety regulations could not only result in costly fines (and a prison sentence) but could risk the life of your tenant. With frequent regulation changes, an experienced letting agent can advise on the requirements the property needs to meet as well as your role as a lawful landlord.
- Securing the wrong type of finance to maximise returns
Profit margins are everything in property, and there can often be changes that affect your bottom line, such as mortgage rates increasing or economic challenges causing tenants to struggle to pay their rent (such as the pandemic.) Whether you need a bridging loan, auction finance, development finance or a mortgage, the right product with the best terms will help to maximise your returns.
Need finance for your BTL? Speak to our award-winning team today!