Being a buy-to-let landlord is a goal for many people who see it as a great way to grow their wealth. Whether they’ve moved out of a previous home and decided to rent it rather than selling, or they’ve purchased a secondary property as a buy-to-let one, it’s not all strawberries and cream. It pays to plan well to turn a penny, otherwise you can be left seriously in the red. And your tenants aren’t going to bail you out either! Here is how to make money as a landlord.
Get Sufficient Insurance Coverage
While individual tenants may choose to take out contents insurance to protect themselves, it’s not a legal requirement to get landlord insurance. That might seem surprising, but it’s true. Certainly, a mortgage lender can make it a requirement of the loan that this type of insurance is obtained but otherwise, it’s an individual choice.
Getting insurance allows you as a landlord to protect the property’s contents (including in common areas), protect against any landlord liability issues including legal costs, and insure unoccupied properties that carry a different kind of risk.
Policies can often be tailored, and they are easily found via sites like Quotezone.co.uk. They can often arrange for emergency cover, alternative accommodation cover, and malicious or accidental damage cover too. Ordinary building and contents insurance isn’t correct and won’t be sufficient.
Hire a Good Accountant
The tax situation as a landlord has gotten more complicated over the years. It used to be a simple matter but that’s no longer the case. To avoid making crucial mistakes, it’s best to hire a qualified accountant who can assist in the proper financial management for the property portfolio. This applies whether the portfolio consists of a single house or several properties dotted around the country (or around the world).
Screen Tenant Applicants More Carefully
Tenants come in all shapes and sizes. Some look shabby but earn well and pay on time. Others appear outwardly presentable but will struggle to make rent payments on time, if at all. Looks can be deceiving. It pays to screen tenants for their financial background. This can confirm whether they’re already underwater due to other debts or if there are other concerns that a landlord should be aware of. Also, trust your gut when speaking with them or meeting them. Do you get a sixth sense that they’re shifty or do they come across as a reasonable person?
Know Whether a Property Will Be Cashflow Positive
Some property yields are such that there are no profits from the rents after taking into account occupancy rates, repairs, maintenance, and other bills. That’s often true in major cities where the prices have become so expensive that the yield is low.
However, when the medium-term expected uplift in property prices is something that you’re comfortable with investing to receive, then that’s fine too. Just be clear that until the mortgage is repaid, a property may be flat from a cashflow perspective and rely solely on price increases to supply a paper profit.
By avoiding the risk factors associated with being a landlord, it’s possible to make a healthy profit. It may be a paper profit until the property is sold, but that’s better than nothing.