Sure, there’s money in real estate investment, and there are many people who make a decent amount being buy-to-let landlords. But, just because you see other people succeeding at it, it doesn’t mean it’s easy. Many people believe they have what it takes to be a landlord, when in reality the job is fraught with unpleasant tasks. Before deciding to invest in a business like becoming a landlord, it’s important to find out whether you’re cut out for the job. Here are a few things you need to know.
Of course, most would-be landlords will consider the cost of purchasing a property, along with solicitor’s fees, surveys costs and more. However, for many people, that’s where the planning stops. In fact, the cost of purchasing is just the first cost in a long line when it comes to setting up this type of business. The property you purchase, unless it’s a new build, is likely to need some work before it can be advertised to potential renters. You’ll also have to comply with renting regulations before you can move anyone in and collect rent. It could also cost you money to draft a contract to be used in all rental agreements between landlord and tenants. If you want an estate agent to advertise the property for you, you’ll also have to put money aside for their services. There can be a lot of hidden costs that crop up in the beginning.
When you own a property, making repairs when needed is part and parcel of the deal. However, when you’re a landlord, these repairs are essential and often need to be carried out quickly. The difficulty with this is that repairs are never convenient. Your tenants may contact you at midnight complaining because of flooded toilet and you’ll have no choice but to call an emergency plumber. Because of the time of night, you’ll also be liable to pay out of hours charges, which means the cost of the repair could double. These types of repairs are common for landlords, so if you don’t like the inconvenience or you aren’t disciplined enough to put aside money for emergencies, you may not be cut out for the job.
You could be lucky and have tenants that look after your property well and always pay rent on time. But, you could also be unfortunate and have tenants who do the exact opposite. As a landlord, you may have to go above and beyond to collect your rent. If a tenant misses a month’s rent, will you be willing to give a second chance and allow him to catch up or will you start the eviction process immediately? One good solution for this is to use the tenant communication app to notify them ahead of time when rent is due. Making these kinds of decisions is tough, and you may even receive a few sob stories that hinder your decision. Then you have to worry about the state of your property when tenants leave. If you’re unlucky enough to have tenants that don’t like to co-operate, your property could end up being left unclean and damaged. The average cost of cleaning and repairing a terrace house every time a tenant leaves can really add up.
Evicting a Tenant
Just because you give your tenant an eviction notice, it doesn’t mean they’ll quietly and peaceful leave, and it doesn’t mean they’ll leave quickly either. Often times, the eviction process is a long one and you may need to involve the authorities to get the result you desire. Sometimes, an eviction has to go through the court to be handled properly. You may have to wait some time for a court date, and if your tenant doesn’t show up it can complicate things. In many cases, evictions are costly, time consuming and messy affairs that most landlords would rather avoid. Having said this, there aren’t many landlords who have been able to avoid situations like it.
Money Isn’t Always a Sure Thing
When you rent out your property you may enjoy lengthy leases with easy-going tenants and you may get used to your mortgage being paid for you every month. However, there will come a time when those easy-going tenants move on and you could be looking at a lengthy time of a property unoccupied. For many landlords, that often means they have the responsibility of paying their own mortgage along with the mortgage of the property they usually rent out with no extra income. Being a landlord means being prepared for financial ups and downs and making sure you set save money from your ups to cover your downs.
When you’ve got tenants who are comfortable in your property and always pays on time, it can be easy to take it for granted and leave them in peace. However, property inspections are recommended for a good reason. If a safety concern crops up in your property and you don’t notice it and deal with it, your tenant is well within his rights to sue you if he’s injured as a result. The last thing you want to do is walk into a property and find problems that need repairing but it will be far less costly to deal with them quickly than it would be to leave them there and risk an accident happening.
Remember Your Taxes
The thought of buying a property and making money from it is the dream for many people, but as a landlord you’ll still be liable to pay taxes. Being a landlord is a business and that means you’ll have to declare all the money you make and pay taxes on it. There aren’t many people who understand the tax implications of becoming a landlord before they decide to do it. You may benefit from visiting a financial advisor and getting an idea of what sort of taxes you’ll need to pay and how that will affect your income.
Renting out properties is a great way to make money, but you need to remember that a landlord has many responsibilities and some of them could put you off for life.