Many people have a dream of owning a second property to let out to earn a lucrative return from for their twilight years. When people hit their thirties, they consider the future more than what they used to. Living in the present is spontaneous, fun and exciting, but it can also lead to financial uncertainty come retirement. This is why people choose to take some of their savings pot to put down a deposit on a second home. Letting out a home isn’t all unicorns and lollipops! There’s an awful lot of stress and plenty can go wrong. Read on to see if you have what it takes to be a landlord.
Having the cash ready to put down a deposit on a new pad is one thing, but having the financial means to keep a property is another. It’s important that you don’t stretch yourself too far financially. You need to consider if you can afford the mortgage repayments if you don’t have a tenant for two or three months. And what would happen if you didn’t vet your tenants effectively enough, only for them to fall behind on their payments to you? It’s crucial that you look into every financial aspect of owning a second home, from the loan to the rental yield. The rental payments that you can recoup each month need to cover your home loan repayments plus leave you a little something extra should you need to carry out an appliance repair, get a patch of damp sorted or clean the carpets come the end of a tenancy.
While most tenants will be pleased to have a landlord with a stand off approach, leaving them to get on with living in a property, they will still need you to be on hand if a problem arises. Will you be able to take a phone call in the middle of the night if a water pipe bursts? And can you organize an electrician at short notice if an electrical fault is spotted? If not, don’t worry. However, you will need to factor in the financial cost of relinquishing these landlord duties to a management company. You can’t simply purchase a pad, let it out and then become invisible. You need to be a decent landlord and treat your tenants with the respect that you expect in return.
As a landlord you rely on tenants, you need them to pay the mortgage off of your investment or to yield your monthly rental income. As remember, if any monthly bills are not paid ultimately you, the landlord, is responsible for them. Here are some further common problems faced by landlords;
- Rent arrears (or recovery). One of the biggest problems faced by landlords all over the country is the problem of rent arrears, tenants not paying the rent as per their agreed contract. To make matters worse trying to recover any unpaid rent can be a laborious battle that doesn’t actually yield fruitful results, rather it ends up costing you more.
- Wear and tear. Tenants do not own the house and as such can treat it in that way. Tenants do not commonly tend to general wear and tear on rented properties and this then falls to the landlord. That said given the landlord does not live in the house or have regular access keeping on top of wear and tear can be difficult.
- Access to property. This can be a contested area as some tenants may be unwilling to grant access to the property when it is needed, despite being agreed upon in the rental contract.
To help you avoid some of these common pitfalls and stresses as a landlord you want to be able to find trusted tenants. To do this consider running a tenant background check to provide you with a bit more confidence and help you make an informed decision when renting your property to people you do not know.
f you need to recoup some money quickly, then investing in property in the current climate probably isn’t your best bet. You’d be better off having a punt on stocks or Forex. However, if you’re willing to build equity and remain in bricks and mortar for the long game, you could have a property that is let out nearly one hundred per cent of the time, and you could end up with a fully paid off asset within ten years. After this decade is up, you can then choose to earn the rental yield to line your own pockets, or you could sell your dwelling and pocket the cash.
Being in the property game is not for the faint hearted. It’s difficult to work out where to buy, how much money to put down as a deposit and how to ensure that you secure decent tenants. However, with research and by following this guide, you can have what it takes to become a landlord.
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