Rental pitfalls awareness for a newbie landlord

[chip*]

Hi,

My wife and I are considering purchasing a 2nd property (undecided on a flat or a house) and rent it out for a small return + a potential retirement nest egg. We are mortgage free (absolutely no plan to move as we are happy in our house and the area we live in) and we can invest 50% of the target purchase price. We have just started researching the rental market so we pretty fresh in this field. As with any investment, we like to know the risks and mitigate them whenever possible.

In this respect, if you are / was a landlord, would you be happy to share your bad experiences or disputes with us, and what did you do to resolve them? i.e. covering any aspect from the tenants, management companies / fees, rental agreement, building damages/insurance etc..

Any other tips would be appreciated too!
Thanks

[S6PNJ]

Chip, here are a few threads discussing rentals etc (some may be useful, some not) that I've been involved in recently. The search is borked (again) so just look back through Business, Finance and Homes Gardens and DIY forums to find some others.

http://www.pistonheads.com/gassing/topic.asp?h=0&a...
http://www.pistonheads.com/gassing/topic.asp?h=0&a...
http://www.pistonheads.com/gassing/topic.asp?h=0&a...
http://www.pistonheads.com/gassing/topic.asp?h=0&a...
http://www.pistonheads.com/gassing/topic.asp?h=0&a...

[Eric Mc]

And don't forget the Income Tax, Capital Gains Tax and possibly Inheritance Tax issues associated with 2nd properties.

[jan50]

You have to put the deposit with a form of tenancy deposit scheme, make sure you do.

Get good references, bank statements, credit check and a good inventory for your tenants and a watertight tenancy agreement.

Jan

[Burrow01]

jan50 said:

You have to put the deposit with a form of tenancy deposit scheme, make sure you do.

Get good references, bank statements, credit check and a good inventory for your tenants and a watertight tenancy agreement.

Jan

If you go via a lettings agent for the property, they should manage all of this ^^^^^

One thing to do is add in all the costs / expenses of running the property to make sure you have a clear picture of the amount that you are making on it. Also make sure you allow for void periods (even if the property rents straight after a tennant leaves there will be an empty period whilst the details referred to above are sorted for the new tennant)

Research the market you are looking at and decide what type of property best suits you - flats are generally cheaper and have less maintenance, but do incur Service Charges and Ground Rent, but where I am they give a better return for the money than houses, and are in more demand due to a shortage. It may vary in the area you are looking at.

Remember you are buying a property for the rental market, not for yourself, so look for propeties that are attractive for prospective tennants, and will give you the best return on the capital you are investing

Edited by Burrow01 on Tuesday 8th January 14:43

[FlashmanChop]

jan50 said:

You have to put the deposit with a form of tenancy deposit scheme, make sure you do. - and you will not get anything to cover any repairs needed and the TPS will fk you over.

Get good references, bank statements, credit check and a good inventory for your tenants and a watertight tenancy agreement. And 7/10 they wont make much difference. unless of course you are dealing with very good, rare people.

Jan

[jan50]

FlashmanChop said:

Perhaps you are right, but if you take a deposit and dont protect it you are likely to face a fine of 3 times the monthly rent.

Getting a guarantor and no deposit is another idea.

Or, get a lettings agent but theyre likely to charge 10% for managing it.

[Stevemr]

Letting agent will charge 10% but achieve higher rent for you hopefully.

Get rent protection insurance small premium, huge piece of mind

calculate your figures on getting 10 months rent a year to allow for voids, if you dont get any leave it account for following year.

Aim for very reasonable rent better to be £25 a month less and rent it out quicher.

Use good Broker for mortgage and try and aim for mortgage with decent svr, the fees are high on BTL mortgages and you do not want to be remortgaging every 2 years.

[Poko]

I would recommend going to a good, well recommend local estate agent. (Try non-chain)
Just discuss your ideas with them, and I'm sure they'll be able to tell you exactly what would need to be done.

I worked as an estate agent for a little while, and people would come in all the time to ask questions like this.. My boss was always more then happy to answer any questions, even if they didn't really intend to go with him. Most people would then go to him to let out their properties anyway!