Being a buy to let landlord can be a rewarding experience if you find trustworthy tenants who pay the rent regularly and they keep the property in good repair and order. However, there are drawbacks to being a landlord and, in this guide, we will explore the top 4 risks that landlords can face, and what you can do to offset these scenarios:
Tenants who don’t pay the rent:
When you rent property to a tenant this is always a risk that you take, no matter how careful you might be during your vetting process. Losing rent can have disastrous consequences, leaving you with the fallout and having to find the payments for the mortgage repayments which can be a worrying time. Vetting tenants can only go so far. Good tenants can experience financial difficulties and they can stop paying the rent and the landlord loses out. Even if you collect a deposit at the start of the tenancy, this is only a fraction of the cost of a few months’ rent. Bruford and Vallance have insurance policies that might be able to help.
Finding good tenants:
It’s not always easy to find good tenants who not only pay the rent but look after your property too. Getting the wrong tenants can be costly for landlords. Some tenants can cause serious damage to properties and although there is nothing you can do to stop this, thorough vetting and requesting references can go some way to reducing the risk.
Not buying the right property:
If you are not sure of the property market in a particular area this is a huge risk to take. Understanding the property market and the rental yield is so important to make sure that your property is profitable. When you are looking for a buy to let property it should be approached as a business decision. The property you choose should be one that makes you money. Avoid overspending on renovations before you move your tenants in and be alert to unforeseen defects or problems with the property that could prove costly. Do your research and conduct an audit before you buy and you should be able to find a profitable rental property.
Perhaps one of the biggest risks for buy to let property owners is having difficulty finding tenants. Just because you buy a rental property doesn’t mean that it will always be tenanted. The risk arises when you have the property mortgaged but you can’t find tenants to rent the property for you. During this time, you won’t just be liable for the mortgage payments but all the other associated costs of the property too such as utilities. To avoid this always look at where the demand is for rental homes and seek advice, and you shouldn’t have any problems renting out your property.