When people say the property game can be a risky business, the emphasis is on the word ‘business’. That’s why proper management is so vital and why you can learn from some of the mistakes that those before you have made.
They buy at the wrong price
Many first time landlords are excited about starting the investment portfolio that they believe will make them millions! Well, that is possible if it’s managed well but more often than not new property investors don’t spend enough time trying to get the best possible price. In addition, many landlords will buy a property in a place they are not familiar with. It could be an area populated by students, another city altogether or in a city while they retire to the country every evening.
The advice – know your location and know the rental market. It’s not enough to just think you’re getting a fair price for the place you’re buying. You need to know what the return on your investment will be from rent and if you potentially sell it.
They don’t manage their finances
It’s exciting and it can be financially rewarding to own and rent out a property or a few of them. But what many landlords fail to realise it needs to be run like a business. There are incomings (rent) and outgoings (boiler checks), tax returns to file and expenses to claim. Many landlords are overwhelmed by the decisions they need to make at an early stage (such as whether to register a Ltd company or simply submit a self-assessment tax return) and end up banking or spending the rent they receive.
The advice – get ahead of the game before your tenants move in. Set up appropriate bank accounts for rents and deposits. Mark in your calendar the key dates you will be liable for tax and when to submit the paperwork and create a cashflow forecast including predicted income and all your foreseen costs. Don’t forget to set money aside for some emergency repairs too.
They don’t manage maintenance
There are two different ways landlords can mess up their property investments when it comes to maintenance. The first is ignore issues when they crop up. This will cause major problems between you and your tenants, not to mention could create even worse problems at your property. The other is when pro-active maintenance isn’t planned or predicted in the long term.
The advice – create a plan for regular maintenance checks at the property. Include a review of the gutters, the roof, the floors the plumbing, the boiler and anything else you think might be a massive headache if it burst, blew up or went wrong. The schedule in maintenance. Trust us, it might seem like an unnecessary expense but a little money spread across the year is way better than one giant bill when you’re least expecting it.
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