Whenever you allow a complete stranger to live on your property, you’re taking a risk. Life as a landlord, then, amounts to a continuous exercise in risk management.
These are the risks Taylor Street Management warns you about and suggests how to deal with them when renting your property:
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For your business to succeed, you’ll need customers that pay for your service. If you’re renting your property, your customers are your tenants. When your tenants can’t pay, you don’t make any money. This is always a risk, but you can filter out the non-paying tenants by performing checks for bankruptcy and credit score, and by asking for a portion of the payment up-front as a deposit.
Damage to Property
Some tenants won’t look after your property in the way they might if it belonged to them. But even if your tenants behave impeccably, you will still inevitably have to deal with repairs and preventative maintenance. In the long-term, it’s better to take a long-term view of repairs; it’s better to invest a fixed, predictable amount sending over a Gas Safe engineer (as you’re obliged to do every year) than to have to deal with the more unpredictable, explosive consequences of neglect.
Between tenants, you might conduct an inventory (with photos) so you can demonstrate responsibility for damage. Another worthwhile strategy is to take out landlord’s insurance with a reputable provider like Homelet. This will turn the short-term shock of a big repair bill into a more predictable expenditure.
Inability to Remove a Problem Tenant
Sometimes, a tenant can prove more trouble than they’re worth. As well as inflicting damage on the property, they may generate noise complaints and generally make nuisances of themselves. Tenants enjoy certain rights and protections under the law, and they are often advised by the powers-that-be to stay in their homes until removed.
You can deal with this by stipulating the standard of behaviour you expect in your initial tenancy agreement. This might include banning things like smoking and pets. You might also carry out stringent background checks on the tenants in question, including seeking references from a previous landlord.
Not enough demand
In some cases, you might struggle to find people willing to move into your property. This will leave you with a vacant property which isn’t providing an income stream, but which is still consuming money in the form of repair and maintenance work. This risk can be mitigated by improving the property to make it more attractive, or lowering the rate you’re going to be charging. Better yet, you could carry out more extensive research on the area in question prior to making the purchase.