From Savvy Investor to Smart Landlord In One Easy Lesson

Savvy investors

Record-high tenant demand and rents have been hot topics for the past couple of months and this shows no sign of slowing down. Rather, continuing uncertainty caused by house price fluctuations and the recent Government spending review all indicate we are well on our way to becoming a renters' nation.

We have covered today's market fluctuations and what they mean for investors in Bulls, Bears and Bouncing Cats. In this article we are going to look at how you can ensure you enjoy a positive, long-term relationship with your Buy To Let (BTL) investment and, importantly, your tenants.

We know, in November 2010, there are five prospective tenants to one available property. We know rents continue to push up and an increasing number of new, opportunity-seeking investors are joining the market. Competition is healthy, but how do you make sure you stay ahead of the game?

To completion and beyond

It is easy, as an investor, to focus so much on the BMVs and ROCs that you don't think too much about what happens after you complete. At Axis, we only source and offer the best deals and make the whole process so easy for our clients that the deal is pretty much handed to you on a silver platter.

Of course you are going to get a great Below Market Value (BMV) purchase price. It goes without saying that your Return On Investment (ROI), Return On Cash (ROC) and rental yields are going to be better-than-average to exceptional. What, then, is left for you to do?

The answer to that is simple. As well as being a savvy investor, you need to be a smart landlord in order to make the most from your BTL investment. After all, a happy tenant is the best sort of tenant to have because they will (a) look after your property, (b) remain there over a longer term and (c) be far more inclined to accept increases in rent if they are getting value for their money.

The abc of a happy tenancy

You may think tenants are more likely to stay put regardless in today's economic and housing market climate. However, no matter how hard things may be ‘out there', an unhappy tenant would often rather take their chances in the wilderness than suffer at home.

Similarly, you as a landlord should have tenants who make your life as easy as possible too. Every relationship requires some work on either side - including the landlord to tenant relationship. However, it doesn't have to be hard work and following a few simple guidelines will help all run smoothly.

Due diligence

You wouldn't invest in a property without completing due diligence. You want to know your investment will be lucrative and easy to maintain, with as little effort and expense as possible on your part. The same should go for your tenant/s. After all, they are part of your investment.

Many landlords choose to work with a letting agent to help let and/or manage the property. A good agent should be able to help you find reliable tenants, conduct the relevant reference and credit checks and, generally, help you to protect your investment. Agents generally charge around 10% upwards of the annual rent to find a tenant, or 15% plus to manage the property at well.

Again, when choosing a letting agent, it is crucial to complete due diligence. We are always happy to negotiate with regulated, local agents on the behalf of our clients, including obtaining a discount on their fee (typically at 8%) so please just let us know if you would like us to handle this for you as well.

Tick all the boxes

If you would prefer to be a more hands-on landlord, then we recommend following these tips from the Residential Landlords Association (RLA):

Use an application form that requests the last three years' residences, date of birth, National Insurance number and next of kin details.
Request proof of ID, such as a passport or driving license.
Request three months' bank statements.
Use a tenant reference service, such as the one from the RLA.
Advise your tenant to take out contents insurance (which should cover accidental damage in the property).
Take out insurance to cover "injury to people residing in or visiting the premises."

We also recommend you take out your own buildings and contents insurance with a specialist, landlord-specific policy. You can even take insurance to protect against a tenant not paying rent with some policies. Again, we are happy to negotiate with insurance agents on the behalf of Axis clients.

Of course, you must also ensure you prepare a detailed inventory of the property, including the condition of the contents, walls, ceilings, doors, windows, fixtures and fittings etc.

Due care and consideration

Due diligence covered, now let's look at the other defining factors successful landlords have in common. In brief, smart landlords look after their investment by looking after their tenants. In order to look after your tenant, you must ensure the property is well maintained.

Your BTL property investment may come ready tenanted. You may choose to appoint a letting agent, or you may decide to go it alone. Whatever the scenario, you are still the landlord and therefore responsible for making sure the property is as it should be.

Investing a little time and effort early on can pay dividends in the future. A well-presented and good quality property is likely to attract a more loyal and higher standard of tenant - in addition to commanding a higher rent. Points to consider here are the condition (décor, furnishings, white goods, etc) and the mechanics (heating, plumbing, etc).

Neglecting these points can be a serious error of judgement. Let's use a real-life example, as once experienced by one of our staff members, to demonstrate.

A cautionary tale

A tenant had been living in her privately-rented flat for five years. She had a good relationship with her landlord and claimed her flat was "almost perfect", apart from one point. It was freezing cold in winter months and, as all was electric (no gas), it was "astronomically expensive" for her to heat. Each autumn, as the weather starter to turn, she would have the same conversation with her landlord and he would promise to fit central heating. He never did.

As the fifth winter approached, she even offered her landlord a higher rent in return for the long-promised central heating. She was a good tenant and explained that, if the property had central heating, she would be happy to stay there indefinitely. Still, her landlord dragged his feet and complained about the "expense".

It would have cost him around £3,000 to complete and she was offering an additional £100 per month in rent in return, so his maintenance investment would have completely paid for itself in less than three years. Driven out by the cold, the tenant took her offer to pay a higher rent elsewhere.

The right balance

Now, we are not suggesting you spend all your time running around after your tenants - far from it! Everything we do here at Axis is driven by The Freedom Plan and SystemZERO, structured approaches to provide the best possible results, in the shortest time and with minimum time and effort involvement on the part of our clients.

There is, however, a big difference between a tenant complaining the shower curtain clashes with the colour of the bathroom suite (another real-life anecdote) and a tenant being driven out by ice on the inside of her windows for three-to-four months a year.

Remember, in order to achieve a premium rental yield, you should present a premium property and in order to do that you need to be a premium landlord. We are here to help you every step of the way, so give us a call to find out what we can do for you today.

To find out more about currently available properties and/or have a no obligation chat about our property investment strategies, call Russell Bonner on our UK hotline 0333 444 0034 or email him at russell@axiscontact.com

Live with Abundance

Rod Thomas sig