WHAT'S IT REALLY LIKE BEING A LANDLORD?
What is it really like being a Landlord? I know that in the 'feeding chain' a Landlord is seen as just above Double Glazing Salesmen, Second hand car Dealers, Jehovah's Witnesses and 'Chuggers'.
However there is not a stereotypical Landlord.
The ones I know are ordinary folk, many have become Landlords by default. Some are business people but many are retired.
Where do I start? Firstly let me answer the question always asked and that is "Do you make any money? Or it may
come in the form of a statement 'Oh you're a Landlord you must be loaded!".
We get this a lot...folks assume that we must be loaded because we dress smart And have a number of properties (none we own and most are in
negative equity (see below) which means we are in debt on most of them and a change in the Mortgage rate or a series of maintainance problems would be disasterous...we are like anyone running any type of small business..we fly by the seat of our pants!!).
Some Landlords do make a lot of money.They buy low and sell high, but they are more what is known as a Property Developer. Some are also Landlords but most would buy,do it up and sell it without the hassle of being a Landlord.
The Landlord is more of a Property Investor. They invest for the future, say for a pension or for their children. Income from letting varies. For instance in our case due to the fall in house prices most of our properties are in Negative
Equity - that is the current selling price is less than the Mortgage loan. So we cannot sell. However with interest rates so low our monthly income from rents is greater (Rent minus Mortgage = income).
The problem with this is that
this increases our Tax liability (Rent income minus allowable items = Tax liability). There are many allowable items i.e. Maintainance, travel (our properties are very far apart so travel is a big part of our claims against
tax), there is your insurances, your safety checks, memberships, legal expenses and of course mortgages. All these and many others can be set against your income. Best get a good Accountant, who understands your situation and they will help you sleep
at night! Just record everything and keep receipts - do it monthly and it will be less of a burden.
So to answer the question about making money....it all depends on things like interest rates, maintainance costs and house prices. We
don't take a salary but put any money we receive back into the properties to ensure their safety and comfort. To date we have had several wrecked properties which have cost a lot and actually have had to put personal money into the pot to survive. It is our
long-term plan to sell, pay Capital Gains and then use any profits for a Pension fund, whilst having very little present income.
What about Mortgages? The 'Buy to Let' Mortgage is mostly based on the value and income of the property and it's ability to pay the monthly rate. There are many
choices. Personally we used a 'Tracker' which sets your rate a certain percentage above the Bank Base Rate. So at the moment with the Base Rate so low is good news. Other Landlords go for fixed terms if they think the rate will rise soon... Generally
it is better not to try and pay off your mortgage as owning a property outright means that, although you are increasing you monthly income, at the same time you are limiting your outgoings (no mortgage payments) therfore increasing your tax liability...but
that is up to you how you do it. All our properties are Mortgaged.
What about 'Emotion' This is a big problem for 'Novice Landlords' - we have
all been there. You see a property that YOU like and you begin thinking that you would like to live there - and you FORM AN EMOTIONAL ATTACHMENT TO IT.. So when a Tenant misstreats it you think 'THEY have wrecked MY Property!! ...and you take it personally.
I know it's hard and I still feel personally defiled when my properties are destroyed or painted with purple walls and cookers are left with inch thick grease etc.. if at all possible a Landlord should see his or her properties as items of business -
this way you will become more professional and systematic in your approach. I admit I am still working on this one!!....often instead of saying ' Ah well,let's call the men in and sort it and get the Debt collector on the job..and get another tenant' - I feel
defiled, sob a little, get a bit miffed, go for a long walk and come home for a wee Dram.. Then after a couple of days ignoring it, I come to my senses and start again.
KEEP IT SIMPLE! The secret of the success of businesses like McDonalds is that they keep things simple and duplicate that simplicity in every Franchise. So as a Landlord - Keep it simple. Use the old faithful
Magnolia walls and white paintwork. Try to make every property as 'same' as you can then you can maintain them more easily. When I want to paint I simply get my Magnolia etc as I know that each of my properties are the same. The same with DOCUMENTATION
and FILES - I keep a smaller file for each property that contains essential documents (AT5, Tenancy Agreement, Next of Kin, Key retention file, Application Form, Guarentor form, Inventory, Gas safety check and then a section for important letters to tenant/Council
tax etc..) In other words I keep everything that I think I might need in a handy file and use a Pilot's Case to transport those files of the properties I am dealing with at present. It's a simple system. Whatever works for you keep it simple. Likewise concerning
the Accounts. I put all my receipts into a cheap file with the month marked, then at the end of the month or sometimes later!...I can open the file and sort my accounts. Once you have a SYSTEM for your first property then DUPLICATE IT FOR THE NEXT and so on.
The only fly in the ointment for me are the keys- try as I may I still end up with the wrong keys on a key tab and have been seen to visit properties with bunches of keys trying to see which fits...don't know what it is with me and keys, but it never seems
to be a happy relationship!
What DOCUMENTS do I need? I have outlined some of the basic documents that are needed on the DOCUMENTS page. The best thing to do is to attend a SAL training and check their Website LINKS and they will guide you. Not only that, but SAL will keep you up to date with the latest legislation (and believe me there seems to be 'new stuff'
coming out every few months).
Do I need to be REGISTERED? Definitely!! It costs around £55 for the first property, then about £11 for each subsequent
property. Registration lasts 3 years before you have to do it again. You get a number which you now have to use on all ADVERTS in the paper. Some tenants will ask for your Registration number as that gives them more confidence in your ability to provide a
good service. For Registration you have to adhere to certain very basic standards of paperwork and work ethic. See the link to Registration on LINKS page.
How do I advertise my property? There are various ways you can do this. There is the LOCAL PAPER, On line advertising like GUMTREE
and other Landlord specific sites. Remember you may (or should be) asked for your Registration number and EPC rating. I have found that often a NOTICE in the property window brings the best results. Also as regards Local Paper adds it seems that the first
week you get very little, then the second week lots...of course it often happens that just after the first add there is a poor response, then you put another add in, just as you do you get a great tenant then spend the rest of the time fending off applicants!!
For us the most effective advertising is 'word of mouth', we find that a previous or present tenant will call to ask if we have a flat for their friend,relative etc.. once we had 2 brothers and their mother all in different properties, that was because of
word of mouth.
Should I use a LETTING AGENT? Entirely up to you. There are some great Letting Agents and they are strictly regulated to give excellent service. However
it does come at a cost. You can have the full package ..they find a tenant, prepare paper work, do the checks, send their approved workment to fix anything and much more. Or you can get them to get a tenant and interview them. I have used someone several times
to find me a tenant and gave her the paperwork and did the interview and viewing etc. She was great and it worked well. But I prefer to have a more 'hands on' approach. I suppose being 'retired' then it keeps me busy and 'young'?? But the choice
is yours. When we take a break we have a friend and his wife to whom we give the 'works phone' and a cash float, the keys to all properties and pay them a fee and they manage the properties for us. We also inform all our tenants of this. So do
what is best for you. There is no right way or wrong way - just YOUR WAY!
What about FIRE REGS? I have recently started 2 things. Firstly I give to all new tenants
a sheet containing basic Fire safety, things like smoking dangers,small appliance safety, fire escape routes and other basic things to do with safety. Secondly I have started a programme of putting a FIRE BLANKET & FIRE EXTINGUISHER in all properties.
This is costly as a 'kit' containing both from Homebase is over £20...be warned although it comes with fixing brackets there are no screws, so don't get caught at a property with all the best intention of installing them,thus impressing your tenant...only
to find you can't put them up 'cos there ain't no screws!!. Also of course you will need smoke detectors which preferably should be 'hard wired'. Battery detectors used to suffice in the past but tenants often would take out the battery after the thing kept
going off when the bacon was frying. I think that now any new tenancy is required to have a hardwired system. On a slighty different matter you should ensure that CARBON MINOXIDE detectors are in every gas supplied properties, but I have known these to be
removed by tenants so there is no guarentee they will stay in situ!
The SOCIAL Aspect Sometimes this is unavoidable if you want to a 'hands on' Landlord. You
DO form a measure of relationship with your Tenants. I find that often we are helping them, not only to fill in Housing Benefit forms but also with more personal problems. You learn a lot about human nature and meet it in all forms! I think what I am saying
here is that you should have certain 'Social Skills' as a Landlord. The spin off from this is that a tenant will maintain contact keep you informed if there is any problem and let you know when they change their mobile number!! If you find this difficult then
I suggest you run your properties through a Letting Agent. Of course some tenants never bother you and are happy in their homes for years, they just pay their rent and get on with their lives....others do not..but that is the way of things.
Accountant? Who needs one!
Do I need an ACCOUNTANT? We prefer to use a local Accountant and pay a yearly fee. Also we pay around £100 a year for our Accountant's insurance against
a Tax Investigation, this covers the costs of any investigation. I have had one investigation to date and had to forward all my mortgage details, dates of purchases, cost and a list of every tenant that had rented from the beginning - this was so they could
check if what I was saying was true. May didn't have an investigation it was only me! If you do your accounts monthly and fill in all the various areas you can use as expenditure. The following are a guide - Rents - Other in - Mortgages
- Loan Interest - Rates - Utilities - Insurance - Maintainance - Renew & Refurb - Fix & Fit - Wear & Tear - Capital allow - Garden Svcs - Travel (45p per mile) - Safety checks - Adverts - Books & Mags - IT - Phone - Stationary - Tax - Conference/M'ships/Training
- Legal & Surveys - NI - Deposits paid - Accountant - Misc In - Misc out - Wages - Property Management. These are the basic sections I use. My Accountant sorts me out if any item is in the wrong section. Your Accountant will also speak with you
as to what these sections are. You may find that some on line property accountancy programmes slightly differ in their sections, but by and large they will cover the same areas.
I need to be a Business? Some landlords are registered as Businesses with Business accounts. Others are Partnerships or Self Employed. Some use their ordinary Bank Account. Do some research about this on line and you can make up
your own mind in which direction you want to go.
Can I do this with my Spouse? Actually this is a great idea, especially if you are both retired then any profits are
split down the middle which halves your tax liabilities immediately. Also when you come to sell and have to pay Capital gains then you double your allowance - can't remember the exact figure but it was about 9k per person. The other thing to consider
is if you are working and your Spouse is not then he or she can take the majority of properties as they are paying little or no tax to start with. Again you can talk with your accountant, or do research about this....or even dare I say, this kind of information
is usually taught at these 'whizz bang' Property Seminars - so there is plenty of information out there.
Do I need a Website? Let me tell you what
I have found....having a basic and simple Website, like this, is a tremendous benefit. When we advertise or get an enquiry we direct them to the site so they can see the property they are interested in and can read all about what is required. What is
helpful also is to produce business cards with the site information. Also when you are speaking with Professional bodies it is useful to direct them to the site so they can meet you and understand what you do. You might say, 'But I haven't
a clue about how to create a Site and to get someone to do it would cost a fortune!' All I can say is that you don't need any skills to create your site or pay a fortune. This site uses Simplesite which was founded in 2003 in Copenhagen,
Denmark, by brothers Morten and Jacob Elk. It costs less than £100 including a domain name of your choice. I made it in a couple of evenings sitting watching tele with my Apple laptop on my lap! The beauty is that I can add/change anything from
my ipad/iphone when I am out and about. All I can say is that this Host suits me fine and there are no hidden costs. I tried several Hosts before this one and they kept on trying to get me to buy 'add ons' and they were so complicated. Anyway commercial over!.........🙃
What's the reason you take a Guarantor? This has been a decision
we have taken as a result of too many tenants doing a 'bunk' owing a lot of rent and leaving a mess behind. With a Guarantor in place our Debt Collector can more easily get back what is owed. What we have discovered is that this actually 'roots
out' tenants who might be potential problems. In some circumstances this has been wavered (when the tenant/family is well known to us for example) but it can give a degree of security. In the light of the guarantor we do not require a deposit. We understand
that many tenants do not have enough money for a deposit and need all the money they can get to help with removal and settling. We do however take a month's rent in advance. This is something you must make up your mind about - the deciding factors for us have
been that rents in our area are so low and a deposit would therefore hardly cover any damage done, but having a Guarantor may mean we can claim back the full amount of work needed to put things right, this backed with a Debt Collector seemed to us a better
way forward. But as I said, you must make the choice. Whatever you choose at some point you will get stung! Sorry but I am a realist! 😥
Ladies Landlord Convention circa 1899 (?!)
How do I START if I want to be a Landlord? Assuming that you have not inherited a property but you are considering buying to let. Then firstly you should have a deposit. This
is not as daunting as it seems and there are various ways to get a deposit together, most common is to re mortgage your own property and take out some tax free equity and invest that in a deposit. I know some landlords that have used a credit card to buy a
cheap semi derelict property then remortgaged it and paid their card back! Bit risky but can work. Then you need to get a good independent mortgage broker to organise a mortgage that suits you. Then find a property, buy it as cheaply as you can, buy
one that will rent and in my opinion a 1 or 2 bed is best, we bought a 4 bed flat and regretted it as it was hard to rent. After this you won't sleep for a few nights due to a combination of excitement and fear! Of course then you need to Register, sort
out the Documentation as already mentioned. Be warned, however buying property is addictive!!
What about GET RICH QUICK SEMINARS for Landlords? Here I might
differ from some Landlords, but we have been to a number of these Seminars and even got some DVDs. My opinion is that a Landlord should consider going to at least one of these. The reason is that not all that is said is bad and in fact
if you go when you have a little experience of being a Landlord you can actually pick up a lot of tips. It is like taking some wheat in your hands...rubbing your hands together then blowing away the chaff and keeping the precious wheat. So go and
listen and you probably will blow away most of it but you will keep some precious ideas. One word of warning and of course you probably know this - just don't get conned into buying their properties or signing anything. Just go, sit, listen
and learn. In short I think you can admire but don't buy! They will flatter you and make you feel that you are going to get unbelievable rich in a matter of weeks....umm. One old English Puritan said 'Flattery is like perfume, you can smell
it and enjoy it but DON'T SWALLOW IT!!' Wise words.
IS BEING A LANDLORD A GOOD THING FOR SOMEONE WHO IS 'RETIRED'? The Scottish Philosopher
David Hume said something to this effect - we can only truly know something when we have experienced the opposite. Now I do not agree with Hume's Empiricist views but he has a point. Maybe we can only experience the peace and quiet and relaxation
of our retirement when we experience the tension, pressure and turmoil of being a Landlord! So after a day of nail biting tension, chasing tenants, fixing blocked loos, buying new toilet seats (what is it about toilet seats that they seem to end up on the
floor)..how much better does a day of relaxation feel...reading, painting (not walls but watercolours!) and talking with friends putting the world to rights...all this is enjoyed far better after a day of 'Landlording'. So maybe
Retirement is the best time to be a Landlord!
Nothing ventured - Nothing gained! GO FOR IT!!
Make your own website like I did.
It's easy, and absolutely free.