7 Buy-to-Let Mistakes to Avoid
If you're about to take the plunge into the world of investment property then you'll want to make sure that you're fully prepared to become a landlord. That means avoiding some of these common buy-to-let mistakes...
1) Not treating your rental property like a business
There's a lot to consider when it comes to being profitable with your rental property and unless you get organised, you'll find yourself losing money before you know it!
Make sure you stay on top of all of your expenses and that you factor these in when managing your finances. Your mortgage isn't the only cost involved - you'll also need to consider things like property maintenance and insurance.
2) Not vetting your prospective tenants
The quality of your tenants will determine your success (or failure) as a landlord.
You can't make a profit if your tenants don't pay you.
It's a great idea to meet your prospective tenants in person so that you can get a real sense for who they are and whether they'll be a good fit for you and your property.
Of course, while first impressions and gut feelings are definitely useful, there are also more quantitative ways to vet your tenants. You can ask for references and you can also run background checks using services such as Experian's tenant checking service.
3) Not fully understanding your responsibilities
There are a number of legal responsibilities associated with being a landlord and it's up to you to both know what they are and to adhere to them. Not doing so can land you with fines or even law suits.
For more information on what your landlord responsibilities are, take a look at the helpful advice on the gov.uk website.
Beginners' Guide to Getting a Buy-to-Let Mortgage ↓
4) Not getting rent guarantee insurance
Hopefully, if you've vetted your tenants well, you won't have to deal with missed or late rental payments too much. However, it's always better to be safe, than sorry and rent guarantee insurance will protect you should the worst happen and the odd late payment turn into something more serious.
It can cover most of your loss of rental income as well as any eviction and legal fees you might have suffered as a result.
5) Not completing a detailed inventory
To avoid any disagreement when it comes to the state and contents of your property, it's a great idea to complete an inventory at the start of any tenancy agreement and again at the end.
Make sure both you and your tenants are present and agree to the inventory.
A good inventory will include:
- Photographs of the property
- A list of furniture and fittings
- Any other details which you feel are appropriate
6) Not having a professional Assured Shorthold Tenancy (AST) agreement
It may be tempting to save money by creating your own tenancy agreement, but an AST will ensure you and your tenants are fully protected. It will clearly outline the rules and responsibilities for each and have information regarding the different ways to deal with issues.
7) Not using a mortgage broker
Of course, we couldn't finish this guide without mentioning the need for a good mortgage broker when you get your buy-to-let mortgage!
This type of mortgage generally comes with more costs than a standard mortgage. You can expect to pay higher fees, larger deposit and increased interest rates. A mortgage broker can find you the best deal for your specific circumstances - and will also have access to products which aren't available on the high street.
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