Tips for first time landlords27-11-2023 | Other
Starting out as a first time landlord is an exciting adventure, but it can also be daunting. If you’ve ever been a tenant, you will know all the things that landlords did that you appreciated and all the little things that drove you crazy, but owning an investment property has slightly higher stakes than just risking annoying your tenant. If you do things wrong, you could end up in serious financial or legal hot water, so it’s vital to start off on the right note.
Getting off on the right foot can help you establish habits that will save you time, money and frustration for years down the line. Here we at CIA Landlords have come up with some tips for first time landlords that will help you get it right from the get-go!
1. First time landlords: Get everything in writing!
This may sound basic but the importance of it can’t be overstated! The lease itself is vital, obviously, and should clearly detail your policies around late rent, subletting, pets, damage, changes to the lease… everything. Your lease needs to clearly state your terms, and what happens when the terms are violated. You can use a boilerplate lease online to help get you started, but make sure you read the fine print and adapt it all to fit your property and your tenants. Having it looked over by a legal professional can help, as can working with an estate agent to ensure everything is above board.
However, it’s not just the lease that you need to have in writing. To cover yourself legally, every communication you have with your tenants about the property should be in writing too. This includes things like planned property inspections, maintenance visits, and giving notice. If you speak to your tenants about these things over the phone, drop them an email afterwards that includes everything you agreed on.
This way, if there are ever any disputes, you can rely on these written records to prove you’re in the right.
2. Get a handle on landlord legislation
Understanding the landlord legislation and your landlord responsibilities is non-negotiable. If you don’t know what you need to do in regards to providing smoke alarms, fixing furniture, or safekeeping deposits, you could easily end up on the wrong side of the law.
If you’re worried about not getting things right, working with a letting agent is one way to make sure you’ve got it all covered. Letting agents can take on as much or as little responsibility as you like – they can just help you with the paperwork, or they can fully take over the day-to-day running and management of your property.
3. Don’t expect to turn a profit right away
If the property you’re renting still has a mortgage on it, it’s likely that in the early days, a large portion of the rent you collect from that property will go towards that, and any extra cash will be eaten up by maintenance and upkeep costs. You also may have insurance or letting agent costs, which will likely take up any leftover pennies.
There’s also tax to take into account. If you only own one property that isn’t yet turning a profit for you, it’s easy to forget that you’re actually technically running a business. But you are, and you’ll be taxed on it accordingly. Rent payments are classed as income, so you’ll be taxed on them. The good news is that whatever you need to spend on maintenance and repairs for your property are considered ‘allowed expenses’. If the numbers and figures get you sweating with nerves – an accountant will be able to help you get things in order and run your business efficiently. They’ll also help you out with any property tax exemptions that might help ease the load.
Even without making a lot of profit, your rental property is still valuable. All those rental payments help you build equity, which pays off over time.
4. Prepare for vacancies
Ah, vacancies…a welcome break or a landlord’s worst nightmare?
Vacancies happen to every landlord. Sure, you might be very lucky and end up with a tenant who wants to stay for years and years and make your life easy, but this won’t always be the case. You might go for years without a vacancy, but most of the time, you’ll have to prepare for periods – sometimes multiple months long – where you’ll have no rental income. If you’re turning a comfortable profit, planning to live without that profit at any given time is vital. If the rent is paying off your mortgage, you’ll have to be prepared to foot the bill for that yourself.
It’s best to develop a contingency plan – like short-term letting (Airbnb, for instance) – or rely on your savings fund to cover yourself in these lean periods. Vacancy periods don’t have to be all doom and gloom. If your property needs some refreshing or you feel like you could get more value out of it by making some changes, look at vacancies as the perfect time to undertake this work.
At CIA Landlords, we offer unoccupied landlord insurance as coverage for periods when your rental property is vacant. We also have specialist unoccupied commercial property insurance for those letting out vacant buildings such as offices and warehouses.
5. Get the right insurance
You can’t drive without car insurance, it’s illegal. You can’t be a landlord without landlord insurance. Not because it’s illegal, but because that would be a foolish move. Protecting your investment property can help protect you from huge costs down the line. Specialist landlord insurance helps to protect you from multiple things – loss of rental income, damage to the property’s structure and other fittings like sheds and fences and malicious damage.
Much like car insurance, you hope you never have to use it, but if you ever need it, you’re grateful it’s there. Take the best first step possible in your landlord-ing journey, get a quote from CIA for landlord insurance today.
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