Investors can encounter a large number of pitfalls when expanding their portfolios. From difficulties with tenants to general maintenance problems, property ownership can seem complicated at times. Therefore, we have listed the typical problems you can encounter as an investor, so that you can avoid financial hardships in the future:
1. Choosing the Right Area
Would-be landlords can come across buildings that are priced on the low side. However, you should always be wary in such circumstances. The building may be in an area where few people would rent, for example, if it is a place liable to flooding. Such properties can also be difficult to insure, so always become knowledgeable of an area before buying property there.
2. Issues with Apartments
Apartment blocks can come with hidden costs and problems. For example, service charges in new builds can be higher than 15% of the rent charged. It is also wise to avoid buying up a lot of flats in one development, because if it performs poorly, your return on investment will be low. Therefore, purchasing properties in different complexes is often a better option.
3. Refurbishing a Property
Landlords should remember that when refurbishing, colours and furniture should always be simple and neutral. By decorating the rooms to your taste, you may alienate people who prefer a different style to you. When selecting new fixtures and fittings, you should also remember to stay on budget. By keeping kitchens and bathrooms at a low cost, you will avoid running over budget and coming into financial difficulties later on.
4. Ex-council Housing
Ex-council houses may seem like a good option, as they can function as affordable family accommodation. However, investors should be aware that housing benefit is no longer paid to the landlord. Currently, benefit for rent is paid directly to tenants. This means that rent may not be received as efficiently as under previous rules and processes.
5. Selecting Honest Letting Agents
When employing a letting agent, ensure that they have set up a contract for you, because some will charge additional fees where others will not. Therefore, to keep control of your outgoings, you should only work with letting agents who provide contracts stating all the costs. For example, some will charge administration fees for let renewals.
6. Poor Due Diligence
Even empty land should be inspected to check for insecure geological structures, rubbish dumps, toxic waste and poor soil.You should investigate every aspect of a building to ensure that it is fit for purpose. It can be expensive to check the physical structure, the plans, the approvals and the facilities. If such areas are left unchecked, expensive charges could creep up later on.
7. Calculating Maintenance Costs
Maintenance costs should also be considered when purchasing a property. Problems such as asbestos could be uncovered during the initial inspection. Also, issues like damp could persist throughout the building for a long time, incurring high costs for the owner. In addition to this, potential tenants are more likely to come onboard if they feel that all maintenance issues have been dealt with fully, making the property more financially viable and livable.
8. Being a Good Landlord
Tenants are the bedrock of any buy-to-let enterprise. By keeping on top of maintenance issues, providing quality homes and inspecting properties frequently, the landlord is much more likely to have long-term tenants. Keep an eye on the little things. For example, when inspecting the building, check the walls for brown marks, as this could suggest water leakage. Black or green spots could also indicate mould, which should be stopped as quickly as possible.
9. Purchasing Derelict Buildings
The key issue surrounding derelict buildings is knowing the market. By understanding if anyone would rent such a property in the area, you can judge whether the building is a wise investment or not. In addition to this, many can get carried away with such development projects. Before purchasing, carefully consider whether the refurbishment (or development) costs would make the venture financially worthwhile.
10. Being Organised
In order to get the most from your investments, make sure that you work closely with your letting agent to resolve any rental issues or maintenance problems immediately. If the pipes burst or the fixtures are in a state of disrepair, see to them straight away. Tell your letting agent that you should be informed of all issues quickly, and put aside a monthly allowance for such problems.
Growing Your Property Portfolio
Whether you are concerned about refurbishment, maintenance costs or any other issues highlighted in this article, it is clear that property ownership can be hard at times. Despite this, remember that property investment is a great market to be in. With care and planning, your portfolio will grow and could bring in significant profits.
Disclaimer: Guest blog posts on the Martin and Co blog are written by external companies. Martin and Co do not endorse the products or services of these companies.