From a landlord of 25 years experience

This article focuses on the things that you need to know and/or do, before diving in to the world of property investment as a landlord…

This article was first published on Medium:

https://medium.com/@juliamknight_13725/10-things-i-wish-id-known-before-investing-in-rental-property-ad5e48c8f1c4

My property empire(!) started in 1999 when a desire to hold onto a tiny 1 bedroomed property, lead me to renting it out, to pay the mortgage, and enabling me to keep it.

Fast forward 7 years. I remortgaged that property to gain the deposits for further Buy to Lets. Eventually, I had 7 properties. Set for life you say? Perfect passive income?

Things you should know if you are tempted to take the same path:

1) Research! And research again!

I cannot stress enough how important this is. Are you going to pick somewhere local to you, where you know the area well, and can be there if necessary? Or does your research show a better return for somewhere out of your area?

Research current prices, sold prices, property trends in that area. Know what the average rental is. Are properties being let quickly, or sitting around for months on end? (Costing you mortgage, taxes, utilities etc). Is it a student area? Is there a major employer in the vicinity? Good schools?

As you can see – a quick flick through the property ads is not going to cut it.

2) Check out the tax situation in your country

Here in the UK, the government is busy hammering the final nail into the coffin of the private rental sector. And rules and regulations can be changed at the drop of a hat. Making it unprofitable to continue, but too expensive to get out. Lose Lose.

There have been times where I have been paying more in mortgage payments than I receive in rent. Basically, paying to have someone live in the property.

3) If you are going to need a mortgage, put down as much as you can as a deposit

This will give you a greater choice of mortgage offers, and lower interest rates. You will also reap the benefit when you sell. Make sure it is a Buy to Let product

4) If the figures stack up, go for a repayment mortgage

Make sure that the payment will be more than covered by the rent you expect to receive. Interest only is a cheaper option, but of course, you will still owe the full amount at the end of the mortgage term.

5) Account for all eventualities

• Void periods, where there is no one living in the property, but it is still costing you to keep it
• Interest rate rises
• Tenants who decide you are rich and so they don’t need to pay their rent
• Repairs and maintenance. Be a good landlord and keep the property in a good state of repair. Good tenants will appreciate this and stay longer

6) Legal obligations

• Gas safety certificate
• Deposit scheme
• Renters pack
• Check your country for other essentials (EPC/Electrical safety etc)

7) Insurances (advised)

• Buildings Insurance
• Legal insurance
• You can also get cover for non-payment of rent

8) Make sure that you or your agent do proper checks on prospective tenants. This will come back and bite you big time if not done properly

9) Get a rental agent

I would highly recommend getting a rental agent to keep you legal, and deal with getting the right tenants to start with, and then dealing with ongoing issues, and rent collection. This also avoids the 1am call from your tenants with a burst pipe. Pay someone else to deal with it

You can of course do it yourself, but do not try to wing it. Make sure you know all the ins and outs.

10) Do not rent out to friends, or friends of friends. It is a business. They will not take it as seriously as you do

Is it passive income?

Somewhat, if you have an agent. But your blood will still run cold when an agent that never normally bothers you, gets in touch. Repairs? Non-payment? Damage? Leaving? Roof caved in? It can be incredibly stressful

Just as an aside, if you can buy the property without a mortgage – do the research, be aware of the pitfalls, and go for it!

I am now down to 3 properties, and will sell another. But I will keep the two best performers in the hope of having a bit extra in retirement.

Go into it with your eyes wide open, and accepting that it is a long-term investment.

Please do not take anything said here as financial advice. I am not qualified to give that sort of advice, but would recommend that you speak to someone who is, before investing any money.

Thank you for reading

View at Medium.com