Landlords: Protecting Your Capital
More homeowners than ever are looking to the rental market to line their pockets as they struggle to sell their property during the recession. This has led to a growing breed of ‘accidental landlords’ – homeowners who are being forced to rent out properties that won’t sell to cover their mortgage payments and weather the storm. The number of rental properties flooding the market was 40% higher in February than in December 2008. If you number among these unwilling landlords, here are some tips to save you money and ensure that your property doesn’t leave you out of pocket.
Buildings and Contents Insurance
Maintaining building insurance is essential, and it’s likely that you already have it as most mortgagors will not lend to you without it. What is often overlooked by landlords is contents cover. Even where your property is unfurnished, it is still necessary to cover items such as carpets, curtains, kitchen and bathroom units in the event of a fire or accidental damage. Standard insurance will not cover properties which have been let, but there are a number of specialist landlords insurance providers offering buildings and contents cover.
Look for a policy which also offers landlord liability insurance; as the landlord, you are responsible for the safety of your tenants, and should any harm come to them while residing in your property, it will cover you for damages and legal costs.
Be Your Own Agent and Save Money
Once you’ve taken care of your mortgage and insurance, and complied with all of the legal, safety and technical requirements, you need to make a decision as to how you will manage your rental. If you have the time to manage the rental property yourself, this can save you money. However, you should consider the time involved: you’ll need to advertise for tenants, carry out viewings, check references and be available 24/7 should there be any problems. Some people think that the time cost is not worth the monetary savings.
Before Signing a Tenancy Agreement…
Once you have a potential tenant you must carry out security checks. Begin by running a credit check to verify that your potential tenant is who he says he is and has the means to pay the rent. Ask for references and when you receive them, check them. When you’re looking to find a tenant quickly, there is always a temptation to cut corners, but you will pay for any laxness in the long run; the tenant from hell is a high price for not investing a little time in finding someone suitable.
For those who are not confident about performing background checks, estate agents often offer this as a separate service, so it may be worthwhile paying for them to do it on your behalf.
Even if you are employing a letting agent to find someone to rent your property, you should still meet them beforehand so that you can form your own opinion.
Find a Landlord Rent Guarantor
Some companies, such as Rite Home, provide a landlord rent guarantee that removes the risk of late or non-payment. Specifically designed to safeguard your income, these companies remove the burden of rent collection and take care of any administrative action resulting from non-payment. For unwilling landlords, whose only care is that they are paid in full and on time each month, these companies can be a godsend.
Although taking on the role of landlord can be a solution for those struggling to sell in a slow market, it requires more than a spare set of keys for your new tenants. Despite the work involved, however, it is almost certainly a better alternative than an empty house and emptier pockets. If you follow these tips you can safeguard the capital invested in your property, and you might even get a handsome return on it.