Becoming a landlord is easy, right? You buy a house and then get some unsuspecting person to pay the mortgage for you. If only that were true. Being a landlord involves navigating a deluge of paperwork and administration, developing an understanding of real estate law, health and safety requirements, local economics and all important people skills. Also, it’d help if you were a dab hand with a paintbrush and have an eye for scatter cushions. We’ve put together an introductory guide to becoming a landlord.
Buy a property
For most people becoming a landlord involves buying an additional property (or properties). Popular areas include those near universities and those with good transport links. Consult online rental platforms to gauge the local rental value and factor this into the price of your property. Being a landlord near your own home has practical benefits, but also consider looking further field, especially at smaller commuter towns where prices may be lower but demand is still high. Aim for a yield over 5%. ‘Yield’ is the annual income received as a percentage of a property’s purchase price.
How to calculate the yield
MR (monthly rental)
MR @ €500 x 12 months = €6000
€6000 ÷ I @ €150,000 = 0,04
0,04 x 100 = 4.0 % yield
Some example annual yields from popular rental markets:
Examples of the annual yields of a 70 square metre apartment in European capitals:
Are you buying leasehold or freehold? If you’re purchasing a leasehold property be sure to check the length the lease. For example, a short-term lease, say 5-10 years, means you may have to pay to extend the lease in the near future. Check the condition of the property: is there subsidence or bats in the attic? Many buy-to-letters purchase their properties at auction, often at a reduced rate. Keep in mind that buying the property is one of many initial financial outlays; factor in taxes, structural surveys, renovation and possible agency fees.
There’s a misconception that buy-to-let is an investment, a bricks and mortar pension policy. Although property investment is almost always a good bet, being a landlord is a business and should be treated like a business. That means registering your business, abiding by your jurisdiction’s business laws and paying the appropriate taxes. Treating it as a business should help you remember that you’re dealing with human beings (your tenants!) and that their satisfaction means they’ll keep paying you rent. Real estate laws in many European countries have changed in the last few years and it’s essential to keep yourself up-to-date. Read industry blogs, subscribe to newsletters or join a professional association.
Becoming a landlord – hands on/hands off
Many landlords use property agents to manage their portfolio. Agents source tenants, deal with contracts and are the first point of contact should anything go wrong. They often charge up to 10% of your rental income per month. If you have a number of properties or a full-time job, hiring an agency is probably a good idea. However, many landlords – new and old – are turning to online rental platforms to source tenants. Such sites often offer their services to landlords for free . This reduces your costs, speeds up tenant sourcing and minimises vacant periods. At nestpick we have an 82% success rate of matching landlords with suitable tenants. We also offer landlords our Full Nest Guarantee that helps minimise those dreaded dry months.
Becoming a landlord means familiarising yourself with the health and safety requirements of your local jurisdiction. This can include: annual gas and electricity safety checks by qualified professionals, installing double glazing, insulation and central heating and fire safety measures (smoke detectors and fire escapes). If you’re working with a university or housing association these rules must be strictly adhered to.
It won’t guarantee success, but it’s a common opinion amongst landlords that the better condition of your property, the less likely tenants are to destroy it (see the Broken Window Theory). It’s worth investing in decor if you’re targeting the younger generation, a generation used to watching one of the innumerable housing design shows. It doesn’t have to be fancy, just aim for clean, neutral and modern (remember that your own tastes are irrelevant as you won’t be living there – that means no ‘jazzy’ carpets, cat figurines or hoardes of gnomes in the front garden). Kitchen and bathrooms are always the main event, so make sure they’re of a certain quality as they’ll last longer and be treated better.
Being a landlord, being reactive
No one wants to live with rats, mold or an overflowing toilet. Be reactive to your tenants and, again, they’re more likely to pay the rent and compromise more easily. Be honest with tenants (if you can’t make it to the property within an hour, say so). Make and stick to contingency plans. Know what is in your tenancy agreement and understand what is and isn’t your responsibility.
Knowledge is power
Being a landlord means you’re job is not only dealing with bricks and mortar but also flesh and blood (a.k.a. human beings). Tenants will always have problems, especially when it comes to the most important place in the world: home. Here are the most common complaints tenants make against their landlords. Keep these in mind and try to avoid the complaint before it happens:
- Hard to get hold of. No one expects their landlord to be available 24 hours a day but you should attempt to return your tenant’s calls within a few hours during the day or the next morning if late at night. Manage emergencies as and when they arise. Make sure your mobile’s voicemail is turned on.
- In a recent survey, 21% of tenants complained that their landlord was employing low quality tradespeople to maintain properties and 17% complained that their landlord refused to fix broken items. The latter complaint was as a high as 42% in another study.
- 24% complained of harassment and 12% claimed their landlord was nosey.
- Surprisingly, only 24% complained about the amount of rent!
The most common complaints of landlords against their tenants are:
- Late or non-payment of rent
- Breaking the rules of the tenancy agreement: keeping pets, smoking, painting the walls neon pink
- Neglect of the property: especially communal areas and gardens which may attract the attention of neighbours and local authorities
- Disputes with neighbours: unreasonable noise, rubbish, pets
Becoming a landlord with nestpick is easy. We offer a unique online platform connecting you with long-term committed tenants, without having to waste time on viewings. It’s completely free and entirely online. If eligible, we offer our landlords 100% occupancy through our Full Nest Guarantee. Sign up today!
If you have any landlording tips or tricks of the trade, feel free to comment below!