Desisive Decisions for Rental Property Investment

Many factors need to be considered before investing in rental property so the prospective landlord needs to be informed of the possible pitfalls which can be manifold.

Never ever give up your day job if you have one until your rental business is well established. Being a landlord doesn’t involve getting a guaranteed pay packet at the end of the week and you don’t want to leave yourself with nothing to live on.

You will be running your venture along the same lines as a small business and will need to be prepared for all the paperwork and phone calls that this will involve.

It is impossible to consider every scenario that might be encountered in being an investor in rental property but the only real way to provide some ‘Insurance’ against gremlins is to have as much liquid cash as possible to back any proposed venture.

Invariably things will go wrong and most situations a landlord has to deal with on a regular basis are those unforeseen circumstances which can only be reacted to once they have already occurred.

There are often hidden costs that will inevitably shock you and any amount of preparation beforehand will not always protect you. There is no way to safeguard against the possibility of void periods when the house is empty, when the tenants don’t pay the rent or the occasions when the mortgage payments will increase.

Will you able to fulfil your obligations to the building society if several things go badly wrong all at once? Have you got a contingency plan or an exit strategy lined up? A wise thing to bear in mind is never to ‘Put all your eggs in one basket’ as the old saying goes.

The type of property that usually appeals to the investor will be the lower-end of the market properties which will quite possibly need a fair amount of cash spending on them first before they are of a reasonable standard for letting.  Once you have tackled this, you will find that you are the proud owner of an attractive property that can command the best possible rent for that particular area.

Adopt a clear strategy and be decisive in all your decisions but be prepared to allow a degree of flexibility if your strategy is not working as well as you expected.  Don’t be afraid to repeat the process if strategies are going well. Anything that has already been proven to work will be useful in the future.

Costly mistakes can be largely avoided by examining the experiences of others. Join in with on-line forums specially designed to help novice landlords. Nowadays there is no excuse not to be informed with the amount of valuable information on hand at the touch of a button.

Decide whether you will want to manage the rental property yourself or hire a reputable letting agency. For the first-time landlord it is wise to get the advice of a residential lettings consultant who will be able to talk you through some of the main points and commitments involved in renting out a property. It may even be possible to take the agent along with you before you buy a rental property to be sure that you are investing in the right area and they will also tell you whether they think the building itself is a suitable candidate for the rental market.  

How long are you prepared to be a landlord for? It could be the rest of your life. Don’t take on a huge commitment spanning decades if you are expecting to make money overnight. It won’t happen. The days of making vast amounts of money from property in a very short time are over. It may take several years before your rental business is healthy enough financially for you to even begin to reap the rewards of your labours.

Are you prepared for an enormous amount of hassle? It will help if you are because things will rarely chug along smoothly for very long and often you will find yourself slap bang in the middle of a crisis when really you don’t want to be there. Remember you can’t call in sick. The buck stops with you and it is your responsibility to sort things out.

What do you do if you tenant is arguing with his neighbour or causing a disturbance in the neighbourhood? What do you do if there is a leak in the middle of the night and you cannot find a plumber? The possibilities for nightmare scenarios are endless. Are you happy to deal with all this? If not, perhaps being a landlord is not for you.  

But having considered all aspects of letting rental property if you are still committed to being a landlord then you will find it enormously rewarding being your own boss and managing your own business.