Rental properties are a source of income for landlords, which is taxable. Aside from income and expenses and tax, owning rental properties comes with legal considerations as well as day to day management requirements. Sound like a business? Well that’s because it essentially is.
Chris Renecle, MD of Renprop, says that many landlords ‘dabble’ in renting out a second property they own, and don’t fully treat the process in a businesslike manner. “This can be detrimental to both the landlord in terms of time and money as well as the value of the rental property,” he says.
So how do landlords go about running their rental properties like a business? Renecle lays out the top five points for landlords to bear in mind:
1. Know your market
Before deciding to rent out a property, or even purchase a property for buy-to-let reasons, get a solid understanding of your target market. Find out what they are looking for in a rental property in the area you own or plan to own a property, and what they want from a landlord. “Most tenants are looking for landlords that will deal with any issues promptly, maintain the property well and communicate well, especially when problems arise,” says Renecle.
2. Employ professionals
Business owners understand the value of employing professionals to handle specialised areas of the business that are not their core area of focus. For many landlords, owning rental properties is something they do on the side, and therefore it is not their main source of income, not something they specialise in or where they spend majority of their time or energy. For this reason, it is essential to any landlord’s success that they surround themselves with professionals to help them run their property rental ‘business’ well. “This includes rental agents who can assist with a range of legal documents such as the lease agreement, as well as tenant screening which is an essential component of rental success and monthly rent collection among other things. Making use of professional services such as these helps landlords to better manage their asset and protect its value,” says Renecle.
3. Establish good relationships
Top business people rate relationships as one of the most important components of success, and it should be no different between a landlord and tenant, as well as the landlord and the professional service providers employed. Renecle says that setting out clear expectations in the lease agreement and any agreements with other service providers is key to establishing good working relations, as is establishing good communication.
4. Watch your budget closely
At the end of the day, it all comes down to the money: the money a landlord has invested in the property and the money that the landlord hopes to make from that investment. Property ownership is a long term investment, and landlords need to be prepared for that kind of commitment financially. Renecle says that planning ahead for any financial hurdles, whether in the form of establishing a savings account or a line of credit for unexpected expenses, is vital. Most important however is keeping a very close eye on the monthly and long term budget, knowing about any shortfalls and having a plan in place to accommodate them.
5. Prepare for challenges
As with any business venture, when it comes to owning buy-to-let properties there are bound to be challenges along the way. “Think strategically and have plans in place for common issues surrounding property rentals, such as tenants defaulting on payments or a period of vacancy between tenants, for example,” says Renecle. “While all problems and pitfalls are impossible to avoid, it helps to be prepared for what you can and have access to your professionals to help where needed.”
Renecle concludes by saying that if a landlord invests in a good rental property and manages the property and the rental process professionally; they can expect to enjoy the benefits of a sound investment that grows in value while also providing a nice boost to their monthly income over the long term.