Would you be a landlord?

Prothet_of_Doom

Last Year I persuaded my wife that as part of our investment strategy, we should become landlords, after I'd experienced what it was like to be a tenant renting a small flat away from home, for use in the week near where I had work. Basically I thought I could provide a better customer experience and make our money work harder.
We (I) did a heck of research on how to finance it and our obligations, but she picked the property in the end after a couple of false starts.
We didn't use an letting agent - we used openrent.co.uk to find and vet the tenants.
As an investment it looks okay, but our first years profit is likely to be wiped out by the preparations before hand and future pointing of 3 of the walls.
We worked on the risks quite heavily before we went ahead.
First Tenants seem to be happy, and say they want to stay another year.
They have decorated 3/4 of the hall stairs and landing, but did not ask permission. The job is a decent one, so I have given them retrospective permission, whilst reminding them that they need to ask first, but that we will probably say yes as long as it's tasteful and not shocking colours.
If we get 10 months occupation per year our mortgage will be paid off in 15 years, and then we can decide if we want to keep it on into retirement or not.
Basically we are looking at 6% return on the capital we put in, but this will reduce if we use the profit to pay more into capital. Unless house prices rise.
I think we bought at the bottom. The previous owner paid 15% more for it at the peak than we paid him, and other similar houses are now on the market (are they selling? I'm not sure) for as much as he paid.
Would I do it again? I'd like to. I have the deposit. I'd rather do a HMO, but clearly much more hassle but potentially higher Return on Investment. My wife would prefer to use the deposit for FUN.

bigfreddiel

Bad tenants and repairs not to mention rules and legislation are the least of your worries.

Neighbours, and local developments can be a severe risk to your investment and income. Just needs a wind farm being built next door, an abattoir opening nearby, or even HST3 appearing out of the blue! Third runway, maybe. Nuclear power station. All of these outcomes are possible and a risk.

Don't do it. Nice balanced tracker portfolio does it for me fj

onlyroz

I was a landlord for 6 months and hated every minute of it. The tenants were always late with their rent and would call the managing agent for ridiculous reasons like "I don't know how to use the washing machine", resulting in expensive call-outs. It was a stressful awful experience and I'd never do it again.

havingaball74

[/QUOTE]
INVESTING IN ISA's et al IS A RISK. If there was some massive global depression, which could occur given the level of sovereign debt in the world, you may end up with nothing more than worthless bits of paper. Think about it.
As I say I have ISA's but I would not sleep well knowing I was reliant on them.[/QUOTE]


This is what worries me about selling the house. I would put half of the money into the new property to match my partner's deposit 50/50 and then invest the rest. I am quite risk averse.

havingaball74

onlyroz wrote: »

I was a landlord for 6 months and hated every minute of it. The tenants were always late with their rent and would call the managing agent for ridiculous reasons like "I don't know how to use the washing machine", resulting in expensive call-outs. It was a stressful awful experience and I'd never do it again.

Did you use a letting agent to eliminate some of these stresses? How much do they shield you from?

havingaball74

Petite_Anglaise wrote: »

I recently sold my property that I had let out for several years- was an "accidental landlord" when my job changed location.


But I was very happy to sell up and not have a mortgage to pay any more! The sale took ages to go through and it was empty for several months.

Now looking to buy (a home) in London...wishing thinking maybe.

This is what concerns me. My house has been empty for ages whilst I decide what to do. Now the thought of it being empty like this again whilst I try and sell in the future fills me with uncertainty. And what happens when you have a BTL mortgage and want to sell? Is there an early redemption penalty? At the end of a fixed term do you have to fix again or can you go onto a SVR whilst it sells? How hard is it to sell with tenants in situ?

slowpoke_rodriguez

I've been thinking about it.
I've invested in equities for the last ten years and done pretty well and have been thinking about diversifying but the figures just don't stack up. I'm also lazy, so the prospect of sticking my hand down a tenant's U bend at 10pm on a Saturday night, or arranging it, doesn't appeal.
I've also made a better return on equities this year alone than my house made in the previous 6 years...

havingaball74

slowpoke_rodriguez wrote: »

I've been thinking about it.
I've invested in equities for the last ten years and done pretty well and have been thinking about diversifying but the figures just don't stack up. I'm also lazy, so the prospect of sticking my hand down a tenant's U bend at 10pm on a Saturday night, or arranging it, doesn't appeal.
I've also made a better return on equities this year alone than my house made in the previous 6 years...

Would you consider using an agent to deal with that stuff?
Which equities have you invested in?
The whole equities thing confuses me, which is why, although I have no real burning desire to be a landlord, the idea of keeping the property that I already own appeals.

walwyn1978

havingaball74 wrote: »

Did you use a letting agent to eliminate some of these stresses? How much do they shield you from?

We did, and not a huge amount TBH. We had an arrangement with them that anything that would cost under £150 to sort by their tame tradesmen would just get done, since we were at a distance and we were both working full time so it made it easier, but that's not an option I think all agents offer. We still got lots of 'this has happened, will you fix it' type stuff, including at least one tenant who had obviously had had a pushover landlord before, as he asked constantly for things even when we'd already said we wouldn't do it (eg The tenant wants all the lightshades replaced. Why? He feels the colour is fading')

Our agents were proactive and useful, and did a good job. But you still get a huge amount of stuff headed your way.

lush_walrus

Yep I've been a landlord of multiple let's for twenty odd years. Done right it's still a very profitable business, regardless of the naysayers.. I can give some broad advice based on that experience that might help.

My advice buy a newish not new 2 bed flat, low maintenance, no lease concerns and has space for a couple to have a child and therefore stay for a period of change. It's also then unlikely to have gas, will be low maintenance for the first ten years or so depending on tenants and boiler.

Pick a town or city, if an area suitable is close to you go with that, long distance managing is a pain and a worry. Somewhere where people commute is preferable.

Avoid students, the bright lights of renting 16 rooms in a house for 20000 a month is soon lost on empty summers, refurbishment every year and non payers. Personally I also avoid those out of work for the simple reason that they are in your property for more of everyday and it ups the wear and tear on boilers, carpets etc. Commuters are good as they are the opposite working long hours in for less.

Obvious things coincide it with up and coming areas, in those areas some good tenants start appearing and you can ride on the rising prices and popularity even in a down market.

Never be greedy, if you find a good tennant leave them to it, don't hassle, don't put the rent up every year just because the flat next door let for 50 more per month than yours. The most efficient is to keep your good tenants a bad one will cost in work and time. An empty flat still needs outgoings.

And if you find good returns find a good letting agent to manage it for you. The best tennants go to those who fully manage - think about it if your job were to deal with tennants all day would you put your most straight forward tennant in the flat with the finders fees only or the ones who are burdening you with managing them.

Key is obviously finding the place that produces the right yield, that is yours to do no one is going to reveal their profitable location to you.

Option b if you are near the coast is pick a property attractive to older people and go for holiday let's. Two or three of my most profitable are holiday lets to aimed to attract over 50s. They are let most the year as the older people holiday all year unlike families. And they are well looked after by them. My mil lives in a prime spot and manages those for us, bookings are automated and online only so minimum effort.

Plenty of money to be made in property you just have to think and do.