Professional landlords are likely to be winning as investors. Amateur landlords will have to rely more on luck than judgement

publication date: Sep 3, 2012
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

Professional landlords are likely to be winning as investors. Amateur landlords will have to rely more on luck than judgement

For landlords who have invested in buy to let for 10 years or more, both capital growth and rental returns are likely to have been successful and this trend will continue to deliver some great returns, especially from an income perspective.

In the long term, the main thing landlords need to contemplate is whether their properties are still achieving their objectives. For example, capital growth isn't readily available for many properties across the UK, so if that's your objective, it may be worth cashing in some of your investments and reinvesting in stock which delivers less income, but is showing signs of delivering capital growth, despite the current recession.

For landlords who have invested since 2003, returns are only likely to be good to date and moving forward, if properties were bought at a discount and rental returns are being maximised. For those who paid ‘top dollar' for city centre apartments or other properties, returns from capital growth when taking inflation into account, are likely to have been wiped out and rents may or may not be covering costs, depending on the mortgage.

Landlords need to steer clear of rent arrears and voids

With rental and capital growth currently tracking in the doldrums, landlords need to make sure their properties cash flow as well as possible.

There are increased reports of tenants struggling to pay their rent and in a defaulting environment, it is vital as a landlord to check your insurance policies to see what cover is available should a tenant not pay their rent and you need to evict them. If you don't have the right cover for your circumstances, make sure you do some research and consider extending or switching your insurance.

To avoid a tenant defaulting, keep track of rental payments, making sure you know the day it's paid and if it's late once or twice, talk to the tenant about why they are having problems and see what you can do to solve them.

If you are taking on a new tenant, take time to reference check them properly. Don't just rely on their demeanour and a copy of a passport or driving licence as proof of identity, make sure you double check their identity carefully and get reliable references from a bank or building society. Check bank statements too, so you know they can afford to pay your rent on the day agreed, ideally this should be just after their wages have been paid in.

For landlords who have a great tenant, but they've been with you are while and you are considering renting the property out to a new, higher paying tenant, take care. It may be a much better idea to talk to your existing tenant about paying a bit more rent and may save you a lot of money in the long run. New tenants may be more demanding and mean you lose two to three weeks of rent in the changeover from one tenant to another. Worst still, they may get into financial difficulties and end up costing you a fortune in non paid rent and eviction fees.

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