Top five pitfalls of being a landlord (and how to avoid them)

buy to let property sign It’s hard work being a landlord and it can be a risky business, but with careful planning and the right financial protection you can reap the rewards. At Quoteline Direct we talk to a lot of landlords and we’ve been asking them how to safeguard against the biggest risks in buy to let:

House Price Crash It’s impossible to predict the future, but it is possible to look at long-term trends and the housing market performs well over the long-term. As a rule of thumb, property investors expect house prices to double every ten years, and the latest figures from the Office for Budget Responsibility predict an annual growth of 4.8% until 2022 (an increase of 22% over the next five years).

In the short-term, house prices have a history of volatility, and the economic uncertainty caused by Brexit may dampen the market. However, the much-publicised housing shortage is likely to spur demand and most property pundits think a collapse in the market is unlikely.

As a long-term investment, buy to let can make shrewd financial sense, but investors can get caught-out if they are forced to sell or refinance during a downturn. The simplest way to make sure you don’t slip into negative equity is to put down a bigger deposit which will also give you access to better mortgage deals.

Can’t Find Tenants Rental voids are part and parcel of being a landlord, but you can minimise the impact with careful planning. The country is facing tough economic times and stories of big businesses going bust are never far from the headlines. As a landlord, it pays to ‘expect the unexpected,’ and it’s recommended that you calculate your finances based on an 80% occupancy (or 10 months a year). Better still, Rent Guarantee Insurance is a cost-effective way to ensure you can meet your financial obligations, with policies paying up to £2,500 a month and costing less than £100 a year.

Interest Rate Jump Interest rates are at a record low as the government tries to kick-start the economy after the financial crisis. Rock bottom interest rates are great news for borrowers, but with no wiggle room left the only way they can move is upwards. Inflation is already beginning to creep-up and that’s usually a sign that interest rates are set to rise.

As a landlord you’re powerless to control interest rates, but you can fix your mortgage to safeguard against inevitable rises. Switching from a variable rate to a fixed rate may cost more in the short-term, but it will provide financial stability in the long-term, and you don’t have to go far back in history to remember when interest rates were in double figures.

Tenants Won’t Pay Non-paying tenants can be a real headache, but you’ll often make matters worse by laying down the law. If your tenants aren’t meeting rental payments, it’s essential to keep communication open. Everybody has faced cashflow problems at some point and sympathetic landlords can earn a lot of goodwill by talking to their tenants and coming up with a creative solution (such as a payment holiday or temporary rent cut). Eviction is costly and stressful for everybody concerned and should be seen as a last resort. However, to keep the option open it’s a good idea to make sure you’ve got the right insurance. Legal Expenses Insurance is designed to cover legal fees and court costs, providing financial security and peace of mind if the worst happens.

Property Damage The first rule of business is to protect your most important assets and that means getting the right property insurance. No matter how house proud your tenants, accidents can and do happen, and it’s essential to make sure you’ve got adequate cover. Most landlord insurance policies provided by Quoteline Direct automatically include £5,000 worth of contents cover which is often enough for unfurnished properties (to cover carpets and curtains). Remember that landlord insurance won’t cover ‘wear and tear’ and it’s sensible to set money aside to cover breakdowns and repairs. As is often said in property investment circles ‘hope for the best, but prepare for the worst’.

Quoteline Direct is a specialist insurance broker with nearly 50 years’ experience. We’ve got access to some seriously competitive polices and can guarantee to beat your landlord insurance renewal premium by at least 10% and hopefully a lot more (with similar cover, based on the same details). To find out more visit our landlord insurance page or Tel: 0161 874 7747 to speak with a member of our team.


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