Managing a Property Portfolio as a Landlord

Introduction

So you’ve decided to become a landlord! Maybe you’ve joined the ever-growing band of buy-to-let investors. Perhaps you’ve inherited a property – or moved in with a partner – or decided to work abroad for a few years, but want to hang on to your UK base.

The next step is to consider how best to manage your property, or properties. Your circumstances will probably dictate whether you choose to do this yourself or appoint an agent to do it on your behalf. If you’re working abroad, for example, you’re unlikely to be able to deal with routine issues personally. However, if you’re just around the corner from your tenants, it may be practical to try your hand at property management.

Going it alone - or employing an agent

Letting agents can be valuable sources of advice and expertise. You can choose to use them initially, to attract and vet potential tenants, draw up the necessary paperwork and so on, then take over the day-to-day running yourself. Alternatively, you can retain an agent to provide a full management service, liaising with your tenants and arranging repairs as necessary.

When deciding how to manage your property, bear in mind that, although you will save money by doing it yourself, you will almost certainly spend a great deal of time – also a precious commodity – on advertising, organising and attending viewings, coordinating repairs, and so on. Be realistic about the commitment you can make. Should you opt to employ an agent, be sure you are clear about the charges you will incur.

Whether you own just one property or a whole portfolio, here are some tips for property management without tears.

Your target market

If you are a buy to let investor, this will have been a key consideration when purchasing your property (see Buy to Let: a Guide). In other circumstances, talk to a letting agent at an early stage about the sort of tenant your property would appeal to.

Furnished or unfurnished?

A few years ago, legislation afforded a landlord more protection for a furnished let than for an unfurnished one, so the majority of homes offered for rent were furnished. Today, however, changes in regulations mean that unfurnished lets are increasingly common.

If you are a buy-to-let investor, you have the freedom to decorate and furnish your property in accordance with the requirements of your target market. Talk to a letting agent for advice on maximising its appeal. If the property you are letting is your family home, full of heirlooms and expensive items, you might do better to put your belongings into storage and offer it unfurnished. Your target market may well be other families, who will, in turn, have their own valued possessions that they want to keep with them. In this case, an unfurnished arrangement can work to everyone’s advantage.

Bear in mind that using a storage company can be expensive and will affect your profits. A better option may be to store your effects in a secure loft or cellar, if you have one.

Finding a tenant

You can do this through an agent, by advertising (in the local newspaper or on the internet, for example), or via personal recommendation. You could also try approaching larger employers in the area, who may need to relocate staff.

Whichever method you choose, ask for references from a reliable source, and do not neglect to check them out. Don’t feel this will make you look unduly suspicious; you are merely taking a businesslike attitude to protecting your investment.

Making it legal

Before the tenancy begins, both parties should sign a correctly framed legal agreement. If you are using an agent, he or she can draw one up for you. Ensure you fully understand its terms before signing.

Assured Shorthold Tenancy (AST)

This is the most usual type of agreement, but it is not appropriate for all letting arrangements – for example, holiday and company lets.

Broadly, an AST gives the landlord the right to repossess his property at the end of an agreed term. An Accelerated Possession Procedure is available should a tenant fail to vacate.

The deposit

The AST agreement routinely includes the payment of a refundable deposit (usually equivalent to four weeks’ rent) by the tenant, and stipulates the conditions under which this is paid and held.

From 6 April 2007, Tenancy Agreement Deposit Protection was introduced. This new scheme applies to all ASTs in England and Wales where a refundable deposit is paid. Its primary purpose is to protect the tenant by guaranteeing that his deposit will be returned in the appropriate circumstances. It will also benefit both tenant and landlord by encouraging them to have in place, from the beginning of the tenancy, an unambiguous and documented agreement as to the property’s condition (see Getting Organised, below).

Getting Organised

From the outset, be sure that both you and your tenant are clear about who is responsible for which costs. Your tenant is responsible for items like the Council Tax, utility bills and insuring his or her possessions. You are responsible for maintenance costs (including the cost of work necessary to ensure the property complies with safety regulations), buildings insurance, contents insurance (if you are letting the property furnished), and service charges and ground rent (where applicable).

Ensure too that both parties are clear about exactly what the tenant will be getting for his or her money. There are no hard-and-fast rules about what constitutes a furnished or unfurnished property. Confusingly, some properties are even offered part furnished! Norms and expectations can vary from area to area and from market to market, so seek the advice of a letting agent.

In general, a furnished property will contain all the main fixtures, fittings and furnishings (including white goods), and the standard cutlery, crockery, kitchen items and so forth, that a typical tenant would expect to use on a typical day. An unfurnished property generally includes only such items as carpets and curtains.

An Inventory/Schedule of Condition should be drawn up, agreed by you and your tenant, and updated before each new tenancy starts. This details all the property’s fixtures and fittings, their condition and that of the property overall, and is invaluable in safeguarding the rights of both parties.

Always keep a close eye on your property finances and paperwork. And remember, it’s good practice to confirm in writing anything you agree with your tenant or agent.

Keeping in touch

To ensure the tenancy runs smoothly, it’s essential to maintain contact with your tenant, even if you employ a managing agent. If the channels of communication are already open and a good relationship has been established, it will be easier to nip in the bud any problems that may occur, thus avoiding, for example, expensive legal action to recover missed rental payments further down the line.

However, do remember that, to protect tenants’ privacy, there are strict rules governing a landlord’s right to visit during a tenancy. A landlord, or his representative, must be given access to inspect the property or carry out maintenance or repairs, but must give the tenant 24 hours’ notice of the visit – he cannot just turn up unannounced – and it must take place at a reasonable time of day. The notice period does not apply in an emergency, or if both parties agree to its being waived.

If problems arise

With levels of personal debt rising inexorably and interest rates on the increase, you should take steps to safeguard yourself as far as possible from the effects of a tenant’s potential financial problems. Be alert to any signs of trouble, such as a missed instalment of rent. This is where keeping in contact can pay dividends.

If your tenant does have money troubles, don’t panic – and be understanding. An arrangement whereby you agree to accept less rent for a couple of months, until the tenant is able to pay the arrears, can benefit both parties. The tenant has a chance to sort out his or her affairs, while you have at least some money coming in.

Insurance is now available to cover rent lost through missed payments, and expenses resulting from legal action against a tenant.