For a property investor, whether novice or experienced, property management is a consideration. In a way, it sounds easy right? Find tenants, collect rent, make repairs, and renew tenancy agreements, Right? Wrong! Property Management is time consuming, frustrating and not at all easy.
Property Management needs to be taken seriously, ignorance is no excuse and getting in wrong can be costly. Lengthy evictions, non-payment of rent, maintenance issues and relationship breakdowns. Cutting corners, ignorance or ignoring the law could result in tens of thousands in fines, litigation and even a prison sentence.
There are three classifications in this sector: Investors, Landlords and Novice Landlords.
Investors – value their time and do not want any involvement in the day to day running of a property. They are more interested in adding value, maximizing the returns and then setting and forgetting. This group tend to concentrate on Income and returns.
Landlords – actively run and manage their property portfolios. This group tend to concentrate on outgoings, cost savings and have disposable time, normally retired individuals. Time to read and understand legislation, attend Landlord groups, keeping up to date on legislation etc.
Novice Landlords – These tend to be accidental landlords or individuals with one property, who generally lack both time and knowledge.
The reality is it takes time to learn and keep up to date with legislation and a level of expertise to find the right tenant and pro-actively manage the property, tenancy and relationship. Systems and procedures help but the tasks can be never ending: have the rents been paid? When does the Gas Safety expire? When does the lease expire? When will the next viewing turn up? Does it need renovating before re-letting? Non-payment issues? Maintenance issues? Emergency issues? Have the contractors turned up? Standard of work completed? Litigation issues? Staff required? Cost / Cashflow issues.
Property Management has to be systemised, organised and menial tasks outsourced. It’s very easy to be sucked in and time swallowed up. It’s important to look at the bigger picture and fully maximize your time but ensuring processes are adhered too and property management is pro-actively managed.
Here are 5 Useful Tips:
1. Invest, Set Up & Forget
If a property is given in good condition, clean and tidy. Most tenants will keep it this way and look after your investment, treating it as their home. If you have a 15 year old boiler, you can waste so much time, repairing, renewing parts and unhappy tenants with no hot water and constant complaints. Sometimes a larger initial investment is required for long term benefit. The property needs to look, feel and presented in the best possible light, so the very best initial photos can be taken for ongoing marketing, when the property comes up for renewal. Poor photos equals reduced demand and rents.
2. Organised Systems
A lettings calendar system essential. This needs to remind you when the Gas Safety Certificates are due, when the renewal is due, when the maintenance inspections are due, when the rent is due monthly. The system needs to contain at least two plumbers, two electricians, two handyman, two letting agents, two emergency contacts, two cleaners, basically your power team.
The first inspection is crucial and should be 3 months into the tenancy. This will provide a good indication as to the standard of your tenants, whether they are messy, dirty, and unreliable or set the property up as a cannabis factory. If you are unsure about the tenants, you need to inspect every 3 months indefinitely if needed. If they are house proud, no rent arrears and you’re happy, you can delay inspections to every 6 months and finally yearly. In my view, inspections should be carried out a minimum of once a year with a checklist of maintenance issues, looking at the roof and guttering, outside painting, chimneys, fencing, inspecting windows, fire safety issues – smoke alarms, carbon Monoxide alarms, fire escapes, black mold issues, water ingress and list potential upgrade expenses, new carpets within two years, bathroom needs to be re-decorated in 12 month’s time. Lastly, speaking to the tenants to make sure they are happy and know of any issues.
However, always think whether any items, like inspections, can be outsourced.
Tenancy Agreements normally charge tenants for late payments. Tenants need to pay the rent on the rent due date and if the rent is late by 7 days, they are charged.
It’s important to get all emotion and anger out of the process. All dealings need to be professional and business like.
This process needs to be systemized, for example.
Rent Due date.
Landlord/Investor check bank account 4 days later, to ensure rent received.
If not received, email sent to Tenant, stated Clause XYZ and will be charged, if 7 days late
After 8 days, Email & Letter sent to Tenant with charge
After 14 days, telephone tenants
After 20 days, book an Inspection
The inspection provides a good opportunity to speak with the tenants and find out what’s gone wrong. Life happens – redundancy, relationship break ups, addictions. Whatever the reason, its important to be calm and understanding and work out a joint action plan for them to move out or find a resolution to their problem. It does not help being angry and emotional, if they have just lost someone they love or have problems they can’t resolve.
The one yearly review, needs to incorporate an overall investment review.
Is the market rent correct? Rent review? Can any value be added to the property? It the property achieving you correct return? Check the mortgage amount / term period / marketplace?
Would a re-mortgage work? Equity taken out to invest? Risks analyzed – Are rates going up and factored in? Tax changes? How will this affect returns?
Each individual property is a business in its own right and needs an annual review.