Rising property prices have led many to consider investing in property as a business. Buying a house and renting it for a profit sounds simple enough. In fact, successful property management is possible, especially if you follow some basic guidelines.
Conduct checks on tenants
Don’t rush into letting your property without first conducting thorough checks on your prospective tenant. Verifying references, obtaining a credit report as well as securing a deposit will save you a great deal of hassle in the long run.
Signed tenancy agreements
Make sure that every tenant signs a tenancy agreement. It’s essential for your legal protection in case you run into any problems with your tenant that you have a legal agreement between you. In fact, it’s worthwhile having a lawyer check over any standard tenancy agreement that you use.
Have enough cash to cover you
Make sure that you have enough cash in the bank to cover yourself in the worst case scenario where you are struggling to find tenants or your tenants stop paying the rent. Don’t risk financial ruin by failing to do a simple cash flow analysis and maintaining adequate funds so that you can pay the mortgage if you have to.
Provision for repairs & maintenance
You will need to factor in ongoing repairs and maintenance to your rent calculations. Failure to maintain the property to a reasonable standard will mean that you struggle to find and retain good tenants.
In addition, have you made provisions for one-off major repairs? This could be a cooker or washing machine breaking down and requiring replacement or structural damage caused by a leak. Whatever it may be, chances are you will encounter one of these problems at some point. You will either need to draw money out of your business or pay for it out of your own pocket. So make adequate provision for these unexpected and often big-ticket expenses that can occur.
Health and safety mindfulness
The home you are renting out is your responsibility and so you will need to ensure that you are meeting all your legislative obligations particularly in relation to health and safety.
Be business like
If you want to be really successful at property investing then you must be business-like in your approach. Don’t make the mistake of seeing it as a hobby or sideline. Set up separate bank accounts and use a bookkeeping system. In addition, consult a tax specialist to make sure that you are meeting your tax obligations. The last thing you want is an unexpected tax bill!
Developing a business out of property investment is possible and many have been doing just that for years. Following these basic guidelines will help to ensure that your venture is a success.