Buying a home with the express intention of renting it out has become commonplace over the past decade. As home ownership has declined, the rental market has been able to boom in its place.
If you’re looking for an investment with the potential to make a lot of money, so-called “buy to let” is certainly a great option. However, no investment option is without potential problems. A lot is said about the positives of buy to let, but there are negatives that you have to ensure you are able to navigate if this is a route you want to pursue. In an effort to guarantee you are furnished with all of the facts about being a rental landlord, let’s examine the potential pitfalls that you are likely to face…
Pitfall: Trusting Strangers With Your Property (And That Trust Being Abused)
Buy to let is one of the only forms of investment where you will entrust your financial future to someone you know relatively little about. Tenants can be difficult. You don’t know them, you don’t know how they intend to keep your property, and you don’t know the potential damage you may accrue as a result of their tenancy. Then there is the risk of illegal subletting, which is becoming all the more common thanks to services such as Airbnb.
Of course, you can mitigate some of this risk by being careful about who you let to. It’s essential you perform background checks on your tenants, which can include a credit score if you are concerned about their financial might. However, you will never be able to be 100 percent sure you’re letting to a decent tenant; a big risk that you will need to comes to terms with.
Pitfall: Life Circumstances Of Millennial Renters
If you’re going to rent your property, it’s almost certain that at some point you will rent to a millennial– someone between the ages of 25 and 40 at the time of writing. Rent statistics indicate that millennials are far more likely to rent than any other generation– but they also have the most insecure lives.
Real wages are falling, and millennials are more likely to move frequently in pursuit of work opportunities. As a result, you may find yourself having to obtain new tenants on a regular basis. If you’re concerned about the high turnover of tenants, you may want to outsource this aspect of your buy to let to a property management company. They will take a cut of your income, but it will be far less stressful for you.
Pitfall: Tenant Damage
As touched on in the first point, every tenant has the potential to damage your property; sometimes, that damage is severe. Some of this damage is to be expected — what’s referred to as “standard wear and tear” — but some tenants are outright neglectful or destructive.
The best way to protect yourself — and your property — against this risk is to ensure you have a good landlord insurance policy. This may feel like an unnecessary expense, but you’ll be grateful for it should you ever have a tenant move out and leave a trail of destruction in their wake.
All of the pitfalls above can be overcome but, if you’re considered by to let, these are definitely factors you’re going to have to keep in mind.
This is a collaborated post.