They say the path to success is not a straight line. If this were literal, my first few years as a landlord would be someone with a very serious inner ear problem. The line was most definitely…wavy.
Almost 3 years ago, I decided to buy a second house to rent out. I look back on that decision now with a mixture of naivety and fondness. Naivety from jumping into something without having done any real research and fondness of learning something new (albeit the hard way).
So with all that said, here’s 5 of my biggest mistakes from my first 3 years as a landlord.
For every perfect tenant, there will be the hellish tenant.
I had been waiting months and months for the completion of the property and was anxious to get things started. I collected the keys from the previous owner and dropped by the property for an inspection.
The keys had barely touched the lock before the neighbour’s head popped round the corner. He asked if I was looking for a tenant and that his brother was looking for a place to stay. How lucky was I! I didn’t even have to pay for expensive estate agents.
In my haste, I hadn’t done my due diligence on their references. This turned out to be my first major mistake.
A few months into the tenancy and the problems were already stacking up. Rent arrears and calls from neighbours about anti social behaviour to name a few.
It turns out the tenant had given me the number and name of a relative as their reference. If I had just Googled their name, I would have quickly realised that they knew each other on Facebook and had pictures together on family reunions.
Years later, I was talking to a landlord who owns some houses near to mine and mentioned the tenant’s name. Lo and behold, the tenant had a history in the area of being unreliable.
The lesson to learn here is that doing your own background checks can be key in finding out if the tenants are reliable. Checking Facebook, talking to neighbours and potentially other landlords. You can also talk to your council as they might be on a naughty list of tenants, but I’ve only heard mixed success with this one.
What can break, will break
Prior to renting out, I spent some time and money making the property look ready for tenants to move in. It wasn’t a huge refurbishment, mostly cosmetic changes, but regardless of that, I thought it necessary in order to get tenants in.
What I somehow didn’t think was necessary, even after the effort of doing repairs, was an inventory check, with photos, of all items in the property. This was yet another mistake. Those same first tenants, then managed to put holes in walls, “lose” a fridge, and break almost every item in the property that wasn’t bolted down, or made of adamantium.
While I was expecting some wear and tear, I wasn’t expecting the level seen. Given this, my second lesson was to always do an inventory with photos and keep some money aside for those wear and tear moments.
Choice is your friend
Fool me once, shame on you; fool me twice shame on me. Unfortunately in this situation, I was fooled twice. I repeated the same foolish decision to go with the first person I could find who wanted to move in. Doh!
I was a little more lucky the second time round and had learnt a few lessons. However, while they paid their rent, they certainly didn’t look after the place and soon more damage was done.
On the third time round, I was determined to do it right. I’m stubborn on some aspects though, so was still hesitant to part with my cash to an estate agents.
Putting in an advert into openrent, gumtree and Facebook seemed to do the job and I was getting at least 20-30 requests to view the house, per day.
After 15 viewings, I figured I’d reached diminished returns on the quality of the tenant and decided to make a final decision. Keeping more options open for more prospective tenants has changed my luck. I’ve now got reliable tenants, who pride themselves on keeping a clean house.
When sifting through those 15 tenants, I had a few that looked good on paper. The references were strong, were flexible with how long the tenancy was and had proof of income.
The option I chose was the one who I seemed to “sync” with the most. He was responsive with texts and seemed to communicate well any issues he had.
It may seem strange having the onus on a more qualitative feature, but it’s something I value when looking for tenants.
Do the maths!
Last but certainly not least, the numbers. It wouldn’t be a finance post without the maths of it. When it comes down to it, there’s no point going for a property if your ROI is not high enough.
I didn’t do the maths on this when considering the property and only by chance did I get an ROI of 9.8%. For info, I used this calculator to find the ROI (after I’d bought it anyway). I now use this for every property I’m considering.
There we have it! It’s been a bit of a bumpy ride, but ultimately I’m glad I went through it. While it has been bumpy, the purpose of this post isn’t to show you that buying a property to rent is a terrible idea. I only wanted to frame it differently, so you can learn from my mistakes and make the right choices when considering buying.