Investing in property can be financially very rewarding but always remember to keep some funds aside so that you can cope with void periods and arrears should they occur.
........ A Landlord! Ok, so it’s not what most of us dreamed of when we were young but with low interest rates and an increase in the numbers of renters, more people are investing in buy-to-let property or letting rather than selling an existing property.
For most Landlord’s this is a long-term plan providing a regular monthly income and ultimately capital growth. However, it has recently been reported that as many as four in ten landlords cannot afford to miss one month’s rent!
Rent is often needed to cover the mortgage, and whether through arrears or having an empty property, a lack of rent can cause serious problems (and lots of stress!)
There are many ways to minimise the risk of arrears including thorough referencing, good communication with tenants, and investment in rent and legal protection. In terms of void periods, good communication is likely to make your tenants want to stay but if they do leave, then a well maintained property will attract new tenants.
However, Landlords should look to protect themselves further with a rainy day fund. I advise my Landlords to expect one month void per year and to budget for at least two.
Similarly when looking to invest in a new property, look at the figures closely. If you cannot achieve a net yield of over 5% when all costs are included (e.g. void periods, mortgage payments, property maintenance), then it’s best to walk away and wait for the next deal.