The Landlord Lifecycle
April 24, 2018
Whenever you start your landlord business - whether that be past, present, or future - you will be on a linear journey that has been undertaken by all those landlords who have gone before you.
This is because there is a specific sequence of activity in order to be a landlord and create wealth through property investment.
Over the years, rules and regulations, the property market, access to financial products, and other aspects will change, but the landlord lifecycle will remain constant.
It can be broken down as follows
This is the very first part of your landlord journey and is where you are researching the opportunity.
You should be covering such issues as:
- Is being a landlord right for me?
- What are my goals for investing in property? (This is very important as it will determine your direction and strategy).
- Will I be purchasing for cash or with mortgage finance? (If the latter, this is the time to start speaking to a reputable mortgage broker).
- Do I have the necessary deposits and acquisition costs to move forward?
- Where is the best area for me to invest?
- Which is the best property type for me to invest in?
- Which is the most tax-efficient format for me to invest in?
This is the stage where you acquire your investment.
You will be covering such activities as:
- Due diligence on individual properties in your chosen area.
This will include ascertaining tenant demand and undertaking both sales and rental to ensure you understand your investment from every angle. You will need to crunch the numbers to ensure the deal makes financial sense for you.
It is worth noting that buying a property with a tenant in situ will greatly simplify your research as you will have the track record of the existing tenancy, knowing the exact rental being received.
- Applying for a mortgage when you have found a suitable property (assuming you are not a cash buyer).
- Going through the legal process of acquiring a property. This will involve appointing a solicitor to act on your behalf for the purchase.
- Starting to look at the products and services you will need such as insurance, lettings agent, tax advisor etc.
- Getting the property ready to rent - such as undertaking any refurbishment or repairs/maintenance and getting a gas safety certificate done along with other compliance issues.
- Complying with any landlord licensing in your area.
This is by far the longest phase of the landlord lifecycle and, in the current market conditions, it is advised to take a long term view and consider a timeframe of around 15 to 25 years.
During this stage you will be:
- Marketing to find suitable tenants.
- Undertaking viewings.
- Referencing tenants.
- Setting up a tenancy compliantly*
*At the time of writing, there are over 160 Government statutes and regulations that landlords need to comply with in order to let out a property compliantly.
It is worth noting that rental legislation is becoming increasingly devolved across England, Scotland, and Wales, so it is important to understand the legal requirements of each country. For instance, you might be based in London and buying a rental property in Wales, so you will need to ensure you understand the rental legislation that applies to Welsh private rented sector.
Lettings agents can assist with all of the above, but the landlord should be aware that no third party can divest you or your legal responsibilities. Therefore, even if letting through an agent on a fully managed basis, you should have some understanding of your legal obligations. Fines for non-compliance are hefty and can be up to £30K in extreme cases.
- Moving tenants in and then checking them out at the end of a tenancy.
It is worth noting that all of the above will not be necessary if you have purchased a tenanted property, once again highlighting the benefits of buying with a tenant in situ.
- On-going management of properties and tenants — although some landlords choose to hand this over to a lettings agent on a fully managed basis.
- Ensuring your properties are compliant and safe and keeping up-to-date with any changes in legislation.
- Ensuring that repairs are undertaken promptly - again a lettings agent can assist with this.
- Making sure that your property is well maintained to ensure that it keeps its value and can achieve the highest possible market rent. This may entail a “facelift” refurb every 7 to 10 years, along with new carpets as required.
- Dealing with rent arrears, problem tenants, perhaps even having to evict a delinquent tenant.
- Re-financing your property as mortgage deals come to an end.
- Undertaking regular inspections of the property or appointing an inventory clerk to do this for you.
- Undertaking your annual self-assessment tax return and paying any taxes due.
- Keep records of your business activities (which as of May 2018 may become subject to new General Data Protection Regulations).
- Reviewing your property’s performance on a regular basis ensuing that it is running with positive net cash flow month on month.
This is when you decide to end your relationship with the property and sell it.
Considerations here include:
- How to achieve the best possible price when you sell? Will the property require any refurbishment to make it appeal to the market?
- Should you sell the property tenanted or with vacant possession?
- What are the tax implications for selling, such as capital gains tax - and making sure you have provision to pay this.
- Deciding the sales channel of the property and collating all the relevant documentation such as title deeds etc.
- Appointing a solicitor to undertake the sales transaction for you.
- Arranging viewings and reviewing offers.
- Assisting with progressing the sale until completion.
Whether buying or selling an investment property, Vesta offers a cost-effective and low risk solution that makes financial sense. When a property is sold with a tenant in place, everyone is a winner. The seller wins because they do not experience a void during the sales process and there is no capital outlay to get the property refurbished ready for sale.
The buyer wins because they buy a property with a tenant already in situ, providing due diligence on an actual tenancy along with income from day one of ownership. There is no capital outlay to get the property ready for rent, no viewings, no referencing of tenants etc.
And finally the tenant wins because they can remain in their property and simply be transferred over to the new landlord.