How to keep your sanity when you invest in property UK

How to remove property investor stress

When you invest in property UK, you are buying an asset that has the potential to change your life. You could:

  • Benefit from leveraging in property investment in the UK, and make a great return on other people’s money. It could supercharge the real returns on your investment capital.
  • Increase your income by investing in a positive cash flow property. What could you do with the passive rental income that is possible when you buy in the best places to invest in property UK?
  • Grow your capital at a tremendous pace. Over the long term, property values in the UK have doubled every 8 to 10 years. UK property is also one of the most stable investment assets in the UK.
  • Leave your loved ones a real legacy. If you invest in a pension plan and buy an annuity when you die the money is gone. You may pass on a pension to your spouse, but after this, there will be nothing left for your children and grandchildren. When you invest in property as your retirement vehicle, its accumulated value doesn’t disappear into thin air (or the pockets of an annuity provider).

However, there are also some disadvantages when you invest in property UK. These can frustrate you, worry you, and cause a whole lot of heartache. In this article, I’ll discuss these disadvantages and share my top tips to stay sane as a property investor.

The dark side of investing in property UK

No pain no gain. That’s what we’re told from an early age. With such a lot to gain when you invest in property UK, there must be some pain – right?

The pain comes in the form of risks. It is the tough side of investing in property. Of course, the market could turn against you, and you could lose money because values have fallen. It is the plight of flippers – investors who buy and hope to take advantage of a strong market.

For long-term investors in buy-to-let property, the risk of losing money when you sell is far lower. That doesn’t mean there aren’t risks, though. Here are the main ones, each of which could drive you insane:

·        Unexpected expenses

The central heating system stops working. The plumbing turns out to be sub-standard. Wiring is faulty. The roof springs a leak. There is a whole host of things that can go wrong in a buy-to-let property. At some stage, you’ll be faced with an unexpected expense. It’s the way of the world. Maintenance is required to keep a property in tip-top condition and maintain high rental income.

In the worst-case scenario, an unexpected repair could cost you a good tenant. If you can’t afford to pay for the repair to be made, your tenant may have no alternative but to move out. That expensive repair bill just got a whole lot more expensive.

·        Tenants from hell

A good tenant is a dream. A tenant from hell is a nightmare. They’ll keep you awake at night. They’ll pay their rent late, if at all. They’ll cause your property’s neighbours untold grief. They’ll refuse you entry to inspect the property.

Eventually, you are left with no course of action other than to take them to court in an eviction battle which could drag on for months. More heartache. More expense.

·        Costly void periods

All buy-to-let investors suffer void periods. The quicker you can turn around a property between tenants, the shorter these void periods will be. When your property isn’t tenanted, your costs rise, and profits fall. The mortgage company won’t suspend your interest payments because your tenant left the property.

So, you’ll want to keep your void periods to a minimum. At the same time, you don’t want to lease to the first prospective tenant who comes along. The likelihood is that this will be the tenant from hell you must avoid.

·        Landlord liability

It is a risk which most property investors never consider. The risk that you could be sued. Let’s say a carpet comes loose at the top of the stairs in your investment property. UK law says that you could be liable for any injury caused to your tenant, visitors or tradespeople. How much could that liability be? How long is a piece of string?

If you are found to be responsible for personal injury, you could be forced to compensate the injured party for loss of earnings, medical bills, and pay all court costs, too. This worry alone is enough to keep you awake at night.

Tips to help the property investor sleep at night

You’ll never remove these risks completely. But you can use some simple and inexpensive strategies to minimise them to almost zero. Here are my eight top tips to stay sane when you invest in property UK:

1.      Rein in those expectations

Don’t think you will become a millionaire overnight. You won’t. Property investment is a long-term game. Invest for positive cash flow, but understand that some of the best property investment opportunities start life as negative cash flow. To grow a tall oak, you must first plant a small acorn. Be conservative with your cash flow estimates, and you won’t be disappointed.

2.      Balance profit and effort

Property is an investment for lifestyle. Consider whether you want to be a hands-on landlord, or keep your time free to enjoy the fruits of your investment. The rental income that is pumping up your bank account isn’t a lot of good if you don’t have the time to spend it.

My advice is to be an investor and not a landlord. You don’t need the day-to-day hassle. Employ the services of an investment property manager, and let them take the strain. Sure, it will cost a little (usually between 10% and 15% of rental income), but it’s a cost that is tax deductible and time-freeing.

3.      Get investment education

How can you expect to win, if you don’t know the rules of the game? Get educated in property investment, and put that education to good use. Research the area before you buy, and invest in the best properties in the best areas. This way you’ll have a constant demand for your buy-to-let. That demand will keep rents high and void periods low.

4.      Lease to the best tenants

Take time to find the best tenants. Advertise and market the property and avoid the free marketing sites – these attract professional bad tenants. When you believe that you have found the perfect tenant, take the time to vet them properly. Check their employment history and credit worthiness, and obtain references from their current and previous landlords. Of course, if you have employed investment property managers, they should do all of this for you (and probably have prospective tenants lined up before your current tenant vacates).

5.      Ensure your tenancy agreement is legal and up to date

Never let your property without a tenancy agreement in place. Don’t rely on off-the-peg tenancy agreements, and don’t be tempted to write one yourself. The law is constantly changing. If you insist on going the DIY route, get a solicitor to check the agreement before it is signed. Again, an investment property manager should have a legal department that keeps on top of all the rules and regulations, and so should never have an out-of-date agreement which isn’t worth the paper it is written on.

6.      Surround yourself with property professionals

It is impossible to know everything there is about property investment. That’s why I make sure I surround myself with property professionals. It is my team, the people that bat for me:

  • A great solicitor (who knows property investment law)
  • A great mortgage broker (who knows the buy-to-let mortgage market inside out, back to front)
  • A great accountant (who knows property taxes like the back of his hand)

And finally, when I started out in property investment, I had a great investor mentor. After my father, the most influential figure in my life.

7.      Don’t invest without insurance

I see so many property investors get caught out by this. They believe they have every base covered, and so don’t think it’s necessary to buy landlord insurance. Or they forget to renew. Landlord insurance typically costs just around £200 to £300 per property. It can cover unexpected repairs, tenant damage, and non-payment of rent, as well as enforced void periods. Oh, and it can cover personal liability. Don’t invest without it.

8.      Build an emergency fund

Finally, build an emergency fund. My advice here is to keep a reserve fund for each property, allowing for around three months of costs. It should be enough to cover any unexpected expenses or void periods.

Make the gain without the pain

No pain, no gain? That’s BS. I don’t believe it has to be this way. Sure, there could be pain in anything that’s worth doing. But that doesn’t mean there must be. If you know the risks before, you can prepare for them. And when you’re prepared for pain, you’ll avoid the pain. Pain-free investment, and aggro free returns. That’s my investment objective. Make it yours too, by following the tips above.

To join a legion of property investors making pain free and hassle free profits from investment in property UK, contact one of our team today on +44 (0)207 923 6100.

Live with passion

Brett Alegre-Wood

Brett Alegre-Wood
May 21, 2017

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