How to enjoy stress-free and life-changing passive income
Buy-to-let tips and advice like the following are rare. It comes from the horse’s mouth, so to speak. It is what a property investor, Richard, told me recently about his buy-to-let investment portfolio. Here is his story, which could help you create life-changing passive income.
I started with a single buy-to-let
It was in 2004 when I made my first property investment. An off-plan property in London, which completed a little over a year later. I’d bought it as a buy-to-let, and set about finding tenants for the flat. I learned a lot about marketing, advertising, and screening tenants from that first buy-to-let investment. It’s hard work.
After that first investment had started to perform, I continued to use the positive cash flow and increase in property values to remortgage and grow my property investment portfolio. I diversified and purchased a couple of older properties, too.
My portfolio has grown, and I’ve had some great tenants. I’m well on the way to creating the passive income that will allow me to retire by the time I’m 50. I wish I’d known back then what I know now. I’ve wasted a lot of time, effort and money managing my buy-to-let portfolio.
Here’s the advice I’d give to first-time buy-to-let investors:
Be prepared for service charges that give you a sinking feeling
When I invested in a couple of existing buy-to-let apartments, I hadn’t been prepared for what I call ‘the hidden service charge’. Now, service charges are levied to pay for things like gardening, maintenance and insurance to cover the owner’s liability. A few months after making my investment, I was hit with an extra charge by the administrators of the block.
I had to pay £4,000 per apartment into a sinking fund to help pay for essential repairs. I thought my service charge covered such costs, but it didn't.
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The lesson is to be prepared for a call on your property. Of course, the likelihood that you’ll need to pay a wedge of cash into a sinking fund increase with the age of the property. It’s one drawback of investing in existing property rather than new build.
Tenants can damage property
Most landlords have experienced a tenant from hell. The damage that tenants can do never ceases to surprise me. I’ve suffered from carpets that look like they’ve had a troupe of line dancers on them seven nights a week. I’ve found doors hanging off their hinges. And I’ve had to wear wellie boots in flooded kitchens where washing machine pipes had been ripped apart.
The lesson I’ve learned is that tenants don’t need a lot of time to cause costly damage. Regular property checks and inventory comparisons are essential to prevent a tenant from going bad and ripping your property apart.
Great tenants are invaluable
Another lesson my tenant from hell taught me was the need to track down top-class tenants for consistent rental income. I started vetting tenants more comprehensively. I asked more questions when we met. I learned that successful buy-to-let landlords never let to tenants on benefits.
When you spend the time and effort to vet prospective tenants properly, and then make sure that you’re a good landlord, you’ll find great tenants and keep them. A couple of my properties now have tenants that have been in them for more than five years. They require lower maintenance and look after the properties like they are their own.
The lesson here is that great tenants are invaluable. But you must work hard to find them and then make sure that you keep them. It requires regular contact, a caring approach, and a willingness to negotiate on rental prices.
Maintenance costs can be expensive
As I’m telling you this, I wish I’d never invested in existing property. Everything is older. And that means the roof, central heating, flooring, plumbing and electrics are all closer to repair or replacement. With the experience I have, I think that the 35,000 reasons to laugh at the scary new build premium discussed in an investment education blog on the Gladfish site are an understatement.
Whatever you do, be prepared for maintenance costs, and be prepared for them to be higher than you think. Especially if you invest in existing property rather than off-plan or new build investment opportunities. Put some money aside from your positive cash flow every month, in a reserve fund. Don’t touch it. This emergency money will be there when you need it.
Being a landlord is hard work
From marketing a property to getting the tenancy agreement right, vetting tenants, collecting rent and carrying out all the maintenance requirements, being a landlord can be hard work. The more properties I owned, the harder the work became. Vetting prospective tenants and carrying out regular checks are essential.
I’m pretty good at DIY, but I had to employ tradespeople to do a lot of work. Unless you’re a qualified electrician or gas engineer, doing that type of work yourself is putting your tenant at risk and your investment property, your reputation, and your income.
Then a couple of years ago, the job of being a landlord simply got too much. I was spending all my spare time visiting properties, trying to arrange maintenance, and taking calls from tenants. That’s when I decided to employ the services of an investment property manager. Gladfish recommended Ezytrac Property Management.
I’ve never looked back. My time has been freed up. The charges are very reasonable. And I know my properties and tenants are being managed effectively and efficiently.
The advice I’d give any new buy-to-let investor is to decide whether you want to be an investor or a landlord. For me, the life of a property investor is the one I choose. It’s all about the passive income and building a buy-to-let portfolio. I’m not investing in property to replace one full-time job with another – I’m investing to create the lifestyle I want in retirement.
Are you ready to join Richard and profit from property?
Richard’s story is a common one. Beginner investors underestimate the job of being a buy-to-let landlord. Investment property management services aren’t as expensive as you may think.
By concentrating on property investment rather than being a landlord, you’ll invest better, buying in the best places to invest in property UK. For more information about how Gladfish can help you become a successful property investor, contact one of our team today on +44 207 923 6100.
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