Landlord Mindset (Part 1)

Landlord Mindset (Part 1)

Today, I am starting the journey of discussing various aspects of being a residential Landlord and my belief that it must be seen as a business. The fist step is Mindset and due to the extent of this section I have split it into 2 parts, today is part 1

·????????Start with why.

There can be many reasons for becoming a landlord. It is important however to understand the purpose and to clarify the goal. Capital growth, income, secure investment etc. It is also at this stage worth considering, is this a one off, or the start of, or part of a portfolio. Additionally, what’s your end game? As Stephen Covey would say “start with the end in mind”.

These are all important questions, as the answers will help you decide how best to structure your business i.e. sole trader v company etc. It will also help you decide what type and size of properties you are looking to purchase along with their location and whether they should be HMO or not.

·????????It’s a business.

If you follow some, individuals, and “experts” on social media etc. they often suggest that Buy-to-Let as a quick and easy way to make money. Done well, it can be a route to earn a strong return on your investment and enjoy capital growth, it is the “quick and easy” part, I would debate.

The Private Rental Sector is like any other business sector and you must go in with you eyes open. You have to understand the game and all the rules along with the potential risks /penalties for non-compliance.

No matter how you structure your But-to-let business, there is a multitude of Legislation and Regulation that you need to understand and comply with.

In addition, as an investment vehicle the PRS is not the same as the financial market and buying shares. As a Landlord there are notable requirements and responsibilities along with ongoing costs, that come with the title. It is so easy to get caught out.

Even down to the simple matter of having to register as a Landlord.

I will go into this in other sections but you are creating a business, so there is a huge amount to learn, the numbers matter and emotion should not be a factor in any decision/purchase.

·????????Emotion.

As an Estate Agent there is nothing, I like more than when carrying out a viewing you can see the individual or couple getting emotionally caught up with the property, you are showing them. The likely hood is that they will beg, steal (it is only an expression - I am not discussing AML at this point) and borrow, extra money in an attempt to ensure they are the highest bidder.

As a Landlord you need to understand the maths and that every penny matters. In that regard you have to stay detached and if it doesn’t stack up or your offer is rejected fine, move on to the next property.

To take this a step further when it comes to “dressing” the property. You must not have an emotional attachment to anything you leave in the flat. Often, not by any malicious intent, items get damaged, stained/marked or just go missing.

·????????Your baby.

I see it time and time again. An individual has bought a property to live in, as an owner occupier. They then lovingly, do it up and it becomes what they often refer to as “their baby”.

Home improvements is a complicated matter. Properties depending on their style and location normally have a price ceiling. This means that after a point, no matter what improvement an individual carries out, it will not increase the sale price or rent, they would receive. Personal taste verses market trends can also be a factor.

If they are doing the improvements for their own enjoyment, that’s great, until there is a change of circumstances and they decide to rent it out. The reason for the change is not relevant. The important issue is you must have a mindset change taking them from an emotional involvement to a business.

The reality is if they put any tenant into their property, the next time they see it, it will have changed, even if there is no “damage” and only wear and tear. They must rethink their emotional involvement in the property. If they can’t, my advice would be to consider selling and don’t rent it out, to avoid the emotional upset (which from experience can be significant with often unrealistic views on the tenants responsibility to re-instate) when they take the property back and it does not meet your expectations.?

·????????Friends and family.

In the acting world, they say don’t perform with children and animals in the property world however it changes to don’t do business with friends and / or family. People will give you funny looks and tell you, “you are being ridiculous” etc however if you are doing any property deal with friends and family, it is essential that everything is done by the book, legally formalised and recorded.

Please remember and I take you back to a previous section, it’s a business, don’t risk your investment by doing favours and not formalising and following the proper process, just because you trust a member of the family or a good friend. Spoiler alert, friends can become enemies and families fall-out. When this happens property and money can become nasty battlefields unless, it is all legally tight.

• Conclusion

I trust these brief comments are of assistance however should you be interested in more information on the topics raise, please feel free to contact me.

Next time I plan on having a look at:

Understanding the business

·????????Understand the maths

·????????Markets

·????????Price /worth /cost / value

·????????Yields

·????????Markets

·????????Demographics

·????????Infrastructure

Build your team

·????????Your team

·????????Agent v no agent

·????????Governing/advisory bodies

·????????Negotiation skills

·????????Communication

·????????Knowledge is key