Before you make any investment you should always investigate the negative aspects as well as the positive. You need to think about what you will do if, for example, house prices fall, or what will happen if you cannot re-mortgage and whether you are still able to hold your investment for the long term? You need to think of the different scenarios and create a plan A, B, and C to prepare yourself to ensure your investment does not fall through.
One of the potential pitfalls you need to think about are voids and even in popular areas properties can sit empty. One rule of thumb many buy-to-let investors apply is to factor in the property sitting empty for two months of the year, acting as a substantial buffer. Your rental properties often need repairing and things can go wrong. You will need to make sure you leave enough in the pot to cover these incidentals, as this is very important so you do not get caught out.
As a landlord, you should also learn about all the insurances available to you as a landlord, such as rent guarantees if the tenant does not pay. By finding out the insurances available to landlord it will allow you to build up a picture of potential pitfalls and how to overcome them while you are investing in property. By initially planning ahead and doing your research it should hold you in good stead and allow you to minimise the downsides, meaning you should have less unwelcoming surprises in the future.
- Peter Iwaniszewski