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  • Stickies & Evergreen

    Top 10 most deadly landlord pitfalls & how to avoid them.

    As Landlords, there are many things that can come back and bite us along the way, being seriously damaging to our wealth. I thought I would compile my list of top 10 most deadly pitfalls, to help others to avoid them!

    1. Buying BMV from a "distressed" seller.

    If you purchase below market value from a "distressed" seller, you need to be aware, that should the vendor go bankrupt later down the line, and it was found that the property had been sold at a discount, the sale can be unwound.

    Furthermore, most lenders will not even lend now where a "distressed" seller is involved, so you do not want to put forward a deal that might get rejected at the last minute, especially if you are on a bridging loan.

    Further reading and detail on this topic: BMV bombshell

    2. Bridging loans when the exit fails

    I see many mentors and gurus talking about creative finance and suggesting the use of bridging loans. These loans are only designed for short term funding as they are cost prohibitive.

    You should only enter into a bridging loan if you have a very clear exit of how you are going to redeem it. See No. 1.

    3. Poor tenant referencing

    The best way to never experience a bad tenant is never to let one into your property in the first place. This means doing intense due diligence on any tenant.

    This can include:

    Employer's reference
    Previous Landlord reference
    Rental guarantor
    Visiting the tenant in their current property to see how they keep it.

    Further reading on this topic: The ultimate way to vet a tenant

    4. Relying on someone else's figures and/or information.

    Whether that be a property sourcer, letting agent or anyone giving you any figures to do with property investment, make sure you do your own intense due diligence and satisfy yourself that you have the correct information.

    A small difference in the achieveable rent for a property can make a significant difference as to how much you can borrow against a mortgage for that property and also how much cash flow you will achieve.

    NEVER, EVER, EVER agree to purchase a property without having been to view it and understand it from every angle.

    5. Failing to protect tenant's deposits

    As a Landlord, you are required by law to protect the tenant's deposit in one of the government approved schemes.

    Failure to do so can lead to harsh penalties in the event of a deposit dispute.

    Further reading on this topic: Important ruling that all landlords need to be aware of.

    Tenancy deposit protection reminder

    6. Failing to commission an inventory.

    The inventory and schedule of condition sets out the condition and contents of your property at the start of the tenancy, so that there is something to compare at the end of the tenancy.

    If you do not have an inventory done, and the tenant damages your property, the onus is on you to prove the damage, not on the tenant to prove that they didn't damage the property or remove anything from it.

    So, if you do not have an inventory, you are actually giving your tenant an unfair advantage.

    7. Being under-insured.

    In these austere times, some landlords try and save money by cutting down on insurance.

    Whilst the vast majority of landlords have invested in insurance (98%), most of these policies are only basic buildings insurance products which safeguard the physical structure of the property.

    Were landlords to experience problems with late or missed rental payments, these policies would offer little or no support; leaving them in a complex predicament.

    Rental arrears are often considered to be one of the biggest problems faced by landlords and are something which specific rent guarantee insurance policies can protect against.

    So to be safe, Landlords should consider Buildings insurance, landlords insurance (for PI) and rent guarantee insurance.

    There is also a new insurance proposition called Rentplan. It is a new service for tenants that offers income protection insurance to cover rent and other expenses, to enable the tenant to keep their home and tenancy if they become unemployed or suffer an illness, accident or involuntary redundancy. Read more about Rentplan >>> here.

    8. Not getting "consent to let" from a lender or freeholder

    Many accidental landlords let our a property with a residential mortgage on it. It is imperative to contact the lender and get permission to let the property. This may involve a small fee or a change in interest rate. If you do not do this and the lender finds out, you will have breached the T & C's of your mortgage and the lender can take action.

    Also, some leasehold properties have clauses in their leases that state you are not allowed to sub-let at all, or, if you do, you have to apply to get a "consent to let" and there will be a charge associated with this.

    9. Not working with a letting agent who has client money protection in place.

    The lettings industry is largely un-regulated and there are many stories hitting the headlines of agents who absconded with large amounts of landlords and tenants monies.

    Only work with an agent who is registered to a recognised accreditation scheme like ARLA or NALS. The SAFEagent scheme shows which agents have voluntarily registered to confirm that they have recognised client money protection in place. These agents registered to an accreditation scheme will also be registered with a Property Ombudsman Scheme, which gives a route of redress if something goes wrong.

    10. Failing to maintain your property.

    This excerpt from the Property Hawk blog says it all:

    By law, as well as making sure the property is fit for habitation, landlords are generally responsible for carrying out all repairs to the structure and exterior of the property. Therefore not responding to issues of damp in your property will not only lead to a deterioration of your housing stock, but may lead to complaints from tenants, many of which won’t understand the relationship between their lifestyle and the damp in the property. This can lead to arguments between tenants and landlords, a great deal of stress and can also potentially lead to you, as the landlord, being prosecuted.

    Condensation is one of the three forms of damp and is caused by a combination of two main factors. The first is the amount of moisture we produce, and the second is the surface temperature where the condensation occurs. We produce huge amounts of moisture everyday, through bathing, washing, showering, cooking, drying washing and even breathing. During the winter months this moisture-filled air stays trapped indoors as tenants open windows less frequently to keep the cold drafts out. The resulting build up of moisture in the homes leads to damp and mould growth. First you see condensation on windows and cold surfaces, and then mould growth occurs where there is a cooler surface temperature, such as on north facing sides of houses and on poorly insulated walls or ceilings.

    Mould will form where there is high moisture content, usually as a result of damp, and the result is both an unsightly and unhealthy house. However, there are many less well-known consequences of condensation and high humidity, including higher heating bills, health issues and also a deterioration of the building. All of these can result in a property that is unsuitable to live in or even unfit for habitation, resulting in conflicts between tenants and landlords, as well as depletion in the value of your property.

    So, how can you protect your property investment and avoid condensation? The only way to avoid condensation and prevent mould appearing on cold spots and north facing exterior walls is to remove it from the air or increase the surface temperatures. As a landlord this is achievable by;
    Improving the quality of cavity wall insulation in the house so that the walls have a higher surface temperature, reducing condensation and mould growth.
    Providing mechanical ventilation throughout the house, especially in bathrooms and kitchens.
    Educating the tenant about the sources of moisture and the consequences of it to help them visualise a solution
    Providing the tenant with a dehumidifier and educating them on its use.

    A dehumidifier is used not only for removing moisture in the air, but also can dry clothes, help houses feel warmer, minimise health issues and reduce heating bills. The reduction in heating bills may not immediately seem like a benefit to landlords however, with the rising cost of gas and electricity it’s likely to become a deciding factor on whether a tenant can afford to live in a property. By providing a solution that creates a healthier atmosphere within the home, minimising any health implications to the tenant, this is likely to remove a great deal of stress from any tenant/landlord conflict regarding issues of damp and health.

    If you have not provided your tenant with a tumble dryer then a dehumidifier is a great alternative as it dries washing and will keep the entire home dry at the same time.

    By investing in a £149.99 Meaco dehumidifier you can significantly improve the quality of your property, leading to happier tenants and a better reputation as a landlord. The cost of a Meaco dehumidifier is extremely small in comparison to the thousands of pounds worth of damage that damp can cause, plus the potential for lost rental earnings. A dehumidifier is not only a tool to remove water from the air, but will also build a positive business relationship between any tenant and landlord and avoid the stress and headaches that arise as a result of any conflict regarding damp properties.

    Related reading on this topic:

    Condensation and mould - a guide to give your tenants on moving in.

    Have I covered everything? What other pitfalls would you warn landlords against?
    I agree with all of those Vanessa and I will add 10 more.

    1. Not keeping up with current legislation and regulation
    2. Not having a sinking fund - some times you cannot avoid the voids and any property can give you a surprise bill.
    3. Using documents like ASTs because they are free and not being certain of the credibility of the organisation that produces them.
    4. Not realising that in this economic climate even the best tenant can loose a job, suffer ill health or a relationship breakdown. If this happens they many not understand how to access state help or they may feel ashamed of doing so. Landlord need to understand the benefit system and know how to support their tenants through a claim - especially with Universal Credit around the corner.
    5.Not being a member of a landlord association like NLA, this will keep you up to date, supply free documents and letters, support you if you need advice and give you access to local meetings where you can network free of charge with like minded landlords in your are
    6. Over estimating the power we have as landlords. We may own the property but once we hand over the keys to a tenant they have all the power
    7. Trying to avoid legislation and regulation when it is much easier to just comply
    8. Listening and acting on advice of people who can talk the talk but wear the Emporer's New Clothes - or is that story too old for most people?
    9. Not valuing our tenants without whom we would not be landlords
    10. Not accepting that we are landlords not property investors and that the buck stops with us.

    Follow me on Twitter@landlordtweets
    Follow me on Twitter @landlordtweets
    Brilliant stuff Mary! Absolutely brilliant.

    This should prove to be a really useful thread for all landlords looking to save money, raise their game, and survive long term.

    I wonder if we can get it up to 30!
    8. Listening and acting on advice of people who can talk the talk but wear the Emporer's New Clothes - or is that story too old for most people?

    No. 8 on your list is so important Mary!

    Over 41,000 views of a thread about a dispute with a property guru and yet, on other forums, I still see newbies asking about his courses and saying they are booking on!

    Business as usual for the guru due to lack of due diligence by newbies.
    When I first started reading discussions on web site what struck me most was the number of people who "sell" wrong information. We are all entitled to an opinion and to pass on information but how many of us are Insured to give advice?

    I have learned that it is the best sales people who attract new landlords and often persuade them to part with large sums of money. People want to buy the dream, they don't want to be brought down to earth. I find some of the sales techniques very interesting including

    1.Making people feel that to take time to think and to do their DD is a sign of their lack of committment to making money and will result in failure

    2.Misleading people with statements like "How to become a property millionaire in 12 months"

    3. Quoting well known wealthy people out of context

    4. Talking about buying property to let as "armchair investments"

    5. Making being a landlord sound easy

    6. Talking about strategy that will only work for some people without taking into consideration the circumstances of the "target"

    7. Using the past as an indication of what will happen in the future

    8. Making promises that they cannot keep

    9. Selling their seminars as an "investment"

    10. Being dishonest about their own achievements

    I know that these people would say caveat emptor but when they have just spent an hour hyping people up I would suggest that they need a cooling off period. Afterall you can cancel double glazing even having paid for it why should a person be committed to spend, sometimes thousands of pounds, in a moment of frenzy?

    It reminds me of power of Billy Graham who said

    "I've read the last page of the Bible. It's all going to turn out all right."

    Not meant to be disrespectful to a person who gave people hope but just to make a point.

    Follow me on Twitter@landlordtweets
    Follow me on Twitter @landlordtweets
    I agree Mary.

    It is very hard for newbies to distinguish between those people (like you and I) who share for the sake of sharing because we love property & landlordism, and those people who share because they have a sales agenda.

    Some of the advice I see given out on forums makes me shudder. It can be completely wrong, out of date, downright dangerous, or even advocating a fraudulent action.

    I started a thread called "When it comes to advice, is most of it bad ... ?" to try and highlight some of my concerns.
    This is why I post a link to a credible source whenever I can. I don't expect or even want people to take my word for anything that I say I just want to raise awareness and give them the chance to do their own DD by following the link.

    I am asked all the time why I post information on fora and what I get out of it. My reply is that I enjoy sharing and I learn a lot from others who I respect. I also enjoy reading other peoples opinions it makes my brain work.Information is worth more than money to me these days

    Follow me on Twitter@landlordtweets
    Follow me on Twitter @landlordtweets
    Mary, you say above:

    "When I first started reading discussions on web site what struck me most was the number of people who "sell" wrong information. We are all entitled to an opinion and to pass on information but how many of us are Insured to give advice?" Angry

    This is SUCH an important point and something I get very hot under the collar about. Reputable advisers/coaches/whatever will be insured and be a member of an appropriate organisation or body that supports ethical practice.

    Jayne Owen @jayneowen

    Editor and Writer: Your Property Network magazine

    Investor: Mozaique Property, South & West Wales and South West England

    Occasional reviewer at The Property Bookshop (@Property_Books)

    In view of this news of an estate agent suffering a sexual attack on a viewing, I would like to remind all landlords to take their own personal security seriously when doing viewings, or attending their properties.

    Paul Routledge, founder of Landlord Referencing, was stabbed 5 times in the head and left for dead when he attended one of his flats and interrupted a drug deal going on.

    Perhaps carry a heavy torch and, if in doubt, ask someone to attend the property with you. Carry a mobile and make sure someone knows where you are at all times.

    Be aware of any strange behaviour like the person crowding your space or making inappropriate remarks.

    Listen to your instincts – If you feel threatened in any way, leave immediately.
    The issue of personal safety when showing property is VERY important. In 1986 the beautiful 25 year old Suzy Lamplugh disappeared after showing a property to an unknown person, her body has never been found. I remember that story as though it were yesterday and it rocked the sales and lettings industry at the time. Lets make this tragic loss mean something by keeping ourselves safe.

    Suzys parents started the Suzy Lamplugh Trust in her memory and on the trust web site they give some excellent advice. PLEASE READ IT HERE https://www.suzylamplugh.org/

    I always tell my tenant that they are ALL that is important in my properties - I can replace everything else. I don't want them figting fires, trying to repair gas or electric fittings, ignoring loose carpets or boards,wedging open fire doors, disabling smoke alarms, blocking fire exit routes.....

    Follow me on Twitter@landlordtweets
    Follow me on Twitter @landlordtweets
    Just want to re-iterate again that personal safety is very important.

    Tenant who beheaded landlord is found guilty of murder

    Killer Karl Bestford faces life behind bars after a jury found him guilty of murdering his landlord in a row over rent.

    Newcastle Crown Court heard how Bestford stabbed Simon Meech 11 times and beheaded him with a kitchen knife while he was still alive.

    Mr Meech had arranged to meet his tenant at the flat he rented from him in Rayleigh Grove in Bensham, Gateshead, on July 28 2012 because Bestford hadn’t paid the £395 rent for around seven months.

    Bestford, 35, then unleashed a frenzied “one-sided” knife attack before partially severing his victim’s head and wrapping his lower body in bin liner in an attempt to dispose of the body.

    But Bestford gave up and fled the scene in Mr Meech’s car leaving his mutilated body in the blood-stained kitchen surrounded by cleaning products.

    About an hour later Bestford pulled over in a lay-by on the A69 and called the police to hand himself in. He was arrested minutes later with dried blood on his hands.

    Read the full article >>> here.