These were just some of the questions asked at a recent property investment forum we hosted in partnership with Edward Mellor, with the National Landlords Association and a HMO specialist as guest speakers.
The point of the forum was to help property investors enhance their expertise in the buy -to-let market, much of the discussion focused on assessing and planning for risk.
Common worries from landlords around the table ranged from; budgeting for damage and structural failure, selective and additional licensing regulation to voids and rent arrears (to name a few).
It was a recurring headache for many that problem tenants and repairs left them with money tied up where it, preferably, didn’t need to be. The National Landlord’s Association shared research which showed that 38 per cent of student landlords experienced arrears in the last year, compared with 59 per cent of landlords letting to blue collar workers, 40 per cent letting to families and a massive 71 per cent letting to benefit recipients (showing students are, perhaps surprisingly, actually the more reliable tenants).*
Another unplanned for risk, which was discussed at length, links back to my last blog post about not ‘judging a book by its cover’ the dreaded Japanese Knotweed, an aggressive, destructive and invasive plant with the power to grow through tarmac, paving stones, brickwork and cement.
It wasn’t all doom and gloom though, the buy-to-let market in the UK is thriving at the moment, and the investors around the table where sharing success stories.
So, how can buy-to-let investors factor these risks into their business plans?
The trick is to try to mitigate risk where you can. Look at your existing buy-to-let portfolio, or any properties you are considering purchasing, and think about which risks could occur. Then review this list and access the likely hood of these things actually happening. Pick the five main likely risks and develop a plan to mitigate the risk. For example, if you are worried about, of have been hit by rent arrears in the past, think about the type of tenant you are targeting – don’t be afraid to be picky about your tenants.
Taking a planned approach to risk will help you get the best out of your buy-to-let investments.
Although we do understand that you can’t always plan for every eventuality, even the ‘more reliable’ tenants aren’t always a 100 per cent guarantee and any tenant could have a sudden change in circumstance causing them to lose income. This teamed with the other risks like underlying Japanese knotweed or other structural issues that occur, can leave you short of cash flow. In some cases this could even mean missing that bargain property you saw at auction! That’s why speed and flexibility are our core values. In most cases we can help with these short-term cash flow problems, whether that be a bridging loan for structural damage, or helping to quickly secure that property at auction.
