Are you wondering how to succeed as a landlord or property investor, however you describe yourself?
Is it still worth being a landlord nowadays? With continuing headwinds from the cost of living crisis, high interest rates, inflation, high taxes, worries about EPC upgrades and the Renters’ Rights Bill, what’s the best way to approach property investment as a landlord?
In this blog post, I explain the 10 key fundamental principles that will help landlords get started and succeed at building their net worth sustainably for the future, all whilst being a good landlord.
Following these 10 tips will help you build a successful property portfolio on solid foundations, as a good landlord, so you can thrive whatever the economic and political climate.
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Updated: 3 October 2024
Quick links: 10 tips to succeed as a good landlord
1. Build a strong team
Investing in property is not like investing in the stock market where you can research stock and make a purchase on an online platform without interacting with anyone. It’s not possible for even self-managing landlords to do everything themselves. This means that landlords need a good team around them.
If you’re raising finance, it’s important to use a mortgage broker who specialises in property investment to advise on the best buy to let mortgages or bridging loans, if significant refurbishment is needed. (Send me a message via my contact form if you’d like a recommendation).
A good solicitor is also a must. You do get what you pay for with solicitors, and you don’t want to be the one holding things up. It’s a false economy to get a cheap conveyancer (or to use self-styled “legal experts” and “eviction specialists” who aren’t legally qualified and regulated).
You need someone who is experienced and practical, and able to chivvy things along. Especially if you’re buying through a limited company. For more tips, here is a blog post on how to speed up buy to let conveyancing. Again, if you need legal advice, I can make a referral if you send me a message via my contact form.
Money spent on an accountant will usually pay for itself, and it’s a tax deductible expense. It’s another false economy to try to do it yourself, unless of course you’re an accountant!
Finally, you’ll need good trades people, unless you’re a multi-skilled builder, and even then you’re likely to need a qualified gas engineer and an electrician. Life as a landlord will be a lot easier if you have trusted trades people you can call on during the refurbishment and also after the property is let.
2. Being a landlord is a business
A classic mistake is not treating being a landlord as running a business. Just as with any business, in order to succeed as a landlord, you need to be clear on your goals and your strategy to help you achieve them.
Focus on the needs of your target market
Whatever the strategy, you need to research your target market, pinpoint locations where there is strong demand, and explore how you will meet this demand.
Most importantly, you need to be clear how you will make a profit on your investment. If you’re not going to make a profit, you’d might as well put your money in the bank.
>> Related Post: What makes a rental property attractive to families
Decide on your investment goals
Be very clear on your goals for your investment. What does success look like?
Are you looking for capital growth after flipping? Long-term income? A certain return on investment? What type of input will you need to achieve these goals? For instance, do you have the infrastructure in place to manage serviced accommodation? What level of cash will you need going forward? How much investment will you need up front?
Plan how you will make a profit
It’s important to plan how you’ll make and maintain a profit.
One of the biggest costs for a landlord can be the fees paid to letting agents to find tenants and manage the property. However, it’s possible to do this yourself if you have the time and inclination.
I use OpenRent to find tenants at a fraction of the cost of high street letting agents. I’ve also always managed my properties myself, saving around 15% a year of the gross rent per property.
Sure, managing your own properties and finding your own tenants do take a bit of effort. But the savings go right through to the bottom line. And most importantly, I know I do a better job than an agent as I care about my properties and my tenants. This is a virtuous circle, as if my tenants are happy, I’m happy!
>> Related Post: How to find tenants yourself without agents
>> Related Post: How to self-manage your buy to let
Landlords need to increase rents
The days are gone when landlords only put up rents when a new tenant moves in.
According to the ONS Price Index of Private Rents data released in September 2024, private rental prices increased by 8.5% in England, 8.5% in Wales, and 7.6% in Scotland, in the 12 months to August 2024.
Landlords should increase rents every year, so that they track market rents. That said, it’s usual for landlords to increase rents for existing renters by a lower amount than the average for new tenancies. This rewards loyal, tried and tested renters.
Some landlords are reluctant to raise rents, but if they don’t do not it in a period of inflation, they’re effectively reducing the rent each year.
Equally, don’t give tenants “rent shock” by increasing it by a huge amount all in one year. Little and often is fairer all round.
I personally increase rent at the lower of CPIH inflation and wage inflation. CPIH rose by 3.1% in the 12 months to August 2024, unchanged from July, and down from the recent peak of 9.6% in October 2022. Wage inflation, on the other hand, is currently higher than CPIH – the annual growth for regular earnings (excluding bonuses) was 5.1% in May to July 2024.
>> Related Post: How to increase rent
Paperwork
Do also keep records of expenses, as regardless of whether you buy a property through a limited company or as a sole trader, you’ll need to file a tax return.
Make sure you update the EPC if you’ve done work to improve energy efficiency, and keep on top of your paperwork.
3. Take a long-term view
Property should be seen as a long-term investment. When refurbishing properties for letting, whether it’s a single let, HMO or serviced accommodation, it’s worth investing in quality materials such as carpet that will last.
Arrange for a gas engineer to service your boiler every year at the same time as the gas safety certificate, as it’ll last longer.
Keeping up with repairs will help preserve the long-term value of your property, and help achieve higher rents. It also improves the experience of your renters, who are more likely to want to stay if it’s well maintained.
4. Include safety buffer
A period of stagnant house prices and persistent inflation is not a time to over-stretch yourself. The cost of materials and labour has shot up over the last couple of years. It’s very easy to spend more than you expect. Also, if re-selling a property in 2025, you won’t benefit from the “free” uplift from a rising market.
Be conservative about your estimates and your assumptions so you have sufficient padding if things don’t turn out as expected. After all, no-one in 2021 predicted base rates would soon increase to over 5%.
You also need to put enough money away to pay for big bills in the future – paying tax, replacing that boiler, and the inevitable wear and tear.
Don’t leave yourself in the position where you’ve pulled out so much equity that you don’t have enough cash flow to repair a leaking room, or even enough to pay the CGT if you decide to sell up.
5. How to achieve financial freedom through property
Property gurus often talk about “financial freedom”. But what does that actually mean?
I think financial freedom means having enough reliable income and investments to fund the lifestyle you aspire to.
Property can be an excellent way of building wealth over the long term. Or even the short term if you’re successful at flipping.
Sure, recycling deposits and expanding as a landlord through debt can be a good way to start your property journey. However, surely financial freedom isn’t about being saddled with so much debt there’s not enough margin for a big bill? Or fearing the next refinancing because the property value has dropped and the interest rates have gone up.
Many people will advise borrowing as much as you can and taking out as much money as possible when you refinance. I disagree with this. With interest rates having increased, a lower loan to value is good for your cash flow, as your net income will be higher, with less interest to pay.
It can also be very tempting to measure success by how many “units” you have as a landlord, or how many properties you’ve flipped. However, it’s all about the bass, to borrow from Meaghan Trainor.
Working towards financial freedom means increasing your net worth. This means net profit after tax. The very bottom line, not gross turnover. Building net assets, not building debt.
Your property portfolio isn’t worth £1 million if the mortgages or third party financing total £750,000. The real worth is £250,000. The bank or other investors own the rest and shouldn’t be included in the value of your portfolio.
True financial freedom means building your net worth over the long term. Then you’ll be free from worrying about your finances.
6. Don’t be too trusting
The old adage that if something looks to be good to be true, it probably is, is correct. Be very wary about people offering you something that sounds like an exceptionally good return, and do your due diligence.
Many unscrupulous companies and individuals try to prey on people’s inexperience or trusting nature to promise high returns that prove to be a scam or just wishful thinking. It’s particularly rife in the property industry.
For instance, let’s take schemes that are supposed to save you tax. HMRC published a warning in October 2023 that transferring ownership of properties to a limited liability doesn’t work, and is tax avoidance. These schemes have been heavily marketed by tax “consultants”, and unfortunately many landlords are having to unravel these schemes and pay fines.
Inheritance tax planning can have unintended consequences. For instance, it can be difficult for family trusts to obtain mortgages. Also, tax rules change.
If you’re planning on using a builder, or even appointing a new letting agent, there’s a lot of information on companies available for free on the Companies House website.
You shouldn’t be afraid to ask for references. If you’re thinking of using new builders for a big refurbishment, ask to visit a previous job, speak to the client and see the quality of their work. Good builders won’t mind.
Finally, before you sign up with letting agents, make sure you read the small print in their agency contract as many try to tie in landlords and make them pay a termination penalty.
Don’t be trusting. You can’t let and forget. You need to manage your letting agents to make sure they do a good job. After all, the buck rightly stops with the landlord.
>> Related Post: Why and how landlords must manage letting agents
>> Related Post: What to look out for in the small print of letting agent contracts
7. Don’t be a shark
Even though we are in a rocky period from an economical point of view, do behave ethically. It’s very easy to get a bad reputation if you go back on your word without good reason.
If the situation does change for the worse, for instance, an unexpectedly bad survey, be upfront about it, and think about how you would wish to be treated if the positions were reversed.
Don’t be one of those sharks who tries to renegotiate a price shortly before exchange, just because you have the upper hand. It leaves a bad taste in the mouth.
Far better to get a reputation for being fair but professional, as estate agents are more likely to call you first with the next good deal. What goes around comes around.
Let your word be your bond. After all, you’re in it for the long term.
8. Think sustainability
Part of investing for the long term is building a sustainable business. This doesn’t just mean investing in energy efficiency (click here for some energy efficiency tips), although that’s a start.
It means being a good steward of assets. Also, it means being socially responsible in the way you go about managing your investments, being a good landlord and looking after your properties properly. Thinking about sustainability and the needs of your renters when refurbishing.
New doesn’t necessarily mean better. Look for ways to recycle or improve what you have. Not all properties need new kitchens. A good clean and a lick of paint can do wonders. Not only does this say money, it also means less goes into landfill.
To find out more on what sustainability means to property investors, click here to read my blog post on ESG.
9. Be adaptable
Key to thriving in a difficult times is being adaptable. For instance, you might buy a property to resell, but its value drops due to falling house prices. In this case, it makes sense to pivot to letting the property for a few years until prices come back up again. There’s no shame in this. It’s being adaptable.
Being adaptable also means keeping up with new ways of doing things. This includes embracing new technologies and new ways of working, like using virtual property assistants. Take a look at this blog post to see how landlords of larger portfolios obtain economies of scale (lower costs) by moving from agents to virtual teams.
Adaptability also means adapting to legal changes. For instance, although the requirement to upgrade rental properties to an EPC was abandoned by Rishi Sunak in September 2023, the Labour government announced in September 2024 that landlords would start consulting on “proposals for private and social rented homes to achieve Energy Performance Certificate C or equivalent by 2030”.
An energy efficient property is easier to rent – I flag the fact that my properties have an EPC C rating when I list them for letting.
Although it may seem daunting, you can stagger the investments over a few years to spread the cost. You’ll also then avoid the scramble for EPC assessors and insulation in the run up to 2030. It’s what I’ve been gradually doing with the one property of mine that was an EPC E when I bought it in 2019.
Likewise with the Renters’ Rights Bill. It makes sense to start thinking about what changes you’ll need to make to adapt to the “once in a generation” change for the private rented sector, which may come into effect as early as summer 2025.
Being adaptable is a state of mind which is crucial to success in property investing. There’s no point having the perfect strategy for 2019 or 2021 in 2024. Don’t be afraid to go back to change your approach if conditions change. We don’t yet know what 2025 will bring, but we need to be thinking about how best to adapt to the new normal.
>> Related Post: The 12 key provisions in the Renters’ Rights Bill
>> Related Post: Mission EPC C for private landlords by 2030
10. Keep learning
One of the aspects that makes being a landlord so challenging and interesting is that there is always more to learn. Not only is the legal landscape constantly changing with new laws coming into force each year, but different economic conditions require different responses.
In order to succeed as a landlord, it’s very important to keep refreshing your knowledge to keep up to date. Not only will you then understand your legal responsibilities, but you’ll also be a better landlord, and plan ahead to make sure you stay on top of everything.
Don’t even consider becoming a landlord if you’re not willing to educate yourself about your legal responsibilities. Even if you outsource management. Managing agents and letting agents sadly don’t always do what they’re supposed to (I speak from experience), and the buck rightly stops with the landlord. This means you need to be educated so you can supervise what they’re doing.
Educating yourself doesn’t have to mean having to spend thousands on a property guru course. You can subscribe to my weekly newsletter for free to keep up to date with what’s important for landlords to know.
Join my private landlord-only Facebook Group, The Independent Landlord Community, where you’ll be able to ask questions and share tips in a supportive environment.
Another good approach is to join the NRLA and become an accredited landlord member. By doing their Landlord Fundamentals course, you can be assured you know all the basics to help you succeed.
I also very much recommend Tessa Shepperson’s Landlord Law membership. Readers of The Independent Landlord get a 20% discount on their first payment by using the coupon code RW75ZK3R. Tessa runs excellent monthly training webinars and has a huge amount of resources on her website, including tenancy agreements and forms that you can easily customise.
Finally, read this blog post on why it’s a myth that landlords earn passive income.
Final thoughts
My final bit of advice is to be a good landlord. Good landlords attract and keep happy tenants.
Being a good landlord means acting within the spirit and intent of the law. Not quibbling about minor things. Keeping on top of repairs. Don’t treat it as passive income – it’s not.
Be fair with your tenants. Treat them as you would want your own adult children to be treated if they were renting. It doesn’t mean being a push over. But it does mean that you should do the right thing.
Being a good landlord is at the heart of being a successful landlord. It’s the secret sauce.
>> Related Post: How to be a good landlord
You may also find useful
- How to be a good landlord
- How to achieve Social Media Success for your Property Business
- 7 ways to screen your property investments
- How landlords can get the best from their managing agents
- My 5 biggest mistakes as a newbie landlord
- A guide to becoming a successful landlord
- How to find renters without letting agents
- Which repairs must landlords carry out?
