What’s the biggest mistake new landlords make? We have asked that question to many experts, and here’s the resounding answer: beginners don’t think of their property as a business. For accidental landlords who see their property as their home, the shift is even harder. But to make a success of letting out your property, that shift is essential.
Your rental property is probably one of your largest financial assets. Astoundingly, though, a representative survey of 500 buy-to-let owners by the investment franchise Platinum Property Partners found that 93% of landlords have no five-year plan whatsoever for their properties.
A business plan maps out how you will reach your property goal. (Read our guide to setting a property goal.) It turns your property into a stepping-stone to the lifestyle you really want, whether that is it a new career, retiring in comfort or life in a hammock.
Six steps for creating a property business plan
Property is a business that can benefit from the same principles as any other type of business. Think about:
- Your product. What are your property’s strengths and weaknesses?
- Your target audience. Who is your ideal tenant? Would your property attract them? How much demand is there in your area from such tenants?
- Your competition. How many similar properties to yours are nearby? How does yours compare?
- Your exit strategy. How long do you want to keep your property? Do you intend to sell it, return to it or keep it and buy more?
- Your numbers. What should you budget for? Do your figures stack up?
- Your team. Who will let and manage your property: yourself or an agent? If you intend to self-manage, do you want to outsource anything, such as repairs?
In the rest of this post, we’ll explore the first point. We will address the other five points in separate articles.
Analyse your product
Be honest about your property’s strengths and weaknesses. You might not have bought it with renting in mind, so some factors could make it harder to let, for example, if it’s far from public transport or near a large council estate. Though you can’t change its location, you can find ways to work around it. You can also change its presentation if, say, it’s filled with too many personal items or looking a tad tired (more of this later).
» Rugby player scores despite location blight
Chris was keen to buy his first property and settled for a small terraced house near a large housing estate and a local nightclub. When he got married and moved abroad to play professional rugby, he let out his home through Swift. The council estate, it turned out, put off some would-be tenants. However, by taking the following steps, Chris ensured that his house never sat empty:
- He was realistic on the type of tenants he would attract. A young family who worried about safety didn’t take it, but a young couple and their brother – all new to the country – liked that they could get more space for less money
- During viewings, all the facts were on hand to answer questions upfront. The nightclub, for example, was going to be turned into housing – improving the area
- Chris was flexible on the deposit, accepting a deposit paid by a council scheme on the tenants’ behalf
- He was accommodating with furniture, buying a bed for certain tenants, then getting rid of a desk for the next ones
- He allowed tenants to paint the house inside, as long as they returned it to its original colours afterwards.
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