If you’re considering investing in buy-to-let property, or already do, then surely, you’ve gone some way towards educating yourself about the best strategies to follow and how you can minimise some of the biggest risks?
After all, property is one of the best wealth creation tools around - but one that requires a decent chunk of starting capital. Therefore, not an investment to be made lightly.
However, no matter how many books you read, courses you attend or networking groups you join, there are always going to be unavoidable challenges when it comes to investing in property and being a landlord. It’s how you deal with them that matters.
Individual level
The biggest risk to the success of your property business is often yourself and the decisions you make. Having said that, you can still do everything right and come across some challenges.
Just think for a moment what could happen in your life that you can’t necessarily control. For example, divorce and illness can not only result in emotional hardship for your families, but also an added pressure when it comes to the management of a property business.
Failure to plan for the worst from a personal perspective means that should something awful happen, there’s no contingency plan in place.
As morbid as it sounds, make sure your wills are up to date, that you have sufficient life and critical illness cover in place and that the management of your portfolio is properly documented.
When it comes to your business activity, there are also inevitable but unavoidable challenges you may come across. There’s little you can do if a sale falls through for example, regardless of how strong your relationship is with the estate agent or if you’re in the best position to buy compared to others.
The same goes for tenants and suppliers – You could do everything in your power to ensure you have all the correct references or recommendations in place and feel that this person is right for you and the property or project, but you have no control over them and what they do.
The only way to overcome instances like this is to keep calm and carry on. The more time you dwell on your disappointment, the more time you are wasting. There may even be some lessons to be learned from your experiences.
Big picture
There are then, of course, the external risks to your property business and the three biggest ones that come to mind are:
- A property market crash taking away the option of re-mortgaging or selling for a profit
- Interest rate rises pushing up monthly mortgage payments
- Void periods, where the units are untenanted and there’s little or no rent coming in
More recently, there have been more specific challenges for landlords such as tax changes which will reduce profit and did anyone foresee Brexit? Suddenly, the property market slowed down and landlords were facing higher tax bills. Then came increased legislation.
High cash flow coupled with not gearing too highly are not the only things that can protect you against these threats, but they are certainly the top two.
How else can landlords overcome challenges?
The good news is with the right support and a robust property portfolio behind you, it can be easier than you think to overcome challenges that are outside of your control.
Firstly, make sure your investment properties are cashflow positive and stress test them against external factors. Secondly, have the determination to succeed and a positive attitude – this is what will keep you going through hard times. Thirdly, have someone or a group of people you can seek advice from and lean on.
By far the most profitable and robust buy-to-let property strategy is high quality and professional Houses in Multiple Occupation (HMOs) like the ones Platinum Property Partners provide. And by far, the best way to overcome challenges as a landlord are to stand on the shoulders of giants and have a knowledgeable and supportive network behind you – funnily enough, just like Platinum Property Partners!
