2009 is going to be a tough year for landlords. The rise in rental prices that was predicted has, thus far, failed to materialise, while at the same time bills are going up and new mortgage finance is virtually impossible to find.
It is perhaps the worst time, therefore, for warnings about a potential increase in rental arrears - but that is exactly what the National Landlords Association (NLA) are offering. The Association suggests that 71 per cent of landlords expect to see a rise in rental arrears over the next year, compared to only 1 per cent who predict arrears will fall. Furthermore, 37 per cent are already experiencing difficulties with late-paying tenants.
Clearly, a tenant’s failure to meet their payment obligations can have severe effects for landlords. One month of missed rent can result in a missed mortgage payment, which can cost you dearly and leave a black mark on your credit rating. Furthermore, the potential for extended void periods in the event that a tenant is evicted (itself a lengthy and potentially costly process) is one that should not be taken lightly as Britons become ever more strapped for cash.
At the same time, the NLA has also warned landlords of the potential expense of winter repairs. Many tenants leave properties vacant for days at a time during winter, particularly over the holiday period. However, it has become clear to many landlords that the average tenant is unaware of the extra steps that need to be taken in an effort to battle the cold.
One of the most common problems faced over the winter is frozen pipes. Landlords should ensure that lagging is fitted to any pipes that might freeze, and should inform tenants of how to turn off the supply in the event of a burst pipe. Similarly, landlords have a responsibility to keep the heating in good working order, and this is obviously of particular importance during the winter months. However, it is possible to avoid many problems by keeping tenants informed. Providing information regarding basic radiator maintenance, as well as boiler pressure and similar tasks, can provide a smoother experience for everyone - and save landlords having to call out technicians.
There have been few more challenging periods in which to be a landlord. Many homeowners are being forced into letting their property because of an inability to sell their house or pay their mortgage. These ‘reluctant landlords’ are likely to find this period all the more challenging and the extra properties on the rental market create yet more competition for existing investors.
Given the difficulties facing landlords, it is all the more important that measures are taken to prevent problems occurring. Ensuring that you have sufficient landlord insurance should therefore be at the top of your list of priorities.
The right landlord insurance policy will cover you against a number of major risks. To begin with, your buildings insurance cover will help you meet the costs of repairs to your property in the event of flood, fire or similar occurrences. And if your property is furnished, then contents cover will ensure that you can replace anything that is damaged or stolen.
Perhaps most important in today’s climate, however, is tenant default cover. This can be bought as an addition to a standard landlord policy, but should be considered as a necessity in the current economic environment. Tenant default cover will help to ensure that, in the event of a tenant failing to meet their payment obligations, you will still be able to pay your mortgage. You may find that some insurers will place restrictions on the sorts of tenants against whom they will offer default cover; for example, some insurers will refuse to cover students or unemployed individuals.
Simply Business allows you to compare prices from leading insurers. You will receive a real quote tailored to your needs, rather than an estimate or a one-policy-fits-all quote. Crucially, this means that you can read the policy documents before you buy - vitally important in order to make sure that you’re covered for the right circumstances.
Fortunately, the low interest rates have given many landlords some breathing space to take stock and carry out any protective measures that will see them through the recession. Awareness of the pitfalls is the first step towards continued buy-to-let investment success.