Why letting a property is a business not a hobby
It’s in every property investor’s best interest to approach buying a property and letting it out as a business, not a hobby.
Why? Like any well-oiled organisation, profitability is a key focus, and usually a reality. For profitability to be a reality for a property investor, the property (or properties, if part of a portfolio) must be managed and run in a businesslike way. A cut-throat approach is not what’s needed; a humane approach to managing tenants is necessary. But in order to reap financial rewards, and grow into a successful property investor, businesslike is best.
When we think of an impressive businesswoman or businessman, we generally imagine that individual to be shrewd, sharp, switched on, possessed of sound interpersonal and negotiation skills, with well-rounded knowledge of the way in which their industry functions, and an ability to understand their own shortcomings. It’s a skill to know when to delegate. A good businessperson knows when to step back and call on the knowledge of a specialist in the field. For example, for a business to operate, cash flow needs to be stable. If you want to try your hand at property investing but are invariably flummoxed by taxation and accounting, make sure you consult a tax adviser and recruit an accountant who has worked with property investors previously.
But let’s get back to answering the statement: why letting a property is a business not a hobby. It’s a business because you, as an investor or potential investor, will want to be successful. You’ll want your investment to be profitable and secure good returns. Obviously there are many reasons as to why someone invests in property, but every investor will want to be successful, on some level, in doing so. Treat it like a hobby, and you’ll be less likely to succeed.
So how can you, whether as a new landlord, an accidental landlord, or even as someone with a few buy-to-let properties in their portfolio, be businesslike in your endeavours? Here are a few tips:
1) Get organised
Self-organisation is an important skill in most jobs, whether you’re a sitting CEO or a freelancer trying to make a splash in the early stages of your career. Being organised as a landlord means keeping a record of all documents related to your tenant or tenants, and all records related to the property and your finances. This takes a lot of organising, even if you hire a property management to manage the property for you.
2) Treat your tenants as customers
You’ll want to be friendly and approachable with your tenant, but it’s important to maintain a professional relationship. It’s all about striking a balance between keeping your tenant happy (encouraging them to remain in the property for longer, thereby reducing void periods) and protecting your bottom line.
3) Research the market and know the latest regulations
Like any savvy businessperson, you need to have extensive knowledge of the industry you are operating in, and at least a basic understanding of the latest legislation and regulations affecting the industry. The buy-to-let sector has been subject to multiple changes in recent years, including stamp duty increases and changes to mortgage tax relief.
Letting a property as a business can make the difference between a profitable investment and an investment that flounders. Our advice? Be businesslike, and don’t be afraid to delegate. No one’s superhuman, so relinquishing some of the responsibility of managing a property can pay off.