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Self-management of a rental property requires excellent organisation and one of the best ways to achieve this is to run your properties like a business.
When you employ someone else to help you run your properties, you can get as involved or be as distant as you like depending on what your objectives are. When you’re going it alone though, you need to have your finger on the pulse.
Create a Business Plan for your Property Business
There is no right or wrong way of creating a business plan. It helps to be as thorough as possible, do your research, include pertinent facts and figures, and be willing to back it up with evidence. Keep in mind that a lender may want to see your business plan before they commit to offering you mortgage funding.
Putting together your business plan will help you work out what the objectives of your property business are and how you’re going to meet them. You should also build an exit plan, so you have an overarching objective to work towards. A proper business plan will also help you to document potential risks to your business and ways you may mitigate these risks, which makes it much easier if they come to pass.
Overall, a business plan will help you be more professional, more organised, and will help you make better and more informed decisions on the running of your business.
Decide How to Manage Your Property Finances
If you choose to hire a letting agent, a fully managed letting agent will usually manage your finances for you and they will produce reports that will help you file your tax return.
If you’re self-managing, you will need to monitor your own finances. Property management software like Landlord Vision can help you to do this and some have their own accounting engines which makes managing taxes far easier. Even if you aren’t using property management software, it makes sense to use some other type of accounting programme to keep on top of everything.
Finance management is not something you want to skimp on. If you absolutely hate accounting with a passion and you just don’t get it – and you wouldn’t be alone – consider hiring a bookkeeper or an accountant. It makes sound financial sense to nail down the management of your finances, as it’s much cheaper than HMRC’s accumulating fines.
Keep Up to Date with Your Market Research in the Property Industry
You may already be familiar with market research if you’ve been in the business for a while, but if you’re self-managing, you’ll need to undertake this regularly.
There are so many questions you want to answer with market research, but the end goal will usually be the same – product market fit.
As a minimum you need to make sure:
- Your property is right for the tenants you want to attract
- There are plenty of your target tenants in the area your property is in
- The rent is in line with market rates
You’ll want to research other properties to rent in the area. Find out what rents other landlords are achieving, what the demand is like etc.
If you want to grow your portfolio, you’ll need to go above and beyond the basics. Understanding the market means you’ll have a better idea of when to sell, when to pivot, when to buy, when to increase your rent and how to offer something different to attract more tenants.
Market research isn’t a one-time thing. Keep an eye on the market nationally and in the areas you have property or want to invest in. Check average yields, rents in the area, new developments in the area, crime stats, businesses that are entering and leaving the area.
You could write a whole book on finding and using this data. If you’re new to market research, spend some time reading articles, chatting to other landlords and speaking to letting agents to learn how best to keep on top of market research.
Determine How You Will Collect Rent
Rent collection is your bread and butter, so you want to think about this up-front when considering self-management. If you’ve created a business plan, rent collection should form a part of it. If you don’t have a business plan or if rent collection is not factored into it, make a plan or write a section on rent collection before you do anything else.
There are different ways to collect rent and each has its pros and cons. We don’t need to go into the different methods here, they are extensively covered around the internet. We will say though, that you should consider electronic rent collection over and above collecting rent in cash or cheque form. The advantages of electronic rent collection far outweigh the disadvantages of collecting in cash or cheque.
As well as how you’re going to collect rent, your business plan should cover how you’ll:
- Check that the rent has been paid
- Remind your tenant the rent is due
- Handle the payments
- Keep track of rents paid and overdue rents
- Keep track of market rents so you’re always competitive
- Raise rents
You should also define a process for non-payment of rent as it will most likely happen at some point. If you’ve already prepared a process for non-payment of rent, you’ll find it much easier to deal with when it happens.
Brush up on the Basics of Property Management
If you’re going to self-manage a property you won’t be able to skip this step. If you’re already self-managing or even partially managing you’ve hopefully done some of this already.
Over the last few years, the government has imposed increasing restrictions on the private rental sector. This has been to deter rogue landlords from operating and to bring more professionalism to the sector. But it has left landlords with a lot of industry legislation to understand and implement. If you went through the motions over the years, chances are you’ll have a good understanding of most of this, but if you’re new to the sector or new to managing we’d strongly suggest getting to grips with this as soon as you can.
Take the time to learn about the rules and regulations that apply to the tenancy type you’re going to operate and the country you’re operating in and know what is expected of you.
There are a few ways to do this:
- Read up on the various subjects around the web. This is free and pretty easy if you’re good at finding information on search engines. It should be enough to give you a general introduction. Start with vague and broad searches, the more you read, the more you’ll pick up on jargon and industry specific terms. As you begin to pick up on the industry specific terms you can use these to narrow your searches to find more specific and relevant information. Repeat this process and you’ll be able to dig into any niche.
- If you want to get something a bit more reliable and something that takes less time, pick up a book. There are plenty of property management books on Amazon and certain reports and white papers that will get you caught up.
- There are some short courses available which we touched on earlier, though we can’t really speak to the efficacy of any of these. Everything we know we learned from experience and a lot of reading!
The government website is a good source of information. It isn’t pretty and sometimes represents a bit of a rabbit hole as one article leads to another, but it’s trustworthy, up to date and factual. For the most part the articles are actually pretty easy to read and understand.
You don’t have to use these sources in isolation, use them all. If you’re a complete novice start with a good book – check reviews on Amazon. While you’re reading the book, Google things you want clarification on. If the book cites further sources, go read those. Take a short course on something you’re particularly struggling with.
Remember anything you pay for will probably be tax deductible – provided you’re improving skills you already have rather than teaching yourself entirely new skills. We aren’t here to get into the whys and wherefores of tax deductibles, so as with everything, make sure you follow the rules before you deduct.
Keep on Top of Industry News in the Property Sector
If you want to grow your portfolio, you’ll want to keep an eye on the industry. Keeping on top of industry news involves monitoring house prices and understanding growth and demand or decline in specific areas that you’re looking to invest in.
In general, you’ll want to understand what new legislation is coming into force and how to prepare for it. As we touched on previously there is a lot of legislation to keep up with and sometimes this can change with little notice (here’s looking at you Coronavirus).
The best way to keep on top of industry news is to set up an RSS feed. They might be old fashioned, but it is the easiest way to monitor the news on a number of websites at once. The good news is that many RSS readers are free. We’re fans of Feedspot and the free plan gives us everything we need to keep on top of industry movements. Each RSS reader works differently, but usually you enter in the URLs of the websites you want to keep on top of. The RSS feed will then send you an email every day with the new articles that have been published on each site on your list. Each day you can flick through this list and if you see something interesting you can click through from your email to read the post. It is hands down the easiest way to keep on top of everything and just requires some up-front work from you to find the best sites to monitor.
Here are some essential sites that we watch in our Feedspot:
- Landlord Law
- Landlord Insider (the Landlord Vision blog)
- LandlordZone
- Property Investment Project
- NRLA Breaking News
- NRLA Industry News
- NRLA Regional News
- Property Road
- The UK Landlord subreddit – yes you can add subreddits into your RSS reader!
- Property 118
- Landlord News
We’re sure you can find many more that will provide information specific to your business model.
If you’re self-managing, you should also join a landlord association. Joining an association will mean you get regularly updated on issues facing the sector and legislation you should know about. There are plenty to choose from such as the British Landlords Association (BLA) and associations that represent country specific interests, such as the Scottish Association of Landlords (SAL).
