Risk Management in Buy-to-Let

Risk Management in Buy-to-Let

Many buy-to-let property investors have been unnerved by urban legends of malicious tenant behaviour. While there certainly are types of tenants that landlords must avoid, it is a myth that tenants are a landlord’s worst nightmare.

While it cannot be denied that there are isolated incidents of malicious destruction of a landlord’s property, it is but a small percentage of tenants that display malicious behaviour. Most of us have, at some time or another, rented someone else’s property. Did you willfully wreck your rented accommodation? Do you have friends or family who have maliciously damaged a rented property? While urban legends of delinquent tenants abound, experienced property investors will confirm that they are the exception and not the rule.

Similarly, only a minority of tenants pay their rentals late, or not at all. The reality, therefore, is that the vast majority of tenants nationally are paying on time and in full, even under tough economic conditions.

It is important to understand that tenants are not adversaries, but rather the clients of a buy-to-let investor. In every business and in every industry, business owners face a risk of delinquent clients. It is a risk that smart business owners and investors identify and manage. In fact, if managed correctly, and tried-and-tested risk management strategies are implemented, the landlord-tenant relationship can be a mutually rewarding one.

There is no reason for a property investor to do business with a small percentage of tenants who display malicious behaviour, or those that pay late or not at all. To avoid such tenants, a property investor simply puts a few simple affordable risk management techniques in place.

Appointing a rental management agent to take care of all these aspects is almost always the best choice. Professional, reputable rental management agents have the expertise, experience, and resources to deliver a professional service to both yourself and your tenant, at a very reasonable fee- usually 8- 10% of the rental, which must ideally be covered by the rental charged.

However, some property investors may prefer to manage their own tenants. This is possible, provided that you are willing to put in the time and effort to do so professionally.

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