The Pros and Cons of Self Managed Buy-to-Let Properties.
Although property prices have fluctuated considerably, property investment is still a relatively safe and easily manageable investment opportunity available to the public. The most common investment route is a buy-to-let rental property. This can provide landlords with a regular income like a monthly wage, acting as a route to top up a pension or extra cash flow, with potential for regular high returns on a single investment.
This piece aims to explore the benefits and downsides of self-managed buy-to-let property investments. Before they are explored, it is important to understand the ins and outs of buy-to-let property.
Self-Managed vs Letting Agency
Like any investment, successful but-to-let investing is not without risks. These risks can be influenced by fluctuating markets, changes in regulations, tax rates and the changing nature of the private rental sector. How you prepare and manage for such situations, alongside factors that are in your control will predominantly determine the overall success of your investment while limiting the consequences of any external changes.
While there is no golden formula for managing your property on a day to day basis, there are two distinct routes that are available to landlords:
- Letting Agent: A letting agent will typically offer two levels of management (this can change from agent to agent). A let only service usually includes finding tenants, ensuring the successful let of your property, but with no further involvement. A full management service will be a far more comprehensive service and will cover up to 90% of the responsibility of a landlord.
- Self-managed: Self-managing is relatively self-explanatory. A landlord will be responsible for 100% of the management of a property. This includes finding tenants, successful leasing of the property and all responsibilities during the tenancy. Self-managing landlords should treat being a landlord and all facets included in a similar fashion to a business.
Benefits of Self Managed Buy-to-let Property
Depending on how you work best there are distinct benefits and limitations to both options. Being a landlord doesn’t need to be a complicated process if your willing to put in a little time and effort to understand your responsibilities and ensure the success of your investment. As long as you are willing to accept this, self-management can be a viable and successful option for your investment.
It is widely accepted that self-managing your property or properties, as opposed to transferring this responsibility to a letting agent, is significantly more cost-effective (can save landlords up to in the region of 50%). While this may be the case, if you do not keep on top of regular expenses, maintenance costs and one-off payments, expenses can spiral to unexpected levels. The cost-effective nature of self-managing buy-to-let properties is the most prominent with a structured plan and documentation of the property. Think of your responsibilities in a similar context to an accounts team.
You Control your Interests
Self-managing your property allows the landlord to have full control over the finer details of managing a property. From choosing prospective tenants in person, drawing up unique contracts to directly meet yours and the tenants’ needs, to directly liaising with tenants, having the final say provides a landlord with a sense of confidence. Self-managing a property allows landlords to thoroughly track all the expenses and guarantee that the property is being handled correctly.
Disadvantages of Self-Managing Buy-to-let Properties
There is no doubt self-managing your own buy-to-let property has a distinct set of advantages, especially providing a landlord free reign to do what they believe is best for their investment. Unfortunately, like everything, there are disadvantages attached to self-managing. The most obvious – if something goes wrong, you have yourself to blame.
An inescapable element of self-managing a property is the endless amount of paperwork and formalities that need to be completed correctly to avoid unaccounted for expenses. Usually undertaken by a letting agent, if you are not willing to undertake or put time aside to complete the necessary paperwork, self-managing may not be for you.
Nepi Property Management
So while this piece has explored the advantages and disadvantages of self-managing buy-to-let properties, NEPI are experts in lettings management.
For those looking to utilise the services of a letting agency in managing their property, NEPI can offer a bespoke rent to rent agreement becoming your tenant and ensuring you receive your rental income. Our fully-managed service is available at 10% – 2 % cheaper than the industry average.