When to take the leap from part-time to full-time landlord
Tuesday 14 November 2017
Despite the government’s best attempts in recent years to make the residential buy-to-let industry as unattractive as possible, there is no getting away from the fact that it can still be a very profitable and stable business.
That being said it does take a lot of careful planning – particularly if you plan to quit the day job and embark on a career as a full-time landlord.
My initial advice before you take the leap into any full-time business venture is to plan plan plan! Remember what they say, failing to plan is planning to fail! Initially I would suggest you calculate your survival income as a starting point, this should be the minimum you need to survive in terms of paying you bills and paying for basic necessities.
Once you have that figure in mind, try and build your property portfolio to the point at which your minimum net profit is equal to twice your survival income.
This will give you the ability to pay your bills and continue to invest in or maintain your portfolio. As with any business you need to ensure you have a sound business plan with solid investment strategies.
The big mistake many investors and landlords make is they fail to understand the business landscape they are operating in. You are not a landlord – you’re a business. It’s very easy to become a Landlord, too easy in fact, but let that be a warning. It’s much harder to create and run a successful, profitable business.
Here are a few good pointers to help you decide if and when to make the move:
Savings to fall back on
With any career change it makes sense to have a financial cushion for when the going gets tough. Unexpected repair bills, a tenancy falling through, illness – they can all spell financial difficulty for a time. Having a nest egg helps soften the blow and means you can sleep easy at night.
A realistic business strategy
Get to know the local authority in the area you plan to invest. Remember there are over 300 local authority areas in the England creating over 300 property markets - all with slightly differing dynamics.
You need to understand the areas you want to operate in thoroughly before you decide how you want to build your portfolio. By doing this you can understand exactly what the market needs are and provide properties with a demand. This can be residential or commercial.
A good support network
Being in touch with people who have ‘been there – done that’ doesn’t only help in terms of supplying you with advice and contacts - having a support network can also make you feel less alone and act as a good sounding board. As a full-time landlord you’ll be working on your own, so you’ll need ‘friends in the field.’ There should be face-to-face meet-ups near you and there are definitely online landlord forums you can sign up to.
Join organisations like the National Landlords Association who will provide you with invaluable information and networking opportunities.
A ‘big brother’ type figure can help when doubts about whether you’ve done the right thing going full-time as a landlord start kick in! Chances are he or she has had exactly the same thoughts at an earlier time in their career and nothing beats experience for sound advice.
A mentor can also help with contacts and nudge you back onto the right path when you’ve taken a wrong turn.
A dedicated office environment
This is your full-time career now so you will need a dedicated office either in your home or at a co-working space if you can afford the initial rent. Not only does an office give you somewhere to store your files and work correspondence, but it means you can always shut the door on it all when you have to get back to family life or just need time to switch off from work (and we all do).
As a part-time landlord with a few properties you probably haven’t found it too difficult to pop round and sort out some of the maintenance issues yourself, or maybe asked a ‘friend in the know’ to help out. As a full-time landlord you have to get serious and find a good maintenance company who aren’t just competent but reliable - and don’t charge the earth. It’s not as easy as it sounds!
Being self-employed and managing your own business feels terrific – but it’s definitely not something to step into without a lot of thought and preparation. There are a lot of uncertainties in today’s market, and you need to be sure and be ready before you take the leap.