Stress is a pernicious thing: it creeps up on you over time without you knowing it, usually when you try to do too much for too long, or when you are very worried about something. With mental health awareness week taking place in the UK every year during the month of May, and pressures on landlords arguably at all all-time high, Tom Entwistle, Founder of LandlordZONE, draws on his own experience to provide tips on how to reduce the stress of being a landlord.
A long time ago at an early stage in my property investing career, I pushed myself to the point of burn-out. I was trying to do too much, keeping too many plates spinning, working long hours, seven days a week, for too many years. But your body can only take so much before signs of stress emerge: difficulty sleeping, letting small problems get out of proportion in your mind and being irritable with everyone close to you.
I was lucky, I caught it before it got too serious, got some sound advice and started to read all about stress, and I learned some really valuable insights. One quote I read has stuck with me ever since: imagine a rubber band that you stretch and release. If you stretch it and release it numerous times it will return to normal, but if you stretch it and hold it stretched for long periods, as with stress, eventually it / you won’t return to normal.
That, I think, is a wonderful analogy for your stress: push yourself too hard and live with too much stress for too long and your body won’t go back to normal. You’ll bring on things like high blood pressure, heart disease, diabetes or some other malaise, which could even lead to death.
Stress in life is impossible to avoid, and to a certain degree some stress is healthy. It actually makes you better at what you’re doing – you can perform better in an exam, when delivering a presentation at work, or dealing with a difficult situation with a little short-term stress to inspire and motivate you. It can focus your energy and enhance your performance. But when you push it too far, when the load becomes too great for too long, and when you are so worried and anxious about things that you start to get everything out of proportion, then the warning signs are there.
It’s being aware of stress that counts. In fact, if we are aware of our stress levels, and we know how to use this to our advantage, it can actually make us smarter, stronger, and happier. Try to get some balance in your life, but remember, having too many social commitments, holidays etc can be just as bad for you. Add this to a busy work schedule and your stress levels can become intolerable.
If you find yourself constantly sweating the small stuff, chronic stress is already taking hold, so think carefully about how you can make changes in your life so that you can de-stress before it gets out of control. One way to do that is to get yourself organised, especially if you run a property business. Find out more about how you can look after your mental health and where you can find support in our related article, ‘How can you protect your mental health as a landlord?’
The gurus might tell you that real estate investing is an easy way to riches. “It’s a nice passive investment, hands off, armchair, let it and forget it!” Become a millionaire with little effort. But don’t you believe it. Letting property, dealing with planners, builders, local government, accountants, HMRC and tenants can be just as stressful as any other profit-making endeavour, if not more so.
What’s more, some of these ‘gurus’, the so-called experts in property, lead people along into schemes that are off-the-scale when it comes to stressful. Many would be property investors have paid out thousands for training courses, maxing out credit cards and setting themselves up for failure by starting out with challenging properties such as HMOs. It’s a recipe for a mental breakdown in my view.
There are many aspects of being a landlord that can be stressful, from finding good tenants to dealing with maintenance issues and keeping up with landlord legislation. But how you go about investing and a running a property business can play a big part in reducing the stress of managing a property portfolio. By putting the planning work in - working out a successful buy to let investment strategy which doesn’t involve too much risk, creating a business plan and a sensible financing structure, and developing your management skills - it is possible to run a property portfolio with minimal stress.
Money, regulatory changes such as the Renters (Reform) Bill, building and planning issues, tenant problems, and tax issues are all key stressors that landlords face. But you can take it all in your stride if you plan effectively. Here are some tips for reducing the stress of being a landlord.
You need to think carefully about the class of property (and tenant) you want to deal with because not all rentals are created equal. You can target those with less stress attached to them, at least to start off with.
I categorise rentals into A to D classifications, which broadly align with locations. So, if you deal with D class properties, you’re looking at less desirable areas - the bottom end of the letting market – and you can usually expect a bit more stress when you’re managing these properties. Having said that, some landlords love this market. They rely mostly on tenants on housing benefits, many of whom make excellent tenants. They learn to deal with some of the problems that arise, develop a knowledge of the rules and carry out the right background checks. Some larger HMOs fall into this category. If you are new to the game or are an inexperienced landlord, you are best avoiding these types of lettings if you are looking to reduce the risks of stress.
At the other end of the scale, A class properties are in the most desirable areas at the top end of the market. Invariably these tenants are the most demanding - they are paying top notch and they are used to receiving the best service, so they expect the best in everything. Again, expect more stress with these properties and tenants.
My properties have been in the B and C classifications: professional and working tenants, young professionals, couples and families - working people such as middle managers, teachers, classroom assistants, NHS workers, local authority and emergency service personnel. These tenants expect good, clean accommodation without the luxury expectations of class A or some of the issues and extra knowledge required with class D. And generally these tenants don’t lose their jobs, so your rent payments are the most secure.
There are also the different types of lettings to consider: vanilla single lets, houses and flats, the houses in multiple occupation (HMOs) I’ve mentioned - large and small HMOs and fully licensable ones, student housing and furnished holiday lets (FHL). All have their unique characteristics but HMOs and FHLs take the most work. They have the highest financial returns, but they require the highest management skills. These types are best suited to full-time landlords.
You have many ways of financing your property investments when starting out. You can use “other people’s money” if you are able to use Houdini like skills, as the gurus would have us believe, but I would suggest you also need a good deal of your own money to get started.
You can use only your own funds to buy if you are lucky enough to have them (the least stressful option), you can self-finance through buying something that’s cheap and in need of renovation and do a lot of the work yourself, or you can borrow the funds with varying degrees of leverage.
If you chose the latter option, I recommend speaking to a good mortgage broker – they are worth their weight in gold – they know the market inside out, how to present your investment case, and they will help you borrow the right amount without over-borrowing, which really would put you under stress.
Whether you’re starting out or you’re already in the property business, you should have a long-term plan. What’s your ultimate goal with your property business - to grow the business to give you a full-time occupation? To provide an income for retirement? Or to sell up and make a big capital gain? If so, what’s your time scale, your exit plan, and what are the long-term tax implications?
Do your own research on property investment – start by reading Total Landlord’s guide to buy to let property investment - keep abreast of the latest rule changes, seek peer group knowledge through joining local landlord associations and investment groups. Join one of the main landlord associations and seek professional advice before committing yourself. These are not difficult things to do but they will help to make sure that you are knowledgeable about what’s required, keep you on the right side of officialdom, and what’s more, they relieve stress.
“Cash is King” is the oft quoted maxim, and it’s a truism that no one in any business can afford to ignore. Businesses can be profitable in theory (you sign rental agreements giving x amount of income per year, with a mortgage and expense commitment of y) but things don’t always go according to plan - tenants don’t pay rent or they pay late, they damage your property, you get anti-social behaviour problems, it costs you money to evict them and you lose income while doing this, the roof needs replacing, the boiler breaks. All these unscheduled events play havoc with your cash-flow.
I have found a cash flow forecast is the best de-stressing tool I know. When you are financially committed or even stretched, you MUST be on top of your cash flow, you must plan ahead and have contingencies in place in case the worst happens. Learning how to drive a cash flow spreadsheet is an absolute necessity in business - I highly recommend it if you want to sleep well at night.
Apart from making sure your property is suited to its target market, is clean and safe for letting and meeting all the current landlord regulations, your pre-tenancy preparation is the key to success. You may decide to leave this to a professional letting agent, or alternatively, do it yourself. Managing tenancies yourself is perfectly possible, and it saves you money if you get it right, but you might want to let the professionals handle this until you have more experience and confidence, or if you don’t have time to do it yourself or don’t live near the property.
Marketing the property, selecting the right tenants, doing background tenant referencing checks, organising an inventory and schedule of condition (ideally by an independent inventory clerk), preparing all the documentation (and there is quite a lot) and signing up the tenant – these are all skills every landlord must learn and develop if they are to manage the tenancy themselves, with the least amount of stress. Total Landlord’s ultimate guide to preparing your property to let is packed with detailed advice to help you get the pre-tenancy preparation right.
The more you prepare at the letting stage, the less chance you have of encountering problems during the course of the tenancy. You will have a lot less hassle should you have the unenviable task of having to evict a tenant. In that unlikely event (if you've selected well), you may be forced to do it. But remember, just a minor mistake in the documentation could mean that an eviction will be delayed (with no rent coming in) or not possible at all. Or due to lack of documentation you may not be able to claim against the deposit for rent owing, or damages to your property.
Having your rent payments made by standing order directly into your bank is the only way to organise payments in my view. It’s the least stressful way as you simply monitor your bank account online, the payments come in on a regular date and you know instantly if there’s a problem.
Act immediately if a rent payment is missed. Contact your tenant to find out why it’s been missed and confirm your conversation in writing with a rent payment schedule. Keep repeatedly sending a payment schedule until the payments are caught-up or in the worst case scenario, you are forced to evict.
Keep up a regular inspection regime and communicate with your tenants, though don’t make unscheduled visits or interfere too much – tenants have a right to “quiet enjoyment” which basically means free from disturbance. It’s their domain during the tenancy term. Total Landlord’s ultimate landlord’s guide to rental property management includes comprehensive advice on managing the property during the tenancy, and what to do if your tenant can’t pay the rent and falls into arrears provides guidance to help if this happens to you.
Keep meticulous records. Recording transactions for your rental business is relatively straightforward and easy to do if you keep on top of it. It’s a simple matter of recording income and expenditure, and by calculating the difference you have your taxable profit, or loss as the case may be.
You can use a simple spreadsheet and record these items in conjunction with your cash-flow-forecast, or if you want to get more sophisticated, use one of the specialist property management software programs that are readily available on the market. These have the advantage that they also remind you of important tasks, such as when inspections and gas checks are due.
You need to get yourself into a routine, regularly recording accounts and filing invoices, and stick to it. That way everything is fresh in your mind, and you don’t need to go scratching around at the end of the year trying to remember what you paid or where money came from.
Remember, you must file a self-assessment tax return by 31 January every year, paying whatever tax is due on rental income - some of which will be in advance. You must also keep all your accounts records for at least seven years for HMRC purposes.
If you are not confident at working out your own tax liabilities, you should consider using a tax accountant to prepare your tax returns for you. By having everything in order you will keep your accountant’s bill to a minimum – most accountants will prepare a personal tax return including a small amount of property income, providing your paperwork is organised, for in the region of £200-£300. Read Total Landlord’s Advice on UK landlord tax: the complete guide for more information.
Making sure you have a comprehensive landlord insurance policy in place is vital to reducing the stresses of being a landlord. Your rental property is likely to be your most valuable asset, so it’s important to protect it. Although not a legal requirement, a conventional home insurance policy won’t cover you for the higher risks associated with buy to let. So, if you let out your property to tenants without dedicated landlord insurance, you could find yourself out of pocket if your property is left uninhabitable by tenants. Most mortgage lenders will also ask landlords to take out specialist landlord insurance as part of the terms of the mortgage agreement.
“A landlord insurance policy can help take the stress out of unforeseen circumstances like flood and fire that could affect your rental property. By having a landlord insurance policy in place, if the property becomes uninhabitable due to a flood or fire, while the work is being carried out you will also have loss of rent cover so that you are not losing out on your income stream during this period.
It’s important that you choose a policy that meets your needs, so if you require additional cover like malicious damage or theft by the tenants then make sure that the policy you are purchasing covers the additional cover that you need. To take the stress out of the situation in the event of a claim, make sure that at the inception of the policy you have cover that protects you from your main concerns.
A good idea is to have a check list of what you require from a policy so that when you get various quotations you can compare on a like for like basis and not just purely on premium.”
Steve Barnes, Head of Broking at Total Landlord
Total Landlord has put together a checklist, to help you make sure you get the best landlord insurance cover for your needs when comparing buy to let insurance with other providers:
Total Landlord insurance checklist:
• Accommodates all types of tenants (subject to the landlord having full control and an assured shorthold tenancy agreement in place) such as benefit recipients, students, retired people, professional tenants – with no difference in cover or price
• Provides full cover between tenancies for up to 90 days subject to policy terms and conditions
• Theft cover including by tenants and their guests
• Offers loss of rental income or alternative accommodation up to 30 per cent of the rebuild value with no time restrictions
• Includes public liability with a minimum of £5,000,000 limit of indemnity
• Includes a Tenants Subrogation Waiver
• Has an in-house claims team with authority to make payments on behalf of insurers
• Has a team that is trained to provide an advised sale, and can offer tailored guidance on what cover a landlord needs based on their own requirements
Read Total Landlord’s guide to finding the best landlord insurance for you, for more information.
Stress affects us all, and to some degree it is a good thing. But get too much of it and you are going down a slippery slope. You need to learn how to manage your property business effectively, getting yourself organised so that you can easily cope with the tasks at hand. Don’t take on too much in terms of your time or your financial commitments. Running out of time to fulfil your duties, tenant issues and money worries are perhaps the biggest sources of stress landlords are likely to encounter when running a property business.
Keeping yourself informed can really help to reduce the stress of being a landlord, so sign up to LandlordZONE for regular updates on private rented sector news and to subscribe to the landlord forum. The forum offers a great source of support and advice and being part of a wider landlord community is a good way to manage your stress levels. You can also visit Total Landlord’s Knowledge Centre, where you’ll find a comprehensive library of content to help reduce the stresses of being a landlord, including this article on nine steps to becoming a good and successful landlord.
