Buy to Let Property Renting is a Business

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Many landlords are employed in business or professions; private renting is an additional income, perhaps to provide an income in older age, so I am fully aware that many have successful additional careers.

But if the main income source was from a business they were running themselves, would they survive if they used the same criteria in that business as they do in their private renting?

Let’s consider an example. Though the comparisons I make could be equally applied to any business, let’s look at a business that would have as a very large investment, as the properties that a landlord owns will also require a large investment. So, let’s look at the Jeweller, who owns properties to fund his old age.

A customer comes in, attracted by the very nice window display. You don’t know him but he has a reference from someone (again, unknown to you). He smiles nicely, is polite and asks can he borrow the Rolex watch you have in the window display. You advise that the watch will cost £7,000. He explains that he has no money but would be really grateful if you would lend it to him for a few months.

Would it be unreasonable of you to refuse to trust your valuable item into his eager, but cash-less, hands? Of course not; you need to protect your property; it was bought to realise a profit. Yet how many landlords will accept as a tenant someone without checkable references, where any deposit paid would be minimal, compared to the investment made by the landlord?

Let’s be a different landlord, but in the same business. He has a beautiful diamond bracelet in his window. Someone comes in to look at it. He has the cash to buy it and seems an excellent prospect for a purchase. The bracelet comes out of the window – and the prospective buyer says ‘there’s a diamond missing there; the catch is broken. Why should I buy?’ The Jeweller explains that yes, he can see the problems, but he spent £500 in replacing a diamond in a pendant, so he cannot afford to replace the diamond and repair this bracelet.

Landlords will show properties in need of substantial repairs and make the excuse all their resources have gone elsewhere, that they cannot afford repairs or replacement of a new boiler. Properties should be sound, clean and with all facilities working and no landlord should be in the business if a contingency fund does not allow for necessary repairs.

I like jewellery shops, so we’ll continue with the comparison. The jeweller engages a new assistant for his jewellery business. He takes no references as the new assistant seems quite charming. All goes well for a period of training and the owner feels confident he has made the right choice and can leave his assistant in charge when he is elsewhere.

On return from a short break away, he finds that there are a string of complaints waiting for him; the assistant has been rude to more than one customer; he has had several friends in the shop, being rowdy and intimidating customers; sales have decreased and the window is untidy and no longer appealing to the passer-by. Does the shop-keeper give his assistant another chance to do more damage? No. He has found his trust misplaced and there is only one option – he fires him, with as little notice as possible.

Why then do landlords accept the anti-social behaviour of their tenants, hesitating to take action, allowing their reputation to be damaged and finding that when the tenant is gone, there is work to do in the tenancy, probably substantially more than our Jeweller has to do to put his window back into order.

Private renting is a business. Some will believe that it is a unique business, that the rules that apply to another business are not relevant to the private rental sector. Perhaps not always but doing an exercise in compare and contrast will show whether the landlord is acting reasonably, or whether he is being taken advantage of and should take action – perhaps quicker than they usually do.

For advice on buy to let issues – Ask Sharon 

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