Common Landlord Risks in the Putney Rental Market

If you are weighing up the decision to start up a new lettings business, you may have some reservations about some of the risks involved. The Putney rental market is strong with great potential for profitable rental properties, but you will need to analyse the potential risks to ensure it is a good financial decision to invest in property. Once you have analysed the risks, you can develop a strategy to help mitigate the risks and then you will be in a great position to generate a good, constant rental income.

As a new landlord, the quicker you start to build up knowledge about the lettings industry, the sooner you will be able to start generating cashflow from your property venture. Once you understand all of the risks, your knowledge will help to avoid potential issues and enable you to decide whether you want to manage the property yourself, use a letting agent or hire a property management company.

You can get a head start by reading our guide to the common risks landlords face in the Putney rental market:

What kind of risks do landlords face?

These are some of the most common risks to be aware of and to prepare for:

1. Tenant-related risks

The most important aspect of renting a property out is to find suitable tenants to move in. The longer it takes to find tenants, the less money you will make, so choosing your property in the right location is key to avoiding void periods where you are not receiving any rental income.

Before you put an offer in for a rental property, research the local rental market to find out how long rental properties are staying on the market for before a tenant moves in.

Another type of tenancy-related risk is allowing tenants to move into your property without conducting thorough tenant screening. Tenant credit checks can help to avoid choosing tenants who are financially unreliable and who are more likely to miss rent payments. Asking for references from previous landlords and employers can also help to identify high-risk tenants who might cause property damage or who frustrate neighbours with anti-social behaviour.

Also, there is a risk that tenants could sublet the property, so make sure your tenancy agreement states that they are not allowed to sublet. This means that you will be able to serve a Section 8 Notice to start the eviction process, as they will have breached the terms of their tenancy agreement.

2. Compliance related risks

Landlords have a large set of regulations to comply with and non-compliance can have serious consequences, including significant fines and in severe cases, imprisonment. As well as establishing a good understanding of the relevant legislation when you are starting out as a landlord, it is also essential to keep up to date with the frequent changes to legislation.

The main legislation affecting landlords include:

• Health and safety regulations – This includes gas and fire safety regulations such as gas safety checks, having working smoke and carbon monoxide alarms, electrical safety checks and ensuring the home is fit for human habitation.
• Other landlord regulations – There are also legal requirements for taking out insurance cover, protecting deposits in a deposit protection scheme and carrying out right to rent checks. Certain properties such as HMOs require licences for rental properties and some local authorities have additional licencing requirements. These are just a few examples of landlord legislation but there are over 300 rules and regulations that can apply to landlords.

3. Market and financial risks

Setting up any type of business comes with financial risks and a lettings business is vulnerable to several financial risks. Volatility in the property market is one risk, although the property market is considered to be a lower risk investment compared to the stock market, for example.

Generally, house prices will increase over a period of 5 or 10 years. Between June 2014 and June 2024, average house prices in London increased from around £387,000 to almost £524,000 according to data from the Land Registry. So, while there are dips in the market every so often, over a 10-year period, property value tends to increase significantly. The risk of house prices falling will be more of a concern if you are looking at renting out property for a shorter period. Property value slumps are less of a risk when you are renting as a long term strategy.

• Economy – Economic uncertainty is another risk for landlords, with the possibility of interest rates increasing and impacting their rental profit margins. Inflation and increased cost of living affects the financial situation of the tenant population, which could impact affordability of rent and the demand for rental properties.
• Taxation – Taxation rules will also influence your finances as a landlord, and changes to tax rates and rules can happen on a regular basis. For example, Capital Gains Tax allowance has reduced from £12,300 in 2022/23 to just £3,000 in 2024/25. Stamp duty, second property surcharges and income tax are costs that need to be accounted for and the rates for these could change during your tenure as a landlord.

How to protect yourself against risk as a landlord

Doing plenty of research before purchasing a buy-to-let property will help to protect yourself but using the expertise of experienced professionals will save you the time of learning everything yourself. You can use a lettings agent to fully manage your properties or just to find tenants. A letting agent will help ensure you meet compliance requirements and provide advice to reduce the risks landlords face.

Hiring a property manager can be particularly beneficial to navigate any legal issues such as evicting tenants or handling disputes. If you use a full property management service, they will take on all of the most time consuming tasks involved in renting property out.

Using an accountant will also help you with staying on top of your tax obligations and they can help you with financial forecasting. There is also a range of property software that landlords can use to help manage their properties, with features such as rent collections, sending tenancy agreement contracts and gathering signatures and alerts for due dates such as when the gas safety check is due.

Taking out comprehensive landlord insurance will also protect you from risks, as it provides cover for damage to your property and pays for the legal fees if a tenant or their visitor suffers an injury in your property. You can also obtain cover against void periods, so you get a payment even if your tenant misses their rent.

Another way to protect yourself from landlord risks is to ensure an adequate security deposit is paid by the tenant when they move in. It is common to ask for one month’s rent as deposit but for higher risk tenants, you could ask for a few months’ rent to be paid in advance as security.

And Finally

We have many years of experience in the Putney lettings market and we help landlords to manage risks through comprehensive tenant screening, realistic rent pricing to reduce void periods and sharing our compliance expertise. Contact us today find out more about our services.