Learning the tricks of the landlord's trade

AUGUST and September are the peak business months for letting agencies. This year is likely to produce record numbers of apartment and house lettings, if only because of the increasing numbers of apartments coming on the market, especially in inner city Dublin. Becoming a landlord, however, is a role that no one should take on lightly, especially if you plan to fulfil all its functions and obligations yourself. The tax relief incentives certainly justify the record number of people who are buying Section 23/27 properties, but there is more to renting out your flat or house than simply handing over the keys.

John H. bought his investment apartment in a designated area in Dublin 2 two years ago. He decided to rent it and avail of the full tax relief on his rental income in addition to the other tax reliefs that come with such investments.

A direct debit was arranged with the tenant but things started to go wrong about eight months into the two year lease when he did not receive the rent. He had difficulty contacting his tenant and the tenant's guarantor, and had nearly as much trouble gaining access to his property.

The problems with his tenant were eventually sorted out and all back rent has been paid but it took about three months, he told Family Money. Since then he has lost his enthusiasm for playing landlord.

Thomas O'Doherty runs the letting office of estate agents Hooke & MacDonald, which specialises in selling and letting apartment properties. He believes John H. was particularly unlucky in his dealings with his tenant. I have never come across a case like it and we arranged about a thousand lettings over the last year. Nor have we ever had to resort to the courts to sort out a problem with a tenant."

He does admit though that a successful landlord/tenant relationship needs to be entered with considerable forethought. "You have to be selective. And that means doing credit checks and checking references, including those of employers and previous landlords before you agree to rent the property. There is no point in wishing you had been more careful if things go wrong."

The lease is the next important element in the equation, says Mr O'Doherty. He recommends that standard Society of Auctioneers leases be used since they set out in clear language the amount of rent and deposits, the duration, access and responsibilities of both the landlord and tenant. "You then arrange direct debits for the rent, all the utilities are put in the tenants name, you draw up an inventory of everything in the apartment which both parties sign and then and only then you allow the tenant to move in.

Your job has only just started once the tenant is in place, says Mr O'Doherty. Not only should you check with your bank every month to see that the rent is being paid, but you need to keep track of the apartment on a monthly basis. Don't necessarily expect the tenant to contact you if something goes wrong or to make any minor repairs. Instead, keep in touch by telephone and encourage them to report any problems, say, with appliances or leaking taps or faulty light switches. Arrange to have carpets and curtains cleaned once a year and for the garden, if there is one, to be regularly tended.

"The most important thing is to establish a good relationship with your tenant right from the start," insists Mr O'Doherty. "If you like each other and have a proper understanding about each other's responsibilities you shouldn't have too much of a problem letting your property."

Not everyone fancies the time commitment that such a relationship demands however, and according to Hooke & MacDonald a large proportion of people who buy apartments for the rental income use both a professional letting service to find the tenant and then a management service to maintain the property.

The advantage of using a letting agency, says Mr O'Doherty, is that we will arrange all the showings, check references, put together the inventory, etc. But when you do this job all the time you develop a sixth sense about people, something the average person may not have." Being totally objective also means not dithering about the size of the rent it seems some new owner scum landlords can be easily talked down from their advertised rent, especially if they like the tenant.

Hooke & MacDonald does not act as management agents, "but we can arrange for one to be hired". Agents charge a once off 6.25 per cent of the first year's rent for letting a property, while property management agents charge a fee of 10 per cent per annum of the annual rent. Given that both fees can be claimed as a tax deduction if you let your flat, the peace of mind they offer is probably well worth the extra cost.