Category: Landlord Opinion

Being a Landlord. It all starts with Mindset.

Let’s start with how we think about property. We need to ensure our mindset is right here. So a property is not just a property. Its an asset. Its also an investment. Per Investopedia,

“An investment is an asset or item acquired with the goal of generating income or appreciation.”

In other words, its something you purchase to make money from.

Whether you are buying a property to then rent it out (Buy to Let, aka “BTL”), or to live in yourself, that property purchase represents an investment. The majority of Landlords are looking to generate income, for future capital growth, or preferably both.

Other reasons to invest do exist (i.e. diversification, to house a relative, charitable motives etc) but primarily the decision to purchase a property is driven by financial motives.

However, as a Landlord, property is more than just an Investment. It’s a Business, regardless of how many properties you rent out. A Business is defined as:

“an organization where people work together. In a business, people work to make and sell products or services. A business can earn a profit for the products and services it offers.”

Reading through that description, its easy to see why your rental property should be treated as a business:

• It requires people (you and other stakeholders) to work together, be it tenants, mortgage lenders, cleaners or handymen.
• You sell a service (a home for a tenant to live in).
• You (hopefully) earn a profit for the service you offer (be that recurring income or future capital gain – or both).

I’d also add that owning and renting out a property involves making strategic decisions, deals with cash inflows and outflows and requires time input from you as the owner – all things, along with many others that I’d associate with a running a Business.

As a Landlord, it’s vital to think of your Property as a Business. For starters, a property purchase for most represents the biggest investment they will ever make. Its also a decision made with a view to generating income or capital growth. These represent two very important factors in most peoples lives. As such, a property should be given the same time, resources and respect as if you were running a Business.

Key point: As a Landlord, you have a Business.

Having this mindset is key if you want your property business to perform well.

THE BAD NEWS: I can’t answer that question for you. 

THE GOOD NEWS: You could (and should!) answer it for yourself.

This blog post will explain how and why you should track how much of your time it takes up being a Landlord. And then what you can do with that information.

Let’s start with why I can’t answer the question for you

It’s because the answer is “it depends”. The time spent being a Landlord depends on many factors, including how many properties you have (obviously!), whether you self manage or let via an estate agent, the age of the property (older ones = more repairs), how far away the property is (assuming you visit once in a while) and importantly, whether you have processes in place to automate the tasks involved in managing the property.

So the answer to the question in the blog title could vary from almost no time at all, to it being a full time job requiring 50+ hours a week.

However here’s the good news:

As landlords we are in a position to know exactly how much time we spend being a Landlord. The even better news is that it’s super easy to do this. Here’s how I do it:

“Each month, alongside recording all my financial data, I write down how much time I’ve spent on each property, to the nearest hour”.

It takes only a few minutes to do this each month, as I don’t worry about it being 100% accurate to the nearest minute. Instead I simply think back over the month and guesstimate the time spent on each property (in another post, I’ll explain my system for recording all the property related tasks I do which makes it even easier to track my time).

The result? 

Using this simple process means I have a wealth of “time” data. I know how long I spend on each property every year. I know which properties take up more time, how this compares to prior years and how much time I spend overall.

That data is powerful. Think back to me likening a profitable Investment Property to a healthy fruit tree. Well data is to Financial Performance like what roots are to a tree. It’s the core. Its the fundamentals which ensure not only the survival, but also health and success of the tree/property.

I appreciate the irony of it taking extra time to record time! But it’s really important for Landlords to record their “time” data as you can use this to make strategic decisions which optimise the financial performance of my properties.

How so? I want to know how to save time, not add to it.

I’d agree. But think of it as time investment, not spent. 

Let me explain it this way: I think we’d all agree that us Landlords want to make money out of our properties. But making money is no use if it consumes all our time. Or even if it consumes our time inefficiently.

For example, lets say a property provides a yearly profit/cashflow of £5,000. That sounds nice right? Well if that same property requires you to spend 1000 hours (I’m exaggerating to show a point), then really it only makes you £5 an hour. Would you sacrifice your time for £5 an hour? Probably not. Definitely not once you factor in the extra stress and worry that comes with running your own business (property).

How does that “per hour” return compare to a property that provides a yearly profit/cashflow of £2,000, yet only takes up 50 hours of your time? I’ll let you calculate the profit per hour on that one and decide which property you’d prefer. 

What can you do with that data?

Armed with this “time” data, you can make changes to how you run a property (perhaps its time to stop doing the repairs yourself, or hire an agent, or even sell a property if its too time consuming). That decision part is up to you, based on your own situation and preferences. The key message is that without tracking your time, you won’t know about any time inefficiencies or potential enhancements you could implement!

And thats why I want to know exactly how much time I spend on each property, each month. I compare this to the monthly profit that same property provides (FYI I also track other metrics such as stress and tasks done but I’ll save that for another post). Its only by collecting this “time” data that I truly know how well a property is performing.

I’ll say it again: Data is powerful. A little time invested tracking time spent could save you a lot of time/money in the long run!

I’ll openly admit, being a Landlord often gives me sleepless nights. There are days where I lose money. That pile of admin just keeps on growing. *sigh*

So why the hell do I do it? Why does any Landlord do it for that matter? Surely it’s better to just sell up and stick the money in a Bank account?

Well as the title of this blog posts suggests, Worry, Risk and Admin are not the only things that Landlords get to experience. There are actually many positive benefits to owning an Investment Property that explain why Landlords sacrifice their sleep, risk their own money and spend countless hours of their own time.

What are these benefits? Please tell.

To answer that, I asked some Landlord friends to explain in one short sentence why they own an Investment Property – here’s what they said, including my own response:

“For long term investment / future pension”

“To supplement our state pension in retirement”

“Passive income”

“Income stream to facilitate earlier retirement”

“pension supplement/ earlier retirement!”

“Long term investment”

“An investment where I hope to make long-term financial gain”

Some fairly consistent answers there. I’d lump all of those into a “Financial Benefits” category. These Landlords are expecting a Financial return from their Investment Property, either now or in the future. Which makes perfect sense. Wherever you have risk (I’d extend “risk” to also include worry and admin!), you should get return. 

The risk-return relationship: Generally, the higher the potential return of an investment, the higher the risk. 

Stick all your money in a low interest savings account is easy and requires minimal effort. But it also won’t give you the same financial benefits that owning an Investment Property can provide (please note, Im not saying putting money in a Bank account is bad thing!). Being a Landlord might give you a few grey hairs, but those should be more than offset by the rewards on offer.

Lets break those Financial returns down a bit:

In property terms, the Financial Returns referred to above arise in the form of cash in your bank account both now and in the future. Specifically:

• Source of income (means don’t need to rely 100% on your employment / pension income)
• Passive income (Property doesn’t require a set number of hours like paid employment) 
• Investment (can give rise to future capital gains which can be converted to cash on sale, or passed to future generations)

What will you do with the Property Income / Capital gains? Thats up to you.; Retire earlier, more holidays, less work, better lifestyle? You chose!

Believe it or not, there are even non-financial types of “Return” for Landlords that can explain why they own an Investment Property:

• Property is a people business. It’s enjoyable working with different people.
• Interest / passion / purpose – Property can be interesting. Its everywhere we look. Its tangible. Its real!
• Helping the Community (despite what press have you believe), as a Landlord you serve an important purpose providing a home in the Private Rental Sector.

So is it worth it?

Absolutely. As Landlords we will frequently feel worried, be snowed under with admin and can even lose money. But there is (or at least should be) a very good reason you are a Landlord. Id encourage every Landlord to have a quick think what their reason is. And then every time your property feels stressful or takes up your time, just remember that reason with a smile.

Would you agree with benefits Ive added in thus post? Would you put something different?

Anyway, I’m off to book a holiday (joke!)