PESTLE- Can landlords be ethical?

Depending on which form of PESTLE analysis you look at, the final E could be for Environmental, Ethics or even the Competitive Environment. I am going to wrap Ethics and the Environment together and leave the ‘Competitive Environment’ for now. 

I have often asked myself whether or not you can be an ethical property investor and I have come back to the answer of an unequivocal “yes”. As a landlord I am very conscious of the fact that I am providing someone with their home, which is arguably one of the most important things in their life and we need to be empathetic of that. As a result, I look to solve maintenance issues as quickly as possible, sometimes this is not always possible and in these instances communication is key. Often tenants are very understanding if they are kept up-to-date and they can see that you are making a conscious effort to find a solution. 

Once tenants have been settled into your property, it can be easy to look to take advantage of this and increase the rent, after all, the cost of moving and the upheaval caused by having to move may leave them with little choice but to pay the increased rent. I often try to avoid increasing rents and use it as a reward for a tenants loyalty and an incentive to stay longer. However, there is a point where increased costs (such as mortgage interest) can leave you with little choice. In instances like these, I will often look to take two key factors into account. The first  is inflation; prices rise over time and rents are no different, however, wages should also reflect this. This should mean that wages rising over time will compensate for the increased rent being charged, so in real terms the tenant is no worse off. I would also make a conscious effort to check the market rents to ensure that you are keeping in line with them, ideally slightly lower. 

It is easy to always think about the income with property investing, but as any investor knows, it is not a one way street as there are also a lot of outgoings. These costs include mortgage lenders, tradesmen and women, the council and agents. I have found that paying these people on time is crucial, you often want to keep good people on side. If you can keep them onside they will have your best interests at heart, trying to do your work to the best of their ability and they also are likely to respond quickly to your requests which can be vital as a landlord. Not only this, but reputation spreads; a good reputation can lead to good word of mouth advertising to attract the best trades people to your jobs. On an even more important level, paying mortgage lenders on time is key. If you don’t, this will impact your credit rating, reducing the amount of lending options you have available to you, which is likely to increase your cost of borrowing. 

Finally, the ethics of buying. As investors, we are always looking to get the best price, however, one of the keys to good negotiation is making sure that the other party does not come out of the deal feeling hard done by. I always try to look at both motives- mine and the vendors. Their motive does not always have to be money, often for instance it might be time, as in a quick sale. A quick sale could help them to achieve their next goal. An ethical buyer’s reputation will spread and lead to other deals as more vendors are keen to sell to you in order to achieve their goal. I have often found that this can work the same with agents, often they want a buyer who is true to their word and will fulfil their promise, after all, deals falling through do not benefit anybody. 

As with all these things it comes down to a long term mindset; if you are investing for the long term and want your reputation to supersede you, you will need to ensure that you consider the ethical side of investing. I have often found good ethics breeds goodwill from tenants, vendors and trades. An ethical approach may have short term costs, yet long term gains. 

If you have enjoyed this blog post, you might enjoy my book ‘Money lessons left at the school gate’, please follow the link if you would like to read the first three chapters for free.

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