When your tenant hands in their notice, as a landlord we all get that dreaded feeling. We know we have to prepare for a void period, the property may need some work and the local council even want to take council tax off you when it becomes empty.
That feeling can quickly be replaced by feeling warm and cosy when you find a new tenant and all seems well in the world again. While it is nice to have that warm and cosy feeling, it is essential that the tenant that you are putting into your property is suitable and passes the right lettings criteria. If you don’t do the right checks, unless you get extremely lucky, you will get a tenant who will damage your house and have rent arrears.
How do I know this? When I first started out I did the same thing. I have over 160 properties myself. That’s right I am a landlord like you, not a 9-5 letting agent who does not understand! In the first couple of years of renting out properties I didn’t like a property being empty for too long so after a month I would relax the criteria and go off my gut feeling when meeting a prospective tenant. This strategy DOES NOT WORK I CAN PROVE IT – I had over £20,000 worth of rental arrears each year and was regularly spending £1,000-£2,000 to develop a property when it became empty.
Where am I today?
We now have the correct rental criteria and in 2012 had only £2,400 of rental arrears across my portfolio and the properties we manage. So as you can see the criteria that you have is essential. At NGU Homelettings our tenant referencing stage is in-house and will always remain so. This allows us to make sure we can control the process, have procedures in place and can look at each individual application in depth. While we would make a lot more money if we outsourced, I feel it isn’t an option if we want to sustain the low level of rental arrears that we currently have.
1) If you are currently using a letting agent do they outsource their vetting or is it in house?
2) What were their rental arrears in 2012?
If you find your own tenants or are with another Letting Agent, make sure you in-corporate my top 5 tips!
1) Have a set criteria for working tenants and guarantors for how much they need to earn. We always ask for 35 X the rent e.g. £450 rent x 35= £15,750 is the minimum a person can earn or the guarantor can earn to take a property. The industry average is 30 X rent e.g. £450 rent X 30= £13,500. In my mind this is too low and your tenant will default!
2) When dealing with Housing Benefit tenants make sure you understand what bedroom rate they qualify for and have a maximum contribution that they can pay towards the rent. If your property is a 3 bedroom terrace and they only qualify for a 2 bedroom rate, what do you think will happen – rent arrears!
3) All references need to be written not verbal. It is easy for a tenant to give you a false number to call.
4) Do not take a tenant who has outstanding rental arrears with an old property. Leopards do not change their spots!
5) Always do a home visit on your tenant to get the documentation that you need. There is nothing better than seeing a tenant in their current home. If it is clean and tidy more than likely they will look after their new property. If it isn’t then run a mile!
If you would like to find out why NGU Homelettings only had £2,400 worth of arrears in 2012 from 550 properties under management and why landlords are coming to us thick and fast in 2013 then give us a call.
To read more of our articles please click on the link below which will take you to our blog page. There is a great article from one of our landlords who we sourced properties for and has now retired – our first landlord to do so which we are really proud of. He now travels the world and pretty much lives on the beach, how does that sound?. To read Mark Cosgrove’s story click on the link below:
If you are interested in heavily discounted properties and would like to be on a beach like Mark, all of our discounted properties are listed on RIGHTMOVE, click the link below to see them, we add between 20-25 new discounted properties a month: