Are You Putting Off Tenants With High Upfront Costs?
There are many ways to annoy potentially great tenants for your property. You could, for instance, ask them for a load of cash upfront – and is exactly what this article is all about.
But first, can you justify asking for hundreds – even thousands of pounds upfront? Well, yes, you probably can. Do ask yourself whether it’s worth it, in the long run, though.
For instance, will it mean you just get the ‘rich kids’ who can ask mummy and daddy for the money – and who are used to a certain standard of living? That’s because it’ll put off other decent renters who simply can’t afford to dish out so much money as a one-off initial payment.
Upfront Costs of Renting
Some landlords ask for a holding deposit, tenancy deposit and the first month’s rent upfront. For some properties, especially the more expensive rents in London, that can add up to more than £3,000. That’s a lot of money for anyone to save up, never mind a young professional relocating the capital for his or her first job after graduating.
If it is someone who has rented before then they may still be waiting for the return of their Tenancy Deposit from the previous landlord.
In order to prevent deterring potential good tenants’, you could try to lower the upfront costs for your property.
This is the amount someone pays to take the property off the market. This gives the landlord time to carry out Reference Checks. Once the landlord decides the checks were fine and the tenant can move in, the Holding Deposit is deducted from the first month’s rent.
It should only be necessary to charge around £200 for a Holding Deposit. That is roughly equivalent to around one week’s rent in London. That way, if they pull out at the last minute, chances are, as the landlord, you will only have lost one week’s rent before you can offer the tenancy to someone else. This covers that £200 deposit which the tenant will then forfeit.
The way to avoid this type of scenario is to advertise as soon as your current tenant hands in their notice. That’s roughly giving you four weeks to find another tenant.
The Tenant Fees Act allow you to ask for five week’s rent upfront as a deposit (or more if it’s in an expensive London area where the rents are often thousands of pounds higher). In the case of the latter it’s usually six weeks rent.
The landlord doesn’t hold on to the deposit however. This is paid into one of several government-accredited schemes who hold on to the deposit until the tenant moves out. The landlord can then make any deductions for broken furniture or other damage. If this is disputed by the tenant then arbitration is begun. This is overseen by a panel who rule on how much money the tenant should be awarded from his or her original deposit. The remainder will be going the landlord for the repairs.
First Month’s Rent
As a landlord you should always ask the tenant to pay a month’s rent in advance. For some tenants they can see this as a big risk, especially if they have never rented before and don’t know the landlord from Adam.
This is where online letting agents like ourselves come in. That’s because many new tenants don’t mind paying to a respectable third party. At Property Loop we will hold the rent for a short period of time – around a week – then pass on the sum to the landlord for banking.
Looking for an online property agent you can trust? Then get in touch with the team here at propertyloop.co.uk.
Built by experienced property investors and landlords, the website connects renters and owners directly. Why not sign-up to see it in action?
It’s a free platform that only charges a small fee once you get your rent money in. Your property is featured on all major search and comparison portals as well as advertised by PropertyLoop everywhere else on the Internet.
You don’t have to worry about finding good renters since that’s the job for the platform. Receive offers straight to your mailbox and select the renters that are right for your property.
Need access to the busy London property market? No problem at all! PropertyLoop is the London market specialist with years of experience and unique knowledge. Whatever your needs are, you can always speak to our friendly support staff. Renting property is made as simple as one, two, three…
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