Finding a good tenant is something universally revered within the rental industry, regardless of if you have accumulated a rich portfolio over the years, or planning on opening the doors to your first property soon. All property owners have heard the horror stories of the unbelievable repair costs and rental arrears left behind by some problem tenants, but what is the best way to secure a good tenant and are they hard to find?
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Don’t Rush the Process
When searching for tenants to fill your vacant buy to let property, the pressures that come with void periods and an unpredictable financial landscape are enough to make any landlord less stringent with who they choose to rent to. However, this can prove to be a damming mistake further into your rental journey, and when legal fees and maintenance costs are mounting, taking the time to find the perfect tenant will prove to be invaluable.
Around half of the landlords in the UK say that they have encountered a problem tenant, and whilst there isn’t an exact science to identifying a potentially rocky tenancy, there are many indicators that property owners can be wary of. Whilst many landlords may concern themselves with how they can find a tenant quickly, it is more valuable to ask what qualities make a good tenant.
Before you create an advert for your rental property it is essential to identify the type of tenant that you would ideally like to rent to. Why does this matter? Well, the more you are able to identify about the idyllic lifestyle of your target renters, the more your property advertisement can cater to these needs. Are you hoping to rent out your property to a family, highlight the local school ratings and nearby parks; with young professional tenants being more dependent on public transport routes and proximity to city centres.
Despite the predominantly negative wrap students receive as tenants, especially when referring to leaving the property in a state of disrepair, renting to students can be a fantastic opportunity. Of course, the idea of such a youthful tenant won’t appeal to all property owners, with landlords being extremely hesitant to carry through with a tenancy agreement without a guarantor being in place. However, if these stereotypes are dismissed student rentals offer brilliant flexibility and security to landlords. Dependent on the rentals location and distance from campus, maintaining a fully occupied property won’t be a problem, with the per room rental charge giving landlords far higher returns and any problem tenants will move on at the end of the academic year.
Regardless of the type of tenant that you wish to rent out to, the need to properly assess the potential tenants character through a face to face meeting is universal. Meeting each of the applicants or at least the ones you would consider renting to, can offer landlords a far better impression of a person when compared to the one dimensional nature of emails. These meetings are also an invaluable chance for property owners to ask the potential tenants questions, finding out what renters are looking for in the area so they can be implemented accordingly.
Do All Tenancies Require a Deposit?
In an act or foresight, landlords often request a tenancy deposit from tenants in order to protect themselves against potential rental arrears, property damage and the associated repair costs. However, it is important to note that taking a deposit from a tenant is not a legal obligation of the landlord. However, many property owners believe that by taking this sum from the tenants as they move in acts as a deterrent to poor treatment of the rental; incentivising tenants to keep the property in a good state of repair so they can claim the money back at the end of their tenancy.
Typically, the amount that a property owner will value the tenancy deposit at ranges from four to six weeks rent for a tenant that doesn’t own a pet, and six to eight weeks rent for a renter with a furry friend. However, with the introduction of the 2019 Tenant Fees Act, landlords are unable to value this deposit at more than five weeks rent, if the sum of the properties annual rent is less than £50,000.
Whilst a landlord does not have to request that their tenants place a deposit when entering the agreement, if a deposit is taken it must be protected by being placed into a tenancy deposit scheme. These regulations on deposits were introduced in 2004 with the Housing Act, ensuring that landlords fulfilled their obligation to return the deposit if the tenancy agreement is fulfilled.
There are two types of schemes under which the tenants deposit can be protected, insurance based and custodial schemes. Under both of these plans the deposit is initially handed to the landlord by the tenant, however, with insurance schemes the landlord keeps the deposit for the duration of the tenancy, paying a premium to their policy provider. Whereas with custodial tenancy deposit schemes the landlord doesn’t hold onto the tenants deposit and is instead secured. It is the landlord’s sole responsibility to enter the tenancy deposit under one of these schemes within thirty days of receiving the sum from the tenant. Once the tenancy deposit is entered into the scheme the landlord then has another 30 days to provide the tenant with “prescribed information”, officially detailing the amount of the deposit, the scheme it was entered into, the address of the rental property and details regarding the deposits recovery.
If a landlord or property owner takes a deposit for a rented property and does not place the collected sum into a protection scheme can result in the tenant being able to recover up to four times the value of the sum originally taken.
Should You Broaden Your Search?
It goes without saying, but broadening the horizons of the type of tenant that you wish to let your property out to, will in turn, significantly the amount of interest your rental property receives once advertised. Whilst many landlords are rightfully emotionally attached to their property, it is ultimately an investment, so managing to fill those vacant rooms and gather a rental income is paramount.
To this end, opening up the doors of your rental property to pet owners can massively extend the appeal of your let. Traditionally landlords have raised concerns over noise complaints and property damage to validate their position against having animals under their roof. However, with only a dismal 7% of private landlords currently allowing pets into their rentals, to say the wider market is hostile for animal loving renters is an understatement, and the opportunity to provide for this demographic showing huge potential. More recently, as of January 2021, landlords and property owners are unable to maintain a blanket ban on pets in their properties, instead making objections in the case of individual tenancies. In this instance a landlord will have 28 days from receiving a request for an animal accompanied tenancy to make an objection.
The same can be said for landlords that are instantly dismissive of potential tenants that claim benefits. Historically it has been common place to see “no DSS”, “No Universal Credit” and “Not Benefit” requests made by landlords when searching for tenants, essentially preventing those in receipt of housing support unable to rent. Of course, this does ultimately stem from fears of worsening the tenant’s financial situation with rental arrears, whilst also landing the landlord in hot water. But, with a recent housing survey revealing that over the course of 2018 to 2019 around two in every five households contained an occupant that was receiving some sort of housing benefit, something the COVID pandemic is sure to have bolstered.
With this being said, the decision by landlords and property owners to exclude those receiving financial support is becoming increasingly unpopular. 2020 marked the first time in which a court determined that a landlord discriminating against those in receipt of housing benefits is “unlawfull”.Besides, with landlords being able to receive their rental payments directly from the tenants housing support, an argument can be made that the stance was largely redundant.
Of course simpler changes can also be made. Assessing what the surrounding properties offer for the same demographic can be a fantastic insight into what tenants are looking for in rentals near you. Alternatively, if the overwhelming majority of rentals in your area specifically caters to young professionals and students, tailoring you rental to accommodate the family lifestyle could be the turning point to success.
Perform Thorough Background Checks
Perhaps being the most direct and comprehensive evaluation of your potential tenants, the referencing process is essential for landlords, assuring they can have the peace of mind their tenants are verified, likely to look after their property and be punctual with the rental payments. Often hailed as the best way property owners can protect themselves from a bad tenant, reference checks first and foremost verify the identity of the potential tenant. Typically, following this a credit check is performed to highlight the applicant’s ability to clear historical debts without interruption, giving a clear indication as to whether they are likely to pay their rent on time. Alongside this affordability checks will also be performed, assessing the tenant’s current employment status and earnings to determine if they can afford the requested amount each month. Many letting agencies also provide a reference from a previous landlord, providing details on the length of the tenancy, when rent was paid and the condition of the property upon vacation; giving an insight into the tenants previous renting relationships.
Typically taking the form of a close friend or relative, a guarantor is someone who makes a legally binding obligation to pay the rent upon the occasion that the tenant fails to do so. Whilst having a guarantor is not an integral part of every tenancy, they are common place with tenants that don’t fully pass their referencing checks, and students due to their short credit history. As the guarantor will need to be in a financial position to cover any rental arrears and the cost of damages exceeding the deposit, they will be subject to the same referencing checks as the tenant in order to assess their financial dependency. For tenants hoping to rent accommodation under a shared tenancy agreement, as the obligation to pay the rent is shared across all tenants as if they were a single party, a guarantor would be responsible for the rent in its entirety, not just an individual tenants “share”. Whilst the liability of the guarantor ultimately varies depending on the details of the tenancy agreement, however, if the specifics in the agreement changed, ie: rent increase, this would bring the guarantors obligation to an end.
Whilst this is not explicitly searched for or evaluated in these tenancy reference checks, some landlords and property owners have found it to be good practice to avoid tenants that are going to be committing to a large increase in their monthly rental payments. This can be especially telling if the potential tenant in question also missed rental payments whilst tied to the lower monthly price. However, this is a very subjective indication and tenants may have been facing financial hardship, or alternatively, have since been able to enjoy an increased income.
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