Non-paying tenants rank high among landlords’ nightmares
Falling prey to a non-paying tenant ranks high among landlords’ nightmares. However, implementing a few precautions before letting out your property can significantly mitigate this risk, saving you time, stress and money in the long run. If you opt for a letting agent, they’ll handle these steps on your behalf.
Building a tenant profile
Start by getting to know your prospective tenant. It could be through a face-to-face meeting or a phone chat. Inquire about their reasons for moving, their intended rental duration, who else will reside in the property and their occupation. This interaction will help you form an impression of them and determine if they align with your ideal tenant profile.
Vetting through references
To ensure your tenant can afford the monthly rent and has proven responsible in the past, it’s crucial to take up references. Always seek your tenant’s consent before proceeding.
Document verification
Ask your prospective tenant for proof of identity and current address. Utility bills or bank statements can confirm their present residence. A work reference would provide insight into their income and employment terms. Ensure it’s recent and on an official letterhead. It’s also prudent to request references from at least one previous landlord.
Financial stability check
A credit check will show the tenant’s financial stability and credit history. If you’re hesitant about a credit check, reviewing their bank statements for the past three to six months can give you a sense of their payment capacity.
‘Right to Rent’ check
As a landlord, you’re legally bound to perform ‘Right to Rent’ checks on all adults (18+ years old) intending to live in your property. This applies regardless of their perceived nationality and includes everyone living in the property, even if they aren’t named in the tenancy agreement.
You’ll need to see the tenant’s relevant documentation in person and keep copies to fulfil this. Appropriate documents could include a passport/ID card, a driver’s licence, a letter from a higher education establishment or a birth certificate. The comprehensive list of eligible documents is available on the government’s website.
Post-move-in check
Once your tenants have moved in, plan a visit within the first few weeks of the tenancy commencement. This check ensures that the occupants are indeed the individuals you’ve rented to and that they are maintaining the property appropriately. Remember to notify your tenants of your visit – unannounced drop-ins are a no-no.
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Please note: a mortgage is secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. Please also note: this is a long term investment which you hope will generate rental income along the way and a profit when you sell the property, but bear in mind that if you need access to some cash, a property can take time to sell or remortgage. If house prices fall, you might not be able to sell for as much as you had hoped. You would have to make up the difference if the property sold for less than you owe – a risk that increases, the higher the percentage you borrow. If you sell for a profit, you may have to pay capital gains tax. Don’t forget that with a variable rate mortgage, your costs will rise if interest rates go up. This would eat into, or even wipe out, your income and profit. It is recommended that you also maintain access to emergency funds to cover your mortgage payments during ‘void periods’ that may arise whilst you have no tenant and the property is not let.
