If being completely honest, most landlords can probably admit to allowing a tenant to move into a property without undertaking particularly thorough checks. Maybe the tenancy went well, or maybe with hindsight, it was the most foolish thing you ever did!
If being completely honest, most landlords can probably admit to allowing a tenant to move into a property without undertaking particularly thorough checks. Maybe the tenancy went well, or maybe with hindsight, it was the most foolish thing you ever did!
Referencing your potential tenant is a vital part of the tenancy process. It is like undertaking a risk assessment for your business; it is not foolproof but will in all likelihood reduce the risks that you may otherwise be exposed to.
So if we are in agreement that referencing should take place, what sort of information should we look at?
Well, the first step is to find a suitable tenant to put through the referencing process. It sounds obvious but there are lots of things to keep an eye open for on a viewing that may highlight that the viewer is perhaps not the tenant you are looking for.
Examples I have had over the years include the 6'6" bodybuilder who asked whether he could put
CCTV above the front door. Whilst I couldn't imagine he could be afraid of anyone, I did wonder whether he was expecting some unsavoury visitors! Another classic is the tenant who has to move in immediately. There is always a reason why, and you should try and find that out. Perhaps they are being evicted from their current
property, or the house they were due to take has just fallen through because they failed their referencing. Assess your viewer and they’re likely accommodation needs and is on the alert for strange questions that might suggest an ulterior motive.
So now you have found someone you think is potentially suitable. My personal view is that you should now start with a credit score and financial profiling. This will show whether the tenant has any adverse credit, bankruptcy or IVA but will also give you an idea of their financial lifestyle. Many credit reports show the number of
bank accounts, the number of credit applications that have been made and the like, giving the landlord an indication of the potential tenant's behaviour.
Be aware that you must have their written consent before diving into their credit file!
Beyond this, an employment reference is imperative. You should ensure that the tenant earns a salary sufficient to cover the rent; as a broad guide, their salary should be at least 2.5 times the annual rent for the property. Additionally, if the employment is on a contract basis, ensure that the contract is due to outlast the tenancy period that you are about to grant.
Most employment referencing enquires whether the post is permanent, whether there is any likelihood of impending redundancy, or indeed whether the job role will change
significantly in the coming 12 months. Landlords should be wary of employer email addresses that are non-business, and/or have the suffix Hotmail, Yahoo and the like. In such circumstances, telephone the company and ask for the contact details of the HR department. An employer's reference created by a friend of the tenant will be far less useful!
With these complete, you should then obtain a reference from the current landlord. Questions should include whether the property was well maintained, whether the rent was paid on time and whether the landlord would rent to that tenant again in the future. Whilst I accept that some landlords, desperate to get rid of a troublesome tenant, may give them a growing reference my experience is that such actions form only a small minority.
Regardless, the landlord reference in conjunction with the other information that you gather should start to paint a consistent picture of your prospective tenant.
For some landlords, the above will be comprehensive enough, and indeed this is broadly what is undertaken by the referencing companies on behalf of letting agents. Should you wish to delve a little deeper then there are a couple of further safeguards that you may wish to consider.
Home visits are conducted by some landlords to try and get an idea of how well a tenant maintains the property and their level of cleanliness. Whilst I can see the advantage in doing so it does feel a little intrusive and unless it's a spot visit they are likely to spring clean
an hour before you arrive!
I am also aware that a number of landlords ask tenants for three months' bank statements. Seeing the state of their account can be very useful. Payments being debited to payday lenders may indicate you have someone who is living beyond their means and who may therefore struggle to pay the rent.
You will also be able to confirm their level of salary and the content of the employer's reference. This is particularly useful if the salary includes a commission or bonus element.
Notwithstanding the above it is. important to acknowledge that this is a people business and it is therefore not possible to adopt a 'one size fits all' approach. By all means, exercise some discretion and latitude when selecting tenants, but remember that the referencing you have undertaken remains important as it will have highlighted the individuals to whom you may want to offer some latitude!
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Things you need to consider before buying a property
Buying a property is a major decision with huge implications for your life and your finances. Try to approach it rationally rather than making it a decision based on what you aspire to. It needs to be right for you at this stage in your life.
With housing in short supply and house price growth continuing, the pendulum is swinging further tow
As supply lags demand, there will be upward pressure on capital values and rents, which is good news for investors - at least for those landlords less affected by the raft of changes designed to take the heat out of the housing market.
