On the face of it, it may never seem to have been a better time to be a buy-to-let landlord. It remains difficult to obtain a mortgage for many first time buyers, so the number of people looking to rent continues to outstrip the number of properties on the rental market, driving up the monthly rent which landlords can charge. However, it is not as straightforward as just buying a number of properties and waiting for the money to start pouring in. Prospective landlords need to remember that investing in property is a business venture, so they need to weigh up all the costs and risks before jumping straight into the private buy-to-let arena.
The importance of tenant reference checks
One common area for landlords to overlook is finding out sufficient information about their prospective tenants. It is essential that landlords ensure that thorough reference checks are carried out before signing up tenants; that way they can significantly reduce the risk of running into difficulties during the tenancy. David Lawrenson, a private rental sector expert from LettingFocus.com, says that all too often checks on prospective tenants are not done at all or carried out unsatisfactorily. He described failure to do so as a “big danger” and that ensuring thorough reference checks are carried out as a “key requirement” for landlords.
It pays for landlords to find out all they can about possible tenants. Not only will these reference checks identify any prospective tenants who have previously not taken care of properties they have rented, but also highlight whether they have had difficulties in paying their rent. Although you can never guarantee a tenant will keep up with their rental payments, if they have previously always paid their rent on time and have no history of being in arrears, they are likely to continue this behaviour while renting your property. However, a tenant who has had problems with keeping up with rental payments in the past should be considered cautiously, as after taking their poor credit record into account they would be a higher risk tenant to let the property to, as the risk of losing income would be greater.
Landlords need to differentiate between those tenants who will do all they can to get their rent paid on time and those tenants who perhaps have no intention of making an effort to pay their rent. It is essential that landlords remember that they are letting properties to make a profit, so they need to ensure they have reliable tenants to have maximum chance of securing income from their properties.
While landlords are able to take out insurance to protect them against tenants who do not look after their property or do not keep up with their rental payments, the best course of action is to make sure that thorough reference checks are carried out on their prospective tenants to ensure that their property is let to low risk clients.
Rental payment difficulties still a possibility
The current economic climate means that even tenants with a previously good record of paying their rent can run into difficulties. The recession has left many people struggling with their finances due to job losses and lower salaries. With this situation showing no signs of subsiding in the immediate future, it is inevitable that some tenants will find themselves struggling to pay their rent, so it is a situation landlords need to be prepared for. For landlords who find themselves in this position with their tenants, it is best if they can talk to their tenants to find out about their situation and work with them to find a way around the problem of making their rental payments.