Hello Medway investors,
I have recently been reading an article from Landlord Action that commented on how they have seen a 43% rise in instructions received between 1 June 2021 and 1 September 2021, versus the same period in 2019, before the pandemic.
Ok, so this statistic is reflective of the immediate period after the eviction ban and most likely due to a mixture of pent-up demand, landlords wanting to sell up and rental arrears caused by the COVID-19 pandemic. Certainly, statistics reveal that 65% of notices served by Landlord Action were Section 8 (rent arrears) and only 35% being Section 21 (no-fault).
Ok, so I know that these may be unprecedented numbers, but it really does drive home the risk that landlords take when letting their property.
No landlord wants to end up with a tenanted property where there are rental arrears or other issues. Not only does this simply lead to a headache, but it also can in some cases lead to financial ruin.
The question that is on my mind is simply how landlords ought to go about preventing these issues in the first place and what lessons (if any) can we learn from the current wave of evictions.
Something that continues to shock and concern me is how so many self-managing landlords (and even some letting agents) choose to source tenants from places such as Gumtree, cards in the local supermarket, SpareRoom and more but fail to properly vet them.
The Home Share team have a reputation for putting forward an excellent calibre of tenant for the HMOs we manage on behalf of our landlords. Not only this, but things like the level of rental arrears and behavioural issues are extremely low.
We achieve this by following a well oiled and excellently refined process when it comes to vetting tenants. Ok, so I acknowledge that this probably won’t prevent issues caused by a completely unprecedented global pandemic, but it certainly makes a big difference when managing your portfolio.
There are four main areas we focus on when selecting tenants for the HMOs we manage. The first two should always be a given, but the second two may not always be at the forefront of your mind!
1.Always check out their address history
Far too many self-managing landlords fail to complete this basic step. When selecting tenants, you will always want to check out their previous addresses. For example, we get their address history for the past three years.
An address history will give you a good idea of some crucial points such as:
- What does the applicant’s current situation look like?
- What does the previous history look like?
- Does anything look suspicious?
For example, if there are a lot of short periods (say 3-6 months) at previous addresses or the address history does not match up with other checks (such as their credit report) then that’s something you will want to look out for.
2. Credit checks
An applicant’s credit history is a crucial element of the vetting process and, very often, when landlords find themselves having problems, a contributing factor is because they have not carried out a proper credit check.
Credit checking tenants will highlight any issues such as CCJs and bankruptcies. This will help build up a picture of the tenant as if there is a history of late payments you may not wish to offer them a tenancy.
3. Personality and character
This kind of ‘soft check’ is important. For example, if there are any red flags that occur in terms of an individual’s character it is better to act, and you may wish to consider not offering a tenancy before it is too late.
In some, not all cases, an experienced landlord can spot signs of a difficult tenant at the viewing stage, and this could be things like a poor attitude or comments from previous experiences which are cause for concern. How they present themselves at the viewing is also a key sign.
In addition to this, we look out for signals such as how they speak on the phone, in emails and in texts as this helps build up an overall character.
4. Are they a good fit?
Following on from personality & character is whether they are a good fit. This is a point you only really need to consider when looking finding tenants for an HMO as the property will be shared between several individuals.
Taking time to find a tenant who you feel would be a good fit is always worth the wait over rushing to fill rooms and finding that you are stuck with a tenant who is a bad fit as this could lead to you losing the other tenants!
One of the reasons people choose to use a reliable managing agent is because of the way they can source reliable tenants. If you are a landlord and have any questions relating to this, the best way to reach me is by messaging me on LinkedIn.