People frequently ask me what is my biggest tip on how to be a successful landlord. The answer is simple. Get great tenants. A good tenant is worth their weight in gold…literally.
Whilst a lump of gold pays you nothing, a good tenant will give you a regular income for years, and sometimes even decades. Some tenants could even pay off your entire mortgage. Tenants are invaluable. If you could put a monetary value on them, some of my tenants have paid me over £40,000 in rent since moving in.
So how do you find a great tenant? Here are my ten tips for getting great tenants:
1. The starting point to finding a great tenant
The starting point for finding a good tenant is your rental property. If you have initially invested in the right rental property; one that’s in a good location, which appeals to a quality tenant, then you are half way there.
Problems arise when you have a rental property that might have been acquired accidentally, or is a little bit tired, or has significant drawbacks, such as being on the ground floor, or a bedroom that is too small, or has a weird bathroom suite, etc.
The property might have been cheaper to buy, but if it’s outside London, it might not rent easily. There is a chance that you will have to compromise on the standard of tenant you are going to get in, if not the risk is it will remain empty leaving you with a painful rental void period (sounds nasty? – it is).
It’ worth landlords asking themselves, “would I ever live here?” and if the answers no – then why would you expect others to be different).
2. Landlord should trust their instincts
I have a sense… call it a ‘kinda bat sense’ (remember batman). I can spot a dodgy tenant a mile off. Now, that doesn’t mean that tenants have to arrive suited and booted, speak nicely or have a high-powered job. No, what you want is a tenant who is honest and reliable. Honesty, above all is the key characteristic. This is what you are looking for and if it you don’t see it in their eyes. Walk away.
I go back to my landlord sense….little things matter. I always try and meet my prospective tenants first. This way you can see what makes them tick. Are they on time? Do they seem responsible these are all key attributes of a great tenant.
3. You don’t want a high flyer
A landlord doesn’t really want a tenant who is too wizzy, too high-flying. Those kind of tenant are likely to be moving out after 6 months, as soon as the end of the tenancy period.
No, landlords want to get ‘steady Eddy’ or ‘Plain Jane’ to move in. A tenat with a mediocre job and lots of local friends and family and few aspirations. Someone who seem happy with where they are in life. These tenants are far more likely to remain local and could well be your tenant for many happy years. The perfect tenant!
4. My sure fire test
One of my sure fire tests to really get under the skin of a prospective tenant is the bank statement test. Unfortunately, because of the time pressures of setting up a new tenancy and a move to another part of the country I didn’t have time to do it myself on a recent tenancy.
If I had, it would of almost certainly saved me from the hassle I’m now going through with having to evict one of my latests tenants.
The process is simple. You ask any prospective tenant to supply 6 months of bank statements. In these days of internet banking it takes minutes for most people to download a PDF and email them across. If any prospective tenant refuses to do it; then in my view they clearly don’t want your property that much, or more likely they have something they are trying to hide. Maybe they really can’t afford the rent or have financial problems or difficulties they don’t want you to see.
My recent experience has only underlined how worth doing it is, my regret is, that I didn’t take my own advice.
5. Credit check prospective tenants
As well as my full proof method of getting under the skin of a tenant, it’s also worth credit checking a tenant to help make sure they are not hiding any other financial nasties. It doesn’t cost you a lot – a few pounds, but it will show if you are potentially about to sign up a tenant with a whole load of debt whose not very good at paying it back!
6. Don’t be pressurized into taking a tenant
I’ve esperienced this recently from two letting agents. Both were clearly getting fed up of showing prospective tenants round my properties and were desperate to get them let to collect their fee. I was faced by both letting agents trying to ‘persuade me/ force me’ to take a very poor quality tenant. I physically couldn’t meet the tenant so I really had to rely on their judgement. Another big mistake! Don’t get pressurized by anybody else to take a tenant. You will almost always regret it. Again listen to any little alarm bells ringing in your head.
7. Avoid losers
Now, I realise this sounds harsh, but if a landlord lets their heart strings to rule their head then things often go wrong. Don’t take a tenant because you feel sorry for them. It will probaly lead to trouble. Somebody who manages their life in a way that they always seem to be going from one disaster to the next is probably not going to make a good tenant. They will take their chaotic losing ways and bring it all to bare on your tenancy. Disaster …so avoid! Harsh words I know, but can you afford to take on the problems of strangers?
8. Consider using a letting agent
I’m not the world’s greatest fan of letting agents, as readers of Properthawk might already know. On a full management fee I don’t think that many landlords get good value for money. However, in my view, you get a better quality tenant if you choose the right letting agent.
Think of letting agents as a filter. Just in the same way that up-market estate agents, like Savills or Knight Frank don’t sell cheap property. Equally up market or mid market letting agents will tend to filter out the dross. I have never found a decent tenant through Gumtree yet. I’m sure it’s possible, but for me it’s really just thrown up a load of weirdo scammers.
9. Don’t panic
Many landlords including myself start panicking when they haven’t got a tenant in. All they can think about is the terror of the rental void. However be warned, by lowering your standards, the effect of letting to a bad tenant can be far worse in the long term.
10. Always have your fall back
Just because you think that you are a good judge of character. That doesn’t mean that you need to take unnecessary risks. If the tenant hasn’t got a track record but you think you can take a punt then it’s worth getting a tenant guarantor.
This way if you are wrong then you stand a reasonable chance of getting most of your rent paid and your legal expenses back.