Finding the Right Tenant - A Guide for Landlords and Buy-to-Let Investors
Finding the right tenants is a crucial element to making your property investment profitable over the long term. It isn't just a case of making sure that your property has people living in it, but making sure that those people are of a tenant profile that fits your overall investment strategy.
Before I get into it I just want to say that when it comes to finding the right tenants you will find it highly beneficial to leverage the expertise of a reputable letting agent. Trying to self-manage your properties will end up being very time-consuming.
This is especially true if you are new to being a landlord, not least of all because there is a lot of legislation that you will have to learn. But, even for seasoned property investors self-managing houses is, in my opinion, not a good idea.
If, as a property investor, you want your business and your portfolio to grow then you need to focus your time and energy on achieving that growth rather than getting bogged down in the day-to-day business of finding and managing your tenants.
To find a good letting agent I recommend that you go through the Association of Residential Letting Agents (ARLA).
But of course, it is often not enough to find a good letting agent, what you need is the right one; one that suits your purposes and style of working.
And in order for you to make sure that an agent you might be considering is right for you then you need to know what finding the right tenants and managing them actually involves.
So, while I am not suggesting that it is wise for you to do the following work yourself it is still of paramount importance that you know how the work of finding tenants for a property should be carried out.
My Portfolio
In my own portfolio, there is a mix of single-lets and multi-lets or HMOs (Houses In Multiple Occupation). The tenant profiles I tend to work with are working tenants and housing benefit tenants.
Housing Benefit Tenants
In my experience, the best ways to find Housing Benefit Tenants are:
- Advertising in the local newspapers.
- Through the local council through their bond or council landlord accreditation schemes.
- Using 'to let' advertising boards in front of the property. You buy your own board or even make one, or use a letting agent to advertise in this way.
HMO Tenants
The best method for finding HMO tenants is through spareroom.co.uk.
There are a few other websites that are similar but at the moment at least, Spareroom is the leader in this market.
Finding the Right Tenants
As I mentioned above (though it's worth repeating) - it's not enough to just find a tenant, you have to find the right tenant to suit your investment strategy.
But there is more to it than that.
Even if a tenant meets the profile you need to be careful that you don't let someone move in that is going to hurt your business because of their behaviour.
Avoiding the Wrong Tenants
You have to be able to spot a potentially bad tenant before they move in. A bad tenant can cost you a lot of money, by not paying the rent, by causing damage, by causing problems with the neighbours.
All of these things can seriously damage your business.
To this end, I set up, and religiously follow, a four-step process when I'm deciding whether a tenant is right for one of my properties
- Start with a phone call
- Get references
- Meet in person
- Trust your instincts
Start with a Phone Call
You can often get a feeling about a person by how they act on the phone.
Ask questions...
Why are they moving? Why are they interested in the house, in the location?
If the property is an HMO, are they interested in finding out about the other tenants?
Do they want to move in without viewing the property?
(If they do, you should be wary.)
Get References
You should be wary of tenants who want to move in immediately and who offer to pay a deposit and the first month's rent when they view the property.
Sometimes this can be an indication that the would-be tenant is trying to dodge referencing checks.
A good tenant has no reason to lie when they are filling out an application form or any reason to try and stop you from carrying out thorough referencing. A bad tenant has a lot of reasons.
You need to check your tenant's references carefully.
Landlord Referencing
As well as the usual checks I recommend that you use landlord referencing. For more information, you can read an article I wrote on landlord referencing, here.
Can the Tenant Afford the Rent?
Obvious, I know - but you need to make sure that the prospective tenant can actually afford to live in your property.
If the tenant is claiming housing benefit then I recommend that you check the entitlements in your area to make sure that the numbers make sense for you.
Meet In Person
I never accept tenant applications from people who can’t or won't view the property themselves.
Why would anyone want to rent somewhere they haven't seen unless there was some reason for it (that you would be better knowing)?
In my experience tenants who don't want to meet you at the property usually have something to hide - and it doesn't end well.
Trust Your Instincts
If it doesn't feel right, don’t go with that tenant. Trust your gut instinct.
I’m a firm believer in trusting your instincts. There will always be another tenant. If it doesn't feel right then go with your gut.
Void Periods and Arrears
Finally, it's important to keep minimising your costs, as this is a key part of any business. Investing in and/or managing property is no different.
Void Periods and arrears are part and parcel of being a landlord, but you CAN reduce the impact of these with some careful planning.
- Be proactive with maintenance
- Deal with tenant complaints quickly
- Keep tenants informed
Deal with Tenant Complaints Quickly
A good tenant won’t stay long if they aren’t treated fairly.
If you need to find a new tenant every 6 months because you’re not looking after your current tenants then this will become very costly. Finding new tenants costs money.
Be Proactive with Maintenance
Make sure you get maintenance problems resolved quickly.
If you don’t look after and maintain the property, then your tenant is less likely to look after it.
Keep Tenants Informed
This is especially important in HMO properties and can be as putting a few simple processes in place.
Tell them how they can deal with condensation problems in the winter. Let them know when the bin days are. Keep them updated when a new tenant is due to move in and out of the property.
Small things like this make a difference.
Putting It All Together
By making sure you spend time and effort in finding the right tenant from day one, by looking after that tenant, you are looking after your asset.