17:50 PM, 30th April 2014, About 10 years ago
1) Tenants who pay their rent on time
2) Tenants who will respect their property
3) Tenants who respect their neighbours
This is a relatively comprehensive guide, hence it is quite long. It may well put you off self-management but please invest your time into reading it fully to gain a better understanding of how to protect yourself, even if you do decide to use an agent.
Despite having granted over 1,000 tenancies on properties belonging to our family portfolio we have only had to go to Court twice to seek possession and have never had a tenancy deposit dispute referred to arbitration or the small claims courts. Perhaps we have just been lucky? However, we like to think our experiences are more likely to have something to do with the way we apply common sense to our letting and tenant referencing processes.
In this guide I am going to explain how you can use same processes we do in order to achieve similar results to find your own tenants as opposed to paying the extortionate fees often associated with high street letting agents.
I will explain what you can do begin the process of finding your next perfect tenant from the day an existing tenant lets you know that they want to move out through to the check in of your next perfect tenant. I have also included several bonus tips to help you to minimise your risks and increase efficiency.
As soon as a tenant serves notice it pays to arrange to meet them. More often than not these days, tenants think they can serve notice with just a phone call, email, facebook or text message.
It is important at this stage to get tenants to serve proper written notice. Therefore, prepare a letter for them to sign at your meeting stating the date they wish to end their tenancy. Produce two copies, one for them and one for you and leave some space so that you can also sign to accept their notice.
Next, find out why they are moving and let them know that you will do your best to help them as much as possible. For example, assure them that you will deal with meter readings on the day they check out and that you will produce letters to inform the utility providers of their contract termination and new address.
Discuss references which you are bound to receive from their new landlord or mortgage lender. Let them know what they need to do to get a good reference and a full refund of their deposit. This meeting is also the perfect opportunity for them to show you around the property and to point out any little jobs which might need to be dealt with.
Discussing references and the potential for a full refund of their deposit is a big incentive for tenants to be as helpful as possible. Explain to your tenants that it is your aim to provide an excellent reference and refund the entire deposit. We use this as an opportunity to tell them what they can do to help that to happen. For example, replacing light bulbs, carpet cleaning and professional cleaning are a classic examples of things your tenants can do prior to checkout to ensure a full deposit refund and a good reference.
By explaining that your aim is to get your new tenants moving in within a few days of your your current tenants moving out will help your tenants to understand the importance of leaving the property in tip top condition. The more helpful you can be in terms of advising tenants what they need to do to get a good reference, a full refund of their deposit and what you will do to help them, the better your chances will be for them agreeing to help you.
At this point you are in a good position to ask your tenants to allow you to show prospective tenants around before they move out. We recommend arranging block viewings. Give your tenants tips on what they can do to help, for example; if they are a bit untidy or the grass needs cutting etc. very subtly point that out. The discussion about references, a full refund of their deposit and what you will be doing to help them on moving day are all very powerful motivators.
Always remember allow yourself at least a day or two to redecorate between tenancies.
If you only have one tenant enquiry and a vacant property there is a strong temptation just to get it rented to the first person who comes along. That person may well be a model tenant but if you don’t do all of the necessary checks you could be swapping a short term void in your cashflow for a ‘tenant from hell’ who could end up costing you £ thousands. To avoid putting this pressure on yourself you need to make sure your properties are advertised at the right price and well before they are vacant whenever possible.
Remember, when tenants begin their search for a new home their initial decisions are based on price, location and pictures.
There is not a lot you can do about the location of your property if you have already purchased it but you can be realistic on price and give prospective tenants a lot of pictures to look at, but not too many.
We recommend adding up to 10 pictures to your adverts. Remember, tenants live inside the property, not outside, so make sure you have more internal pictures in your advertisements. Adding good pictures to your advertisements can also reduce wasting time on viewings.
Given that tenants buy on price, why not make your property slightly cheaper than others currently being advertised in the area? Also consider that tenants search Rightmove based on rent bands in multiples of £100. Advertising a property for £825 could result in you receiving far less enquiries than advertising it for £800. This is because people searching up to £900 may be expecting something better. If they are searching for properties up to £800 they may not find yours if it is priced at £825 but they will if it’s £800. Don’t make the classic mistake of advertising at £799 though, otherwise all those listed for £800 will show above yours on Rightmove! Make sure people see yours advert first.
Remember that we are a Nation of pet lovers. Would you really object to your tenants owning a goldfish? Think about the message you are sending out when you advertise your property. Most landlords includes the words “no pets” in their advertising and that potentially rules out enquiries from over half of the population. The easiest way to double the number of your enquiries from a property advert is to use the words “pets considered – guarantors may be required”.
The most popular place for tenants to begin their search for a new home is the internet. The UK’s largest property portal is Rightmove, Zoopla are also a huge group which included Prime Location and several “partnerships” with Newspaper groups. You will need to use an agent to advertise on these portals but you don’t have to sign up to a management contract if you don’t want to. Also BEWARE some companies “Let-Only” contract. They charge you for doing nothing if the tenant stays on! Details of the company we use can be found below.
The following is a list of initial questions to ask before arranging a viewing. These are in addition to standard questions such as name, contact details and income:-
A typical conversation will last 10 to 20 minutes. If you don’t like what you have heard don’t arrange a viewing. Of course you need to be polite at all times but there are several excuses you can use to put people off. A classic is:-
Often it is just better to be completely honest, e.g. I’m really sorry but I don’t think it would be fair on your two Rottweilers to leave them in a 2 bed flat all day whilst you are out at work!
It’s best to do viewings in pairs for security and other practical reasons.
Try to arrange block viewings wherever possible to save yourself multiple trips to the property.
We suggest you stagger appointments every 15 minutes and always text people an hour before to confirm. Very rarely do people ever turn up on time but that’s fine if there are two of you. This is because one of you of you can keep the next set of viewers chatting whilst the other is showing others around. This also demonstrates that demand for your property is high.
During a viewing we always explain the referencing fees we charge, but only when we feel confident that we will be offering a tenancy subject to satisfactory referencing. If you like what you see and hear and your prospective tenants appear to feel the same way then explain that you would like to meet them at their home to complete some paperwork. Explain that you will need them to provide photocopies of their passport/driving license and two utility bills at that time and that you will also need to see the originals.
If they agree to everything above they’ve pretty much made up their minds that they want to take your property.
If they don’t agree you may wish to apply this little motto “some will, some won’t, so what, who’s next”.
Some people will want to look at other properties and that’s fine, they can always get back to you and you can pick up where you left off if your property is still available. If you don’t like the look of them simply tell them to have a think about it, go and look at some more properties, and that you have several more viewings to do. Leave it with them to get in touch again if they want to proceed. Usually by the time they get back to you your property will be let if you have followed our advertising tips.
Dress smart casual as that’s generally what makes tenants feel comfortable. They know why you are there and in most cases they will have their documents ready for you to take a look at. As well as looking through these make sure you get chatting and reconfirm the reasons they first told you they were looking to move. Ask to meet their pets if they have any. During this time you should be looking for little tell tale signs of whether they are likely to respect your property. Look out for washing drying on radiators (as this is a common cause of condensation on windows which leads to mould problems), mould on walls, condensation on windows (as this is often a sign of a property being poorly ventilated by tenants) scratches on the backs of doors, poor cleanliness of carpets and gardens, messy kitchens and unpleasant odours of pets or cooking.
It’s also a good idea to mention that you would like to review their last 6 months bank statements. Some people ask why. Explain that you are not particularly fussed about how much money they’ve got. You just want to see their income going into the bank and that their regular commitments are honoured without exceeding any agreed credit limits as this information can help you to make an informed decision if for any reason the formal referencing process is delayed.
For the very best results you should use a combination of “soft referencing” and “formal referencing”.
Soft referencing includes:-
1) Meeting the tenants in their own home to see how they live and to meet their pets
2) Reviewing bank statements
3) Taking copies of passport(s) and proof of current address and viewing originals
Formal tenant referencing includes:-
1) Credit history check (which will highlight any CCJ’s & bankruptcies)
2) Confirmation of showing on the Voters roll
3) Locate information (which may reveal undisclosed addresses which can then be searched)
4) FCC Paragon are one of the UK’s largest tenant referencing agencies and providers of rental warranties. As a result they have a huge database of tenants which they know have previously caused problems to former landlords. A cross check against this database is incredibly valuable.
5) Managing agents/landlords reference(s) (both current and previous if applicable)
6) Income reference(s) regardless of whether employed, self-employed or retired. If your prospective tenant is a foreign national you must view original Visa / Work Permit. Check that the expiry date has not passed or will come about mid-tenancy.
Note that if a tenant fails formal referencing we a good referencing company will usually advise the level of rent they think the tenants are good for. You should also consider requesting a guarantor who should also complete formal referencing.
It is important that processes are followed properly so forewarned is forearmed, particularly for the benefit of your tenants.
Whilst you are with your prospective tenants, ideally when meeting them in their own home as part of your soft referencing process, and before either of you have formally committed to anything, we recommend you to explain what the processes will be from that point in time right through to move in day. That way, your tenants will know exactly what to expect and what needs to be done.
Move in day can be incredibly stressful for tenants so it’s important that you set their expectations in regards to the time you will need to spend with them going through various paperwork. If tenants don’t know what to expect you might find yourself fighting for their attention whilst they are dealing with removals or getting impatient because the removal people want to get on with their jobs.
The processes and time required from “agreement in principle” to let through to handing over keys and completing paperwork, including serving legal information/notices, should first be explained and then completed in the following order:-
1) Formal referencing typically takes two working days if the tenants have primed those required to provide references. It is important that you remind prospective tenants of the importance and urgency relating to formal referencing. Advise them to let their employers, accountants, existing and previous landlords know to expect reference requests and to ask them to respond quickly.
2) Explain that the tenancy agreement will be drawn up as soon as referencing has been completed and assuming that all references are satisfactory of course .
3) Explain that once referencing is accepted you will ask for a holding deposit to be paid to hold the property. This will often be the same amount as you will be expecting your tenant to provide as a deposit towards possible damages when their tenancy officially begins. You will need to protect the deposit and have the Deposit Protection Certificate and Prescribed Information ready to serve within 30 days of signing the tenancy agreement. You are not required by law to protect a holding deposit until such time as a tenancy is granted. If referencing fails we recommend you to insist on a Guarantor. You are of course at liberty to ignore the results of formal referencing but that is not recommended. If a tenant withdraws from letting the property and decides not to sign your tenancy having paid the holding deposit you will usually be entitled to retain it in full.
4) If possible, give your tenants a copy of the tenancy agreement to look through prior to move in day. You should never sign the tenancy agreement prior to move in day unless you already have vacant possession of the property. This is just in case the existing tenant doesn’t move out. The same goes for new purchases by the way, they can fall through and the completion date can be delayed. If you are purchasing a new property you can still do everything explained in this guide. Just make sure that your purchase offers are conditional upon the vendor allowing you to show your prospective tenants around the property prior to completion.
5)Explain to your tenants that they should allow between one and two hours to go through all paperwork on move in day.
6) Explain that on move in day the first thing you will do together is meter readings. We also recommend you to have letters prepared for the tenants to sign to go to Utility companies and the local council for council tax purposes, these include meter readings and move in dates. The tenant signs these, you counter sign and you make sure they are posted. This ensures that bills don’t stay in your name.
7) Explain to tenants that you will do a snagging list inspection after the first month but they are to contact you immediately if there are any problems whatsoever. It might be coincidence that we have never had a cannabis farm in one of our properties but it’s more likely our due diligence has put the crooks off. Some apparently perfectly acceptable tenants show great interest and then for unexplainable reasons don’t proceed – perhaps these people are the rogues and criminals you are looking to avoid? – you will never know!
8) Explain that on move in day the first piece of paperwork you will present is the inventory. Use this as an opportunity to show tenants where everything is and how all appliances work, especially heating systems and the location of the stopcock for water. If you are not very experienced at producing these we strongly recommend you to use the services of a professional inventory clerk. Professional inventories generally cost in the region of £100 for an average buy to let property. If your inventory is not up to standard you will find it incredibly difficult to make a claim against the tenants for any damages at the end of the tenancy. To save time have the inventory prepared in advance of move in day and make any changes necessary on the day.
9) Explain that on move in day the next stage will be the signing of the tenancy agreements – one for them, one for you.
10) Explain that keys can not be handed over until the tenancy agreement has been signed and at that point you will also hand over the Landlords Gas Safety Certificate
11) You have up to 30 days after the commencement of the tenancy to protect your tenants deposit and to serve a Tenancy Deposit Protection Certificate and Prescribed Information. We recommend the sooner the better. Ideally, protect the deposit on move in day and have the papers ready to present at check in but only after the tenancy agreement has been signed. Always get tenants to sign your copy of these to confirm that they were served after the tenancy was granted.
It is very important that you follow each of these steps in the right order for legal reasons. Advising your prospective tenants about your processes at an early stage will minimise the risk of nasty surprises on move in day and thereafter.
Just remember, this is the start of what will hopefully be a long term relationship. It is important that you nurture the relationship over time. We are not suggesting you become best friends with your tenants, the law is that you give them peaceful enjoyment and that you should leave them alone as much as possible once they are settled. However, it is important to give their property related problems equal if not greater attention as you would your own if and when they arise.
You may well prefer to take on tenants who are looking to stay long term. However, we only recommend you to offer 6 month agreements. Only offering a short term tenancy when you want tenants to stay a long time might appear counter-intuitive. However, it is important to minimise your risks and to keep your options open so that you can apply to the Courts for a possession order on a no fault basis if you absolutely need to at the earliest possible opportunity. If you are letting to students you may wish to consider 12 month agreements if it would be difficult to re-let your property part way through an academic year. Always take guarantees from parents or rent in advance if you are letting to students because they may drop out mid term.
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