The tenant vetting process and tips to avoid bad tenants

If there is one thing that you want to do as a buy-to-let landlord, it is to avoid bad tenants. As I discussed in my last post, when looking at strategies to avoid bad tenants, your gut feeling is important but must always be backed up by proper referencing. In this post, I’m going to look at how to vet tenants and check background details that they will have supplied, before giving the benefit of my experience and a few tips to help you avoid bad tenants.

These are the basics of the tenant vetting process, which we go through with every applicant here at Ezytrac. If you are considering doing it yourself, the following is the very minimum you must do to avoid bad tenants in your investment property.

The 3-step tenant vetting process

You might remember that last time I said it was important to get some details from applicants. These details will allow you to check the tenant’s history and current status.

Step 1: Check references from current and previous landlords

Even if the applicant has handed, you signed letters from previous landlords, phone or write to them to check that what you have been told is true. Be prepared with questions to ask about rental payments, damage, and general behaviour.

Step 2: Check references from current and previous employers

Never take the word of the applicant as being gospel, especially when it comes to their employment record. Call the employee’s current employer and make sure that what you have been told checks out. You may not be able to get a lot of information over the phone, but you can certainly check that they are employed in the capacity you have been told, and by whom you’ve been told. Make sure that the applicant provides payslips from the last three months to confirm income.

Step 3: Check the applicant’s credit rating

The credit rating will help you to identify how well the prospective tenant is paying his or her bills. A low credit rating, and you could find that you have a tenant who is bad at prioritising outgoings and puts the rent at the bottom of a list that includes plenty of nights out and impromptu house parties. There are plenty of online credit check services, generally costing around £15 to £20 per check.

5 tips to help you avoid bad tenants

Your success as a buy-to-let landlord hangs on getting the very best tenants you can. We have clients who have had the same tenants in a property for as long as ten years. These types of tenant pay their rent on time and take good care of the investment property which they have made their home. They are worth their weight in gold.

Here are six tips that will help you to avoid bad tenants and find the diamonds when doing your tenant vetting process:

1. Don’t take on tenants on benefits

I know this is a growing section of the market, and there are now some safeguards in place for landlords, but I’d recommend you avoid tenants on housing benefits. The housing benefit that you receive is rarely enough to cover the whole rent, and you run the risk of the tenant being unable to pay the balance.

I know that not all tenants on benefits are problematic but stick with the stereotype to avoid bad tenants.

2. Don’t take the tenant’s word at face value

You have to err on the side of caution: this is your investment property, and you’ve paid out good money to become a buy-to-let landlord. When the tenant supplies references, always check that the contact numbers are right. Use directory enquiries, the Internet, or any other means possible. You’ll be surprised how many buy-to-let landlords have been duped by references given by friends of the tenant.

3. Always have a proper, bonafide tenancy agreement in place

This is the one document that will save you heartache later. It’s worth going to the expense of having it drawn up by a solicitor to make sure it offers the landlord protection it should and is watertight. Although not part of the tenant vetting process, I include the tenancy agreement here because it is such a vital tool of the buy-to-let landlord.

4. Beware cash paying tenants

Tenants who pay cash upfront could have an ulterior motive for doing so. Don’t let yourself become the next buy-to-let landlord with a £20,000 clean-up bill caused by marijuana-growing tenants.

5. Don’t hand over the keys until the deposit has cleared

A cheque is only a piece of paper. Never hand over the keys until the deposit has cleared into your account, along with the first month’s rent. Once in your investment property, it’s hard to evict nightmare tenants and could take months. An applicant becomes a tenant the moment you hand over the keys.

Bonus tip to keep the buy-to-let landlord protected

Here’s a bonus tips to keep you protected while a tenant is in your investment property:

·      Always have landlord insurance

This is a must-have, even if you have tenanted your property with friends or people you think you can trust. Include rental guarantee and legal expenses: it’s a little extra cost, but a whole lot more peace of mind.

If you’ve got any questions, please feel free to contact us by phone on +44 1522 503 717.

Yours in effortless property management,

Robert Smith