When investing in a buy to let property, the choice of tenant is crucial.
It is interesting to note that the risk for a landlord in the luxury sector will generally be higher than in the lower rental brackets. Affluent tenants can experience rising debt to income ratios and affordability problems just as easily as anyone else.
Five steps to get and keep the right tenant:
- Background: Screen potential tenants with their permission. A thorough credit check will confirm if the tenant is employed and if the job is likely to be long term.
- Rental history checks: Request landlord references from two previous properties a potential tenant lived in.
- A signed lease: This is essential. Nothing must be agreed to verbally.
- Consider a managing or letting agent: Creates some distance between the tenant and the landlord with all aspects of the rented property handled by the agent. The fee for this work could range between 12% and 20% of the rental, depending on the level of service provided.
- On-going checks: Continued vetting of a tenant is important. This could include periodic credit checks during the period of the lease. Also, periodic inspections of the rental property to see if the tenant is meeting his or her obligations regarding care of the property. The right of inspections should be built into the lease agreement. These checks, might best be handled by an agent.
- 3 Oct, 2019