The non-paying tenant is every landlord's worst fear. As a landlord you rely on a steady flow of income to pay your mortgage, maintenance and buy to let property insurance costs. When a tenant is not able, or refuses, to pay his rent for a prolonged period this can leave you out of pocket, facing costs than can shake your business.
Sadly, evicting non-paying tenants can be a lengthy, complicated and expensive process. The legal system is designed to provide help and assistance for tenants in need so the likelihood is that you will be unable to act fast to get them removed. The chances are that you will be made to agree to a reduced payment schedule or a negotiated rent. This can cause considerable complications for your cash flow.
While you can never be certain of who you rent your house to, the simplest solution is to make sure you check potential tenants out carefully before any legal contracts are arranged. Make sure to take up references and check employer details. The best solution to the problems of a bad tenant is to avoid taking one in the beginning.
Many buy to let landlords accept a tenant without doing any groundwork. Often people see it as easier to accept the tenant quickly than to do proper research and inspect bank statements, employer's details and references. In today's market where there is a tremendous demand for rental property, failing to check your tenant out could cost you dearly.
The first thing to check is employment details. If your tenant has given you the name and address of his employer then write them a letter. You need to know how long he has worked there and you need to confirm that he is on a full-time, permanent contract.
The second most important thing to do is to check the references with a former landlord. This will tell you whether or not your tenant has been able to pay his rent on time and in full. If the preceding landlord is not prepared to provide a reference, that's a sign to refuse the tenant.
What if your tenant is unemployed? It's a question that many buy to let landlords will ask themselves, should you rent your property out to tenants on housing benefit? Many landlords immediately dismiss this kind of tenant as they are seen as problematical to deal with and there is a lot of paperwork involved.
But is this fair? Many landlords opt for their tenants to be on housing benefit as, in spite of the paperwork involved, it's a guaranteed income. Other tenants may lose their jobs and fall into financial difficulty, but a tenant on housing benefit is receiving regular payment from the department of social security. A lot of landlords appreciate the guarantee this provides.
One thing that you need to do however, is inform your insurance company. When you are insuring a buy to let, the background of your tenant is an important factor. Some insurance companies will up your premiums if you take on this kind of tenant others may not. Whatever the circumstances it's essential that your insurer has all the facts so make sure you reveal this information.
Taking on a bad tenant can adversely affect your buy to let insurance so it's worthwhile ensuring that all the details check out, it could save you a lot of time and money in the long run.
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