How To Pick Good Tenants
Choosing the right tenant is an essential part of any landlords success. Bad tenants can create a huge hold in your portfolio not only in missing rent but also property damage.
Landlords face the constant problem of trying judge a book by its cover. A tenant can’t just be judged on appearance. Just because someone appears respectable and has impeccable references does not mean they won’t trash your property or grow a cannabis farm in the attic.
In this post the experienced team at Octo have put together some advice to help you find good tenants who pay their rent on time and don’t cause any property damage. All key areas such as screening methods, key questions to ask and red flags will all be touched upon.
How to Screen Tenants
Screening tenants is the first step that every landlord should take, you are either very trusting or very stupid if you don’t screen tenants before offering them an agreement. Any rental property is a huge investment and if not taken care of by tenants can become a large liability.
The is the foundation of finding a good tenant.
Best ways to screen tenants
Every landlord screens tenants differently, this normally depends on your age, location and type of tenant you are looking for. The most popular ways are:
- Telephone Interview
- In-person Interview
- Asking tenants to fill out an application form
- Social Media Checks
- Employment References
- Financial Circumstances
- Previous Landlord References
- Credit Checks
- Right to Rent Checks
Using Application Forms for Tenant Screening
Application forms can be a great way to initially screen tenants with little effort. You can use a standard template that requires the tenants to provide some basic information, such as:
- Employment Status
- Marital Status
- Whether they have dependents
- Current address
- Are they a pet owner?
This form can be used as a starting point in finding out who meets your “criteria” for a good tenant. For example, if you require all your tenants to be in work and an application notes he is on Universal Credit then you can remove him from your selection process.
The easiest way in order to execute this process is to create a simple form in your chosen word processing software and then convert this to an editable PDF. By converting to an editable PDF potential tenants can fill out the form digitally removing the need for a printer/scanner. Adobe have created a free guide to help you
Conducting Phone Interviews
A 15-minute phone interview can be a great way to get to know any prospective tenant. Have set list of questions prepared before the interview in order to get the information you need. Keeping the interview structured will allow you easily compare tenants after all the interviews are complete.
There is no better way to judge a tenant than face to face, it gives you the opportunity to meet with the potential tenant and judge their character and if they match your needs. It also can couple as an opportunity for the tenant to view the property again and meet their potential landlord.
Ideally, an in-person interview should be conducted after an initial application form or telephone interview. This will help save you time and also allow you to compare your initial thoughts from stage 1 to stage 2.
Listen to your gut and instinct, experience can play a big part by picking up on small clues about a tenant. For example, do they come across honest? Look out for cat/dog hair on clothing if they claim to not own pets.
Screening tenants using social media
Social media is a growing asset for landlords to screen tenants, around 11% of landlords use it during their screening process. Social media sites can provide a free insight into a potential tenants lifestyle, job and hobbies. At Octo, we suggest you use social media to investigate claims made during the initial application form. For example, checking LinkedIn to match occupational claims or Instagram for regular pet pictures.
Although in theory screening tenants on social media is a perfect solution as it is easy to access and free, it should be used with caution as it does not always give a true representation of a person which can lead to dismissing good tenants.
If you require that an applicant must be employed in order to be successful this is an important step in the screening process. Understanding a tenants employment status may be key to understanding if they earn enough to cover your rental payments. As a landlord, you are within your rights to ask to see a tenants contract of employment.
Some landlords can be pickier and refuse tenants on zero-hour contracts as they don’t have guaranteed work. However, this can narrow down your number of potential tenants making it harder to find suitable tenants.
Many landlords ask for a written reference from an employer confirming that the person works for them and how long they have been an employee. This letter should be on company letterhead paper or from an email account linked to the company. If it’s written or typed on plain paper or sent from a generic web-based email account, be suspicious.
It is always worth checking a tenants financial situation in more detail. Asking for further documentation such as payslips or banks statements if they are self-employed to make sure it matches with what they have told you. It is always advised to ask for 3 months worth of payslips or bank statements.
Previous landlord references
It is good practice to find out what the tenants previous experiences have been with landlords. Ask for their previous address and landlord contact details for their last few tenancies, 3 years at least. If this isn’t possible letting agencies or previous rental agreements are always a good source of information. Something to bear in mind – there are determined tenants out there looking to pull the wool over your eyes by asking family members or friends to provide glowing references.
Credit checks are an essential part of the process and will pick up any CCJs or other previous credit problems. Keeping in mind that you will need the permission of the prospective tenant to do this.
If a tenant has bad credit this doesn’t always mean you have to rule them out, if they are up front about previous issues and can demonstrate they haven’t defaulted on their rent previously then they may still be a good choice. If you remain unsure about a tenant you can always ask for a larger deposit, pay extra rent up front, or find a guarantor.
The Residential Landlord Association offers a credit checking service for their members. You can also register with Experian, Equifax and Trans Union who provide a similar service.
Right to Rent checks
All landlords in the UK must verify that a tenant is legally allowed to stay in the country. In 2016 the Right to Rent check was introduced forcing landlords to check the immigration status of tenants. These checks must be carried out even when the landlord believes the prospective tenant is a British citizen. However, there are some exceptions, including students, so check out the government guidelines first. (Direct Link)
If the tenant can’t provide any documents for your records you can use the online government portal to verify their immigration status.
Essential Questions to Ask Tenants
It is a good idea to have a list of questions ready and to take notes when you are screening new tenants. This will save you time if you have a long list of tenants to get through. You can compare their answers and use the information to draw up a shortlist. Ask each tenant the same questions to avoid discrimination. Ensure your questions are relevant to renting, not too personal and don’t lead to discrimination on grounds of race, gender, religion or sexuality.
There are potentially dozens of questions you can ask, but the following are some of the most useful:
- Why are you moving? Make sure the tenant’s reasons for moving out of their old property sound legitimate, i.e. a change of job, end of a relationship, the old landlord is selling up, etc. If the tenant needs somewhere else to live because they were evicted, be wary.
- Do you have any pets? If you have a no pets clause in your tenancy agreements, this could be a deal breaker.
- Do you or anyone who lives with you smoke? If they are a smoker, let them know that they won’t be allowed to smoke in the property (if applicable).
- What do you do for a living? Ask for a general indication of how much they earn, so you can check whether they can afford the monthly rent.
- Who will be sharing the property with you? It’s always good to know in advance if the tenant plans on moving their extended family in.
- Are you looking for a short or long-term lease? Long-term tenants are always preferable, as finding new ones is a hassle.
- Can you provide references? This is important for reasons we have already covered in this guide.
- Is there anything I should know? This gives the tenant an opportunity to ‘fess up’ about problems they had with their previous landlord or the fact they are about to be made redundant.
- Why should I consider your application? Is the tenant a painter/decorator, plumber, electrician, etc. Are they good at DIY? It’s always handy to have a tenant who can fix problems without dragging you out of bed at midnight to change a light bulb.
- Do you have any questions? Give the tenant time to ask their own questions.
Red flags you should look out for when screening tenants:
The Octo team have put together some common red flags reported by other landlords. Every situation should be taken on its own merit:
- Bad credit
- No ID documents
- A criminal record – evaluate each case on its own merits, but a history of violent or antisocial behaviour doesn’t bode well for you or the tenant’s future neighbours.
- Low income – assess whether the tenant can afford the rent and deposit. If the figures don’t add up, they are a bad choice.
- Prior evictions – has the tenant been evicted from previous properties? If so, find out why and verify the information from their previous landlord.
- Willing to pay a lot of rent upfront – an eager tenant with a wad of cash is a dream come true for some landlords, but don’t always look a gift horse in the mouth. Tenants who want to pay more than six months’ worth of rent in advance may be looking for a property where they can set up a cannabis farm without fear of a nosy landlord poking around.
- Very demanding – if this person is already making unreasonable demands and you haven’t even told them they can move into the property; do you really want to take them on?
- Flaky – a prospective tenant who can’t even be bothered to show up for a viewing on time is hardly a model tenant. They could *forget* to pay the rent on time, too.
- Dishonesty – does the person claim not to have any cats, yet they’re covered in cat fur? Do they claim to be a non-smoker but reek of tobacco? If they lie about the little things, what else are they hiding? Do you really want to find out?