Have you ever signed up new tenants for one of your properties and then regretted it almost right away? If they turn out to be unsuitable because they don’t pay rent on time, or fail to look after your property, you may wish you had completed proper tenant screening beforehand.
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Studies show almost 90% of landlords check potential tenants for rental history, previous evictions, credit scores, job history and income, which leaves 10% of landlords taking a gamble.
A tenant check is one of the fundamentals of being a responsible landlord, but if you’re inexperienced in the buy-to-let market, you may wonder what the process involves. Suffice to say, it’s well worth the effort of screening potential renters before inviting anyone to sign on the dotted line to avoid issues later.
What is a tenant check?
A tenant check refers to a process undertaken by letting agents and landlords to look at the financial and personal situation of applicants.
Your top priority should be to protect your portfolio from irresponsible and unreliable renters by weeding out those who aren’t willing to keep the property in reasonable condition, including the landlord furniture if you rent out furnished homes.
Screening tenants helps to ensure they can be trusted to keep your investment safe. It’s rather like when someone applies for a mortgage, and they are credit checked to see if they are a reliable borrower. You’ve invested a lot of money in your buy-to-let portfolio, so you don’t want the wrong type of person to live there.
Tenant screening means finding out if they will pay the rent on time, take good care of the property or create any kind of issues, such as noise nuisance or antisocial behaviour. It can include many different aspects including talking to their previous letting agent or landlord, credit checking and contacting their employer to determine whether they have the means of meeting rent commitments.
Check tenants’ identity
The law requires you to check that all tenants can legally rent a residential home in England before the start of every new tenancy. You must check that a tenant or lodger can legally rent your residential property in England. All members of the party must be checked, even if not named on the agreement, under the government’s right to rent policy.
Check original documents or see the Gov.uk website for further information on how to check your tenants’ right to rent online through a “share code”.
Reference check tenant
A complete tenant reference check normally includes checking their ID using a driving licence or passport. Also, you will need proof of income, as you don’t want to take a risk on tenants who can’t afford to pay the rent.
Obtain a confirmation of employment in the shape of an employer’s written reference confirming the tenant is employed and their salary. Most landlords carry out a credit check to ensure the tenants aren’t bad debtors with a history of non-payments.
Ask for references from former landlords with contact details and check with them in person. This may seem like a lot of checks, but it’s your investment at stake, so it’s best to complete everything thoroughly.
Red flags to look out for
When tenant screening, there are certain red flags to look out for, such as time wasters. If there are a lot of applicants, listen to your gut instinct, such as those who delay providing you with important items such as references or salary information. They may be bluffing because they have told a few untruths when they applied to boost their chances of winning the property. While they might seem pleasant on the surface, if they don’t have the documentation you require, don’t proceed with their application.
If you discover an applicant has been evicted in the past more than once, this should be a red flag, even if they can come up with a good reason for it. It suggests they have a history of issues, and they may not be a reliable tenant.
Credit check on tenant
When applicants have a low credit score, but tell you this is all in the past now, is it worth taking a risk on them?
The answer is probably no, as it’s likely to be something that will impact their ability to afford the rent. It may mean they are paying off past debts and even if they have a good salary now, there’s no guarantee it will be used to pay the rent.
Once you’ve carried out the tenant screening process and have chosen the renters who are most suitable, remember you’re entering into a relationship that requires understanding on both sides to succeed. Communication, respect and trust both ways are the way forward for a long-term business agreement that will satisfy both parties and avoid becoming dysfunctional.