When considering a buy-to-let property one of the major considerations that you need to make is how you are going to find a tenant, ideally one that will stay in your property for the longer term. Buying a buy-to-let property can be a good investment option, especially when considering the demand for rental properties across the UK, but if you do not have a tenant in place for large parts of the year there is no income being generated. This article looks at some of the different methods in finding the perfect tenant and what they mean to your property and finances.
Research
The work for finding a tenant begins before a property is even purchased. There needs to be research undertaken to discover the rental demographic of the geographic area that you are looking to invest in. The findings of this initial research will determine the type of property that is likely to succeed in the rental market and give you an idea of potential returns based on the purchase price and likely rental income.
The rental demographic changes from town to town and having local knowledge of the area is definitely a bonus. There are many different types of rental, generally speaking an apartment or small house is well suited to young professionals who wish to save money for their future house purchase, and then you have houses in multiple occupation (HMO). These properties are generally thought of in terms of student housing where there are multiple tenants within the property on their own tenancy agreements. Your budget and the potential tenants that it could draw will be key in the success of your buy-to-let.
Upon completion of the purchase you need to consider how you are going to advertise your property for let and whether you want to be heavily involved or let someone else take care of certain aspects of the tenancy.
Hands On
If you wish to be involved in all aspects of being a landlord and reap the maximum financial reward, then taking a fully hands on approach is more likely to be the best option for you. Through not using an agency you are able to retain 100% of your rental income without sacrificing a percentage for agency fees. These method does require a lot more work and effort on the owner’s part however, with the same processes and checks having to be carried out and some costs still incurred.
The first part is advertising your property, there are now many websites online that allow you to reach potential tenants albeit at a slight cost. The other method is to advertise through local free-ads and word of mouth, although this method may be harder and take longer to find a tenant. Once you have a prospective tenant you should look to screen them to discover if there is any reason why they are not suited to your property.
Screening a prospective tenant can sometimes be daunting, however it is a vital step in safeguarding your property and investment. Going down the route of screening the prospective clients yourself does mean you have to conduct your own checks through other companies but the benefit is a much reduced price in obtaining the information you need. As a landlord you should be checking the background of the tenant, whether they have had issues with payment of previous rentals, as well as financial checks. If you are a member of a landlords association many of these checks will be available through their services.
Letting Agencies
The second option for finding tenants and maintaining a relationship with them is to employ a letting agent. This method allows you to take a hands-off approach with regard to day to day happenings but generally the agent will take between 10% and 15% of the monthly rental figure as a management fee. The actual percentage will depend on what service you take out from them, broadly speaking there are 4 types of service:
Tenant Find – a simple service that simply finds prospective tenants for you.
Let only – this is the tenant find service but also includes every step up until the tenant moves into the property. This is everything from references through to collecting a deposit.
Let with rent collection – the let only service plus the collection of monthly rent and chasing of any arrears.
Full management – the full package, managing all aspects of a buy-to-let property including the upkeep and maintenance of the property.
The total amount you will pay is dependent on the service you choose and how hands on you wish to be. If you are considering appointing an agent you should contact the Association of Residential Letting Agents who will be able to give you advice and details of letting agents in your area.
Looking after your tenant
The best tenants are the ones that do not cause too much hassle, keep the property in a good condition and meet their monthly rental payments. These tenants are hard to come by but if you have carried out the appropriate checks and satisfied yourself with your tenants past then you are off to a good start. One of the biggest contributors to tenant’s happiness is the treatment from their landlord and their ability to make a rental property their ‘home’. Allowing a tenant to decorate their property, use their own furniture or remove furniture they dislike builds their affinity to a property and make it more likely they want to stay.
A good tenant can be what makes or breaks an investment, a bad tenant can cause financial issues, damage to the property and therefore extended periods without any rental income, whilst a good tenant can see a fruitful relationship for both parties. Taking some basic steps can help you find your perfect tenant.
This article was provided by Mike James, an independent writer and marketer representing a selection of UK based property and investment companies – including Prime Centrum, who were consulted with regard to the information covered in this post.