Guide for first-time landlords. Part 4 - Finding tenants and managing the business

POSTED: 19th May 2015
IN: Landlord helpful guides

With the number of UK buy-to-let investors rising eight per cent to 1.63m in the last year, it’s clear that the world of property investment is stronger than ever.

undefinedWith more mortgages to choose from than ever, and pension reforms giving retiree’s access to their pension pot all in one go, 2015 could see the number of landlords increasing further. It’s thought that by 2020, buy-to-let mortgages could account for 25 per cent of the market. For those who decide to travel the road of buy-to-let, it’s important to do plenty of research before making an investment.

In this four part series we’ve been investigating the ins and outs of buy-to-let to find out how landlords can make a return on their property investments while also ensuring that their projects run as smoothly as possible. We’ve already looked at the importance of selecting the right property, financing buy-to-let and making sure the property is safe for tenants to live in.

In this post, the last in the series, we’ll examine how new landlords can find the right tenants and manage their business. You’ll learn about setting tenancy terms, the value of good tenants, and processing applications.

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Terms of the tenancy

Before you start to advertise your property, you need to determine the terms of the tenancy so that prospective tenants are made aware of the most important information.

The terms should include details of the following:

  •          Period of the tenancy
  •          How much rent is required
  •          How much deposit is required
  •          How the rent will be paid
  •          Whose responsibility it is to pay bills

The period of the tenancy will outline how long the tenant’s contract will last. Typically, this could be six months or a year, but it’s your decision and you can offer a shorter or longer tenancy to suit the needs to your tenants.

The value of good tenants

Putting in the effort to find good tenants may seem like a long process, but it will certainly pay off in the long run. Since good tenants are less likely to damage your property, as long as you offer them a quality property in the first place that won’t fall into disrepair, you’re likely to save time and money on maintenance.

Before you start the search process, you need to prepare and decorate the property,ensure the property is safe and make it look presentable and appealing for viewers.

Finding tenants

Whether you choose to use a letting agent, advertise online, in local shops or through word-of-mouth, there are several ways in which you can find tenants to fill your property.

Letting agents

If you decide to use a high street letting agent, they’ll manage the entire tenant-finding process for you, and this could save you a considerable amount of time and effort. You will of course have to pay for their help though, and so it’s up to you to assess what is most important. Also, before seeking the support of a letting agent, remember that you may have different opinions when it comes to finding the right tenants. The type of tenant they consider to be perfect may not be right for you.

If you’d prefer to use an online letting agent rather than a high street agent, once you’ve registered your property with them they’ll advertise it for you through a range of portals such as Rightmove, Zoopla and Gumtree.

However, although letting agents can save you time, research suggests that it can pay to manage your property yourself. According to a recent poll by SpareRoom, 85 per cent of tenants would rather deal direct with a landlord than a letting agent. They want to know their landlord is contactable and someone they can trust.

Finding tenants online

There are other resources you can use to find tenants. Social media can prove particularly helpful when it comes to getting friends or family to recommend people, and it’s interesting to see how fast news of your property can get around. By posting a tweet with the basic details, thousands of people could potentially see it and share it with people they think could be interested.

Traditional advertising

While the internet can be a powerful tool for marketing your property, there’s no need to disregard more traditional forms of advertising such as an ad in a newspaper or a sign in your local post office. These can attract the attention of people in your local area, and reach those who might not necessarily use social media or popular property websites.

What your ad should entail

No matter how you advertise your property, remember to include plenty of information about your offering. Matt Hutchinson, director of SpareRoom, says: “A good ad has high quality photos. Include pictures of the kitchen and living room as well as the bedrooms to help potential tenants get a feeling for the property, even before they come along for a viewing. This will also save you time.”

If you’re running a House in Multiple Occupation (HMO), don’t forget to also talk about any existing tenants. Matt Hutchinson says: “Too many room ads just talk about the property. Yes the building is important, but many house sharers are looking for more than bricks and mortar. In a recent survey only eight per cent of SpareRoom users said the property was more important than the people they share with, so include something about any existing housemates in your ad.”

In summary, your ad could include the following:

  •          Rent
  •          Bills
  •          Deposit
  •          Room sizes
  •          Clear photos of the rooms
  •          Unique offerings
  •          Location information

Processing applications

If you’ve worked hard to create a property that tenants should love, and have crafted ads that show it at its best, you may receive interest from more than one prospective tenant. When faced with more than one applicant, it’s important to take the time to adopt a systematic approach to processing the applications that you’ve received. When handling applications, be sure to consider the following:

  • Employment: Is the tenant in employment and based on their income, can they afford to pay you rent?
  • Credit checks: It’s recommended that you conduct credit checks on potential tenants to ensure their credit history doesn’t ring any alarm bells. It’s always best to assess your tenants individually though, one late credit card payment doesn’t necessarily mean they will struggle to pay their rent.
  • Rental history: You could ask potential tenants to provide references from previous landlords. This can help you to learn a little bit about how they behave as tenants.

Processing applications can seem time consuming, but it’s best to avoid cutting corners so that you can find the right tenant for your property.

Moving in

Once you’ve offered someone a tenancy, the first step is to ensure tenancy agreements and guarantor forms are signed if necessary. Deposits are optional, but in order to cover any serious damages, it can help to ask for one. Not only can this money prove useful if the tenant was to break something, it can also often present damages from happening in the first place as tenants are likely to take more care. Be sure to secure your deposit under a tenancy deposit protection scheme.

Before your tenant moves in, conduct and inventory and list all the contents of the property while recording the condition that the property is in. Supporting your inventory with photos can help, particularly if any problems were to arise at a later date.

Don’t forget that you’ll need to provide your tenant with a set of keys, and make sure you have at least one set for yourself too.

Property management

When managing a property you’ll need to be organised so that you can keep on top of paperwork. Once your tenant has moved in, a rent book can prove invaluable to document how much rent has been paid and on what date. Also, file away any receipts or invoices associated with the property. For example, if you find yourself having to call a plumber, keep a record of the work that they do and how much you have paid. This information can come in useful when it’s time to file a self-assessment tax form.

A great start

This post is instalment four of a four-part series for landlords making a first buy-to-let investment. In the other three parts, we take a closer look at:

Part one: An Introduction

In part one of this series, we started by asking: Is buy-to-let right for you?

Part two: Finding and buying the right property

In part two of the series, we looked at how landlords can find the best property for them.

Part three: How to get your property ready for tenants

Part four, the final instalment in our buy-to-let series will look at how you can find and manage your tenants. You’ll learn how to manage your property and ensure that everything runs as smoothly as possible.

Buy-to-let can be a lucrative investment providing you do your research and find ways to manage your property effectively. By devoting time into outlining tenancy terms, advertising in the right places, and processing applications, you can lessen the chance of problems arising.

When it comes to making a strong investment in property, finding the right mortgage is a must. To find out more about buy-to-let mortgages please don’t hesitate to get in touch with the team at Aldermore. 

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