Selecting Your Tenants – the most important task for landlords and agents?
Editorial:
Vince Cable in his new book—”The Storm: The world Economic Crisis and What it Means”—quotes an old Arabic saying: “Those who claim to foresee the future are lying, even if by chance they are later proved right”
He goes on to say that it would be more helpful to think of plausible scenarios than likely specific outcomes, recognising that no one fully understands how this drama will play out.
In that vein, the FAS report, Financial Risk Outlook 2009, published this month, gives three plausible macro economic scenarios:
1—The global economy proves resilient with a limited duration global and domestic downturn, and commodity prices settling to sustainable levels, easing inflationary pressures.
2– The recession is more severe than expected, world-wide and domestically, with deep and prolonged asset price deflation and a lack of response to economic stimuli. (p38)
3—Slow and prolonged long-term recovery with stagflation—stagnant growth with strong inflationary pressures.
Discounting option 3 as the most unlikely scenario, the report states that house prices have dropped 19.1% from their 2007 peak, and that traded options currently indicate a peak to trough fall of 35% (p34)
The result could be up to 500,000 buy to let mortgage holders in negative equity—not a problem unless they are forced to sell.
In fact currently landlords are being squeezed on two fronts: in a lot of areas rents are falling due to oversupply, whilst buy-to-let mortgages are penalised relative to owner occupiers by fixed-rate deals, high deposit requirements and high arrangement fees.
The advice, as usual, is to hang on in there, don’t panic and improve your management efficiency to see the crisis through.
There must be lots of buy-to-let investors out there, originally beguiled by the prospect of ever increasing asset prices and income—a safe pension option—who are now realising the harsh reality of what being a landlord is all about.
You can make money in property in good times and bad, and property is a tremendous long-term income provider, and a growing capital asset, but it is just that—long-term.
In the meantime—unlike a passive pension investment—it must be managed.
This month’s newsletter looks at one of the crucial aspects of property management—selecting tenants.
The content here is provided by TenantVERIFY.co.uk
Tom Entwistle
This Month’s Topic: Selecting Tenants
The law gives a considerable amount of protection to residential tenants, otherwise a minority of landlords would be unable to resist the temptation to take advantage.
However, the same goes for tenants: a small minority of tenants will abuse their landlords’ position, causing damage, behaving badly or using their knowledge of the laws to their advantage and getting away with “murder” or certainly living rent free for long periods.
Despite varying opinions to the contrary, the rental laws are pretty evenly balance in the UK and they have stood the test of time since the last major changes around 1979.
The tenancy laws are certainly a vast improvement on what went before that .
A bad tenant, one unable or unwilling to pay rent, one which trashes the accommodation (often the two go together) or one intent on using the law to their advantage, can seriously damage a landlord’s wealth, and perhaps health as well for that matter, given the amount of stress involved.
The secret of landlording success therefore is to avoid these bad tenants in the first place, if at all possible.
Of course it’s not possible to have a 100% guarantee whatever you do, as some problems arise even though your tenants have the best intentions—no one can plan for redundancy.
However, as a landlord or letting agent, you can considerably reduce the chances of these problems by being very selective when choosing tenants—avoiding the problems in the first place is by far preferable to dealing with them later, when often they become intractable.
In this issue of the LandlordZONE Newsletter we will be discussing how best to select your tenants based on the experience of one of the longest established on-line tenant vetting services: www.TenantVERIFY.co.uk 0845 260 4421
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