Taking on a new tenant is always a risk and making a bad decision could cost thousands, but how can you minimise the risk of this happening? Although there is no way of guaranteeing your tenant will be perfect, carrying out the proper credit checks can greatly improve the odds.
It’s up to you as to whether you want to carry out the checks yourself, or whether you use an experienced letting agent with a well-developed instinct for spotting potential troublemakers. It can take quite a bit of time to carry out all the proper checks thoroughly, and it’s not worth cutting corners.
After you have found your potential tenant begin verifying their identity by asking for some form of official ID such as a passport or driving licence, as well is their National Insurance number. You’ll also need some basic details including proof of income, bank and employee references, references from previous landlords. Additional information should include details of who will be living in the property, whether there are children and/or pets, and if anybody is a smoker. Ask them why they are looking round for another rental property, and check the electoral roll to make sure they were registered at their last address in the name they have given you.
Following up References
A reference from their current employer is especially important, as it will tell you not only if they can afford to rent the property, but should also give you an idea as to their character. While most tenants are honest there are a few around who may try to falsify this information, so check the phone number you are given to make sure it really is their place of employment. It’s usual to request the last three months bank statements so you can see they receive a regular salary.
Verify their previous landlord’s details are correct by checking with the Land Registry website, as this is one person you’ll particularly want to contact. This is the perfect opportunity to find out if they paid their rent on time and if they looked after the property. Ask their landlord if they’d be happy to rent their property to them again.
Carrying out Credit Checks
You can carry out a credit check on your own, or you can use an agency to do so. It’s essential to do this as it will show whether they have any bankruptcy orders against their name or any County Court judgements.
If you are a new to letting out property you may find it awkward to ask all these questions as they can seem quite invasive, but bear in mind it can take months to evict bad tenants and very few landlords can take that risk. Although you can trust your instincts to a certain extent, unless you are experienced in dealing with tenants it can be difficult to spot the bad ones. Above all resist the temptation to rush through the referencing process. If you feel it will take up too much of your time then employ an experienced letting agency to do the legwork for you. Finally it’s worth remembering that most tenants are decent people who pay their rent on time and who will look after your property properly.