For landlords and property professionals, finding the right tenant for your rental property is fundamental for business success.
But who should be your target tenant?
It’s not as simple as finding someone who can pay the rent on time. Wide-ranging factors such as profession, marital status and long-term goals should also come into play when thinking about what you want from the arrangement and the safeguarding of your property.
Here, we look at the pros and cons of renting to different types of tenants so you can identify the right target tenant for you.
Choosing the Right Tenant
Before you start marketing your rental property, you first need to identify a target audience to gear your tenant search towards.
By identifying a specific tenant persona from the get-go, you will be in a better position to rent your property and attract your ideal tenant. Whether your first priority is the careful upkeep of your property, or to find a long-term tenant, establishing your needs and requirements at this stage will help narrow down the search.
When it comes to finding a good tenant, think about your future relationship and who you want to be dealing with on a regular basis. A good tenant looks different to different landlords. Do you want someone looking for a long-term let, or a you happy with a quick turn-around?
Whatever your needs, here are some of the pros and cons of different types of tenants;
High Income Tenants
The income of your target tenant depends largely on the type and size of the rental property you own and its location.
For example, landlords with property in central London will need to target high income tenants in order to meet monthly rent payments.
One of the biggest benefits of renting to high income tenants is that you can rely on sufficient rent return and are unlikely to have to chase up missed payments. However, a tenant with a higher income is likely to hold your property up to higher standards.
Any good landlord will be committed to ensuring their properties are pleasant, safe spaces to live in, but renting to this group requires a higher level of detail.
This means replacing carpets and furnishings more regularly and providing sought after benefits such as high-speed internet and modern security systems.
Low Income Tenants
If your property is located in a less costly area, it’s likely you will need to target lower income tenants.
Renting to tenants receiving housing benefits comes with its advantages and disadvantages;
- One disadvantage is that rent is paid to the landlord in arrears rather than in advance.
- There is also a lot of paperwork involved in renting to tenants on housing benefit and administration processes can be slow.
- Another issue is contents insurance. Premiums can rise when letting to this tenant group.
- Unfortunately, some landlords are wary of renting to tenants on housing benefit due to an assumption that their property won’t be looked after properly, and payments will be missed. However, this negative stereotype is unfounded and is down to a minority of individuals.
However, renting to this group comes will lots of benefits to landlords;
- Due to the lack of rental properties available, advertising your property as accepting housing benefit means you will have a large pool of prospective tenants to choose from.
- Tenants in receipt of housing benefit are often looking for long-term housing
- As the rental payments are made by the Department for Work and Pensions, payments should be regular and guaranteed.
Renting to Families
Renting to families comes with wide ranging benefits;
- For one, most families are looking for a long-term home as moving with children is a hassle usually best avoided.
- There has also been research to show that renting to families results in less property management time.
The downside is that with children, there usually comes more damage and wear and tear to your property. If you’re particularly precious about a certain property in your portfolio, you may want to avoid renting to large families with young children.
However, if you’re letting the property long-term, you will most likely be redecorating at the end of the tenancy agreement anyway.
Most families are looking for a rental home with a little extra space. Make sure you highlight this benefit of your property when attracting tenants. Families are also more likely to have their own furniture so may be looking for an unfurnished home.
Tenants with Pets
It could be debated what causes more damage to a property- children or pets! While lots of landlords refuse renting to tenants with pets outright, accepting these tenants may be to your advantage.
For one thing, you can charge more in rent. With rental properties that accept pets being few and far between, pet owners will expect to pay a little extra for the privilege. The extra maintenance needed allows you to justifiably charge a premium.
If you do decide to go down this route, obtaining a previous landlord reference from your potential tenants will alert you to any problems caused in the past.
Renting to Student Tenants
Students have a bad reputation when it comes to taking care of rental properties. However, the student rental market is ripe with opportunity, with student homes in high demand in University towns.
Here are some of the benefits;
- If you own property in a University town, finding tenants won’t be a problem.
- If you’re looking for short-term lets, students tend to move on after a year.
- Students are less fussy when it comes to appliances and furnishings, so if you have an older property with basic furnishings it shouldn’t be a problem. As long as your property complies with health and safety obligations and is a comfortable place to live, you won’t need to offer state-of-the-art appliances.
- Renting per room means higher returns!
But don’t forget to consider the following;
- Maintenance and repairs needed may be higher as there tends to be more individuals living in student properties.
- Students like to socialise. When renting to students you need to be aware of the neighbours as you might be called upon to deal with complaints!
- For most students, this is their first time living away from home. In place of a credit check, you will need to ask for a guarantor to safeguard your investment.
- There is growing competition in the student rental market, with purpose-built housing being created. Do your research before you commit.
Renting to Young Professionals
Young professionals are often favoured by landlords due to their independence and financial security.
Here are some of the advantages;
- While still young, this group are less likely to host big parties than students and tend to be more house proud, resulting in less wear and tear.
- With more experience behind them, young professionals are better able to deal with minor issues independently before asking the landlord for help.
- If you decide to rent an HMO property you can expect greater returns.
- Professional couples tend to be stable tenants and are better able to manage rent requirements with two incomes.
Here’s a few things to keep in mind;
- Like high income tenants, young professionals will expect certain living standards and mod cons. You may need to provide a dishwasher, high-speed internet and contemporary furnishings to attract this group.
- If your property is an HMO, you need to be aware of the added paperwork and responsibilities this requires. You may also need to consider potential conflicts between tenants.
- Young professionals tend to move jobs more often which may result in the premature end of a tenancy.
- Younger renters usually search online to find rental properties. Bear this in mind when choosing where to advertise your property.
Finding the Right Tenant
Once you’ve chosen a target tenant group, make sure you complete this checklist before renting your property;
- Meet your potential tenants face to face. It’s important to have a good relationship with your tenants and meeting in person is the best way to work out if it’s the right match.
- Ensure essential tenant checks are undertaken. No Letting Go offer a right to rent check service which is a legal requirement for landlords and letting agents in the UK.
- It’s also worth getting a credit history check and a previous landlord check to be on the safe side.
What Happens Next?
The rental property industry works both ways. If you want to attract your ideal tenant, you need to prove that you’re a responsible and organised landlord with the right safety checks in place.
No Letting Go provide a range of professional services to help streamline your workload and ensure you are fully compliant. From house viewings to inventory management, we can help during all stages of the rental process.
Browse our fully-compliant suite of letting services and feel confident that your property inventory management needs are taken care of
Some believe tenants with criminal convictions are less likely to pay rent, and more likely to cause damage.
However, is it really that simple?
Should you let to tenants with a criminal record? Let’s take a closer look to help you weigh up the different factors.
Why Do Some Landlords Have Their Reservations?
First things first, let’s explore why some landlords have reservations about letting to certain tenants.
All private landlords are looking to safeguard their investment. This means making sure a tenant:
- Can pay rent on time
- Has the right to rent in the UK
- Is unlikely to cause damage to their rental property beyond fair wear and tear
For this reason, many run tenant reference checks to ensure someone doesn’t have a criminal history.
However, someone with a criminal past may not necessarily be a bad tenant. This also works vice versa.
How to Find Out If a Tenant Has a Criminal Past
Asking a tenant for a basic disclosure certificate will show their criminal record. Also, certain reference checks can give you the information you’re looking for.
What to Consider When Running Criminal Record Checks
If you run a background check and discover a prospective tenant has a criminal record, there are some key factors to consider:
What Crime Was Committed?
Some crimes are far more serious than others. You should consider the severity of the offence before deciding whether to rule out a potential tenant or not.
You should also weigh up whether this crime would impact them as a tenant. If someone was caught growing cannabis in your property, for example, this is grounds to serve them with a Section 8 eviction notice.
How Many Crimes Were Committed?
Was the crime a one-off offence or multiple? This should give an indication into whether they’re a reformed character or not. An isolated incident is very different to a long rap sheet.
How Long Ago Was the Crime?
Time is also a significant factor that you should weigh up. How long ago was their crime committed?
Arrests vs. Criminal Convictions
If considering a potential tenant, you need to ensure you only look at convictions – not arrests. Being arrested for something does not make someone guilty of that crime.
Is Anyone Else at Risk?
If you’re letting a HMO, you need to make sure your other tenants won’t be at risk. This involves looking at the nature of the crime; violent offences are very different to others.
Can They Still Pay Rent?
As a landlord, your primary concern will often be to ensure your investment is secure.
Has this criminal conviction prevented them from holding down long-term employment? If so, this may impact their ability to keep up with rental payments.
This is why thorough credit checking is essential.
Is Your Rental Property at Risk?
Does the prospective tenant have a history of arson, or vandalism? This may make you think twice about whether to let to them.
Regular landlord inspections can help you ensure your property is being looked after as agreed.
Tips for Letting to a Tenant With a Criminal Record
If you’ve decided to proceed, here are some tips:
Tenants with unspent criminal convictions can cause havoc for landlords, as they can make their insurance invalid.
You’re not legally required to check if your tenant has a conviction. However, many insurance providers insist you inform them if anyone with a conviction is living in the property.
Some insurance providers may refuse the tenant altogether, while others may increase your premium.
Run Thorough Checks
When it comes to a tenant with previous convictions, being thorough is key.
Don’t take any information at face value, always gather the facts for yourself. If anything seems unclear or vague, ensure you get to the bottom of it.
Meet the Tenant More Than Once
Form your own opinion of the tenant! Remember, you’re letting to a person, so building a relationship is highly important.
Meet them multiple times if possible, and decide for yourself whether you’d like to let to them.
To Let or Not to Let?
While many landlords have their reservations, there are some undeniable positives to letting to tenants with a criminal history:
- May encourage a longer-term tenancy, particularly if they’ve struggled to find somewhere to rent previously
- Builds trust with your tenant, helping to create a positive relationship
- Encourages the tenant to stay loyal, reducing the risk of void periods
You need to weigh up what’s right for you, considering all the factors mentioned above.
Need Help Safeguarding Your Property?
Regardless of who you let to, you need to ensure your property is being looked after properly.
From check in to check out, our property inventory services can help. We’ll make sure you’re compliant with safety regulations. We’ll also reduce the risk of disputes and ensure the terms of the tenancy agreement are being met! Hassle-free renting has benefits for everyone – so we’ll help you get there.
High tenant demand means buy to lets can offer a lucrative investment for prospective and professional landlords. However, changing terms to tax relief on buy to let mortgages and rising interest rates require landlords to think carefully about the risks and rewards of entering into one.
If you’re considering a buy to let (BTL) mortgage, it’s important you understand the differences between a BTL mortgage and a residential mortgage and the different types available to you.
Having all the information available is one way to make a secure decision. That’s why we’ve created this guide on buy to let mortgages so you can make the right choice for you.
What is a Buy to Let Mortgage?
Put simply, a buy to let mortgage is a loan specifically designed for landlords looking to buy property to rent.
Buy to let mortgages are viewed as higher risk by lenders, meaning there can be higher fees, deposits and interest rates than residential mortgages.
But don’t let that put you off completely!
Can Anyone Get a Buy to Let Mortgage?
If you’re looking to buy property in order to rent it to other parties, it’s likely you’ll need to make a BTL mortgage application.
There are certain criteria you need to meet in order to be considered.
You are eligible for a BTL mortgage if:
- You are looking to invest in residential property (this includes houses and flats)
- You have the financial stability to repay the mortgage
- You own your own home (either with a previous mortgage or outright)
- You have a good credit rating
- You earn over £25,000 per annum
- You are below a certain age. (Most lenders have stipulations regarding the age you are when your mortgage ends which is usually between 70-75 maximum)
How do Buy to Let Mortgages Work?
BTL mortgages aren’t too different from regular mortgages, which, as a homeowner, you’ll be very familiar with.
There are, however, some variations it’s important to be aware of:
- Fees and interest rates are a lot higher than residential mortgages
- The deposit is around 25% of the property’s value as a minimum
- BTL mortgages tend to be interest only, rather than requiring monthly repayments. This means that the loan is to be paid in full at the end of the mortgage term.
- Most buy to let mortgages are not regulated by the Financial Conduct Authority (FCA). However, if you are letting the property to a family member, this will be considered as a consumer buy to let mortgage and will be subject to the same regulations as a regular residential mortgage.
Types of Buy to Let Mortgages
Buy to let mortgage deals can differ depending on which lender you go with.
Interest rates will all depend on the amount of money you borrow and how much rental income you receive.
It will also be affected by the type of buy to let mortgage you choose:
Tracker BTL Mortgage
If you opt for a tracker mortgage, your monthly repayments are subject to change each month depending on interest rates. This is great news if rates decrease, but not so good if they increase dramatically.
Discounted Variable Mortgage
A discounted variable mortgage is a mortgage deal with an interest rate set around 2% below the SVR (standard variable rate). These deals usually last around two years. The rate is still subject to change dependant on the SVR, but the discount will stay in place for the agreed time.
Multiple Year Fixed Rate Mortgage
A fixed-rate mortgage will keep your repayments low and stable for two to five years. Different mortgage providers offer different deals, so it’s worth shopping around. Just make sure to check what the rate will increase to at the end of the fixed period.
How to Get a Buy to Let Mortgage
Now you know the basics, it’s time to find out how to apply for a BTL mortgage and where to look.
Most large banks loan BTL mortgages, and a mortgage broker can help you decide which mortgage deal makes the most sense for your needs and purposes.
Another place to look when searching for the best mortgage rates is a reputable price comparison website.
Here are some reliable sites to use:
It’s worth checking a few comparison sites to get the bigger picture before making a decision. And don’t forget to read the small print for hidden fees and extra charges!
How Much Can I Borrow?
Your borrowing limit is connected to your rental income. This is called a loan-to-value, or LTV amount, which is worked out as a percentage of the property value. An LTV for BTL mortgages is usually around 90%- 95% rather than 100% for residential mortgages.
This means that your loan is likely to be lower, due to the perceived high risk factor.
Because of this, it’s recommended that you charge around 25%- 30% more for rent than your mortgage payment.
Local property agents or websites can help you get an idea of the amount of rent you can charge in your desired area.
Despite lower borrowing amounts and a larger deposit, the average buy to let purchase price is actually lower than for a residential property.
Tax on Buy to Let Mortgages
Keep in mind that there will be other outgoings to consider when deciding if you can afford a BTL mortgage.
Income tax, capital gains tax, landlord fees, landlord insurance, and letting agent fees all need to be considered.
With changing terms to tax relief on buy to let mortgages it’s important to keep track.
The new regulations mean that landlords can no longer claim all their mortgage interest against income tax on rent. The amount of interest deductible is being reduced by 25% a year until 2020, when it will become a 20% tax credit on the mortgage interest paid.
This change has the potential to raise some landlords up a tax bracket.
Plan for all Circumstances
As you know, applying for a mortgage is a not a decision to be taken lightly as the responsibilities are a long-term commitment.
To protect your financial security, it’s a good idea to have a plan in place for different eventualities.
For example, it’s not uncommon for a rental property to experience void periods in which no rent is coming in. Or, at some point or another, a pipe might burst, or a roof might need urgent repair. As a responsible landlord, you need to be able to provide effective and timely repairs.
To protect yourself from this burden, making a savings plan is vital. Ensure you are saving as much as possible when you have full paying tenants to avoid any stressful situations in the future. This should happen before making an offer on a house.
Tip: Don’t rely on selling the property to pay the mortgage off! If house prices fall, and you don’t have a backup plan, you’re in serious trouble.
Protect Your Buy to Let Investment
While applying for a mortgage is always a risk, once you have all the information at your fingertips, you can make a better informed decision.
One way to help guarantee the safety of your property investment is to ensure you are fulfilling all your duties and requirements as a landlord.
No Letting Go offer a wide range of property management services including professional unbiased inventories, safety assessments and maintenance reports to help you protect your investment.
Browse our full list of services to find out how we can help.
Looking to invest in rental property? There are many things to consider before getting involved in buy-to-lets.
Whether you’re trying to increase your portfolio or you are just getting on the ladder, it’s worth keeping these key principles in mind when choosing a rental property to invest in.
Here’s a comprehensive guide to rental property investment.
Is Investing in a Rental Property a Good Idea?
In short, yes. Rental properties are very attractive to landlords as mortgage rates and interest rates are low and rental return is high. The current housing market means that there is a great demand in tenants looking to rent.
As a landlord, you need to have a business plan for rental property investment. It’s worth familiarising yourself with how much mortgage interest you will be able to claim and what income tax you will need to pay. By 2020, landlords will get a 20% tax credit on their mortgage payments which may push some property owners up a tax bracket.
Before investing in property, you will also need to consider stamp duty, how much maintenance costs will be and whether you need landlord insurance.
Once you’ve decided you will buy a property, there are some significant factors you need to take into account.
Choosing the Right Area
This is the most important thing to consider in real estate. You need to perform market research to work out whether you will get a good return on your investment.
It may sound simple but choose an area that renters would like to live in. There will be a price growth for properties bought in up and coming areas. You will get a higher return by investing in a developing area. Consider:
- Transportation links
- What are the local schools like? (if renting to families)
- Are there enough shops, restaurants and businesses?
- Is there a university?
- What are the other properties in the area like? Do the neighbours correlate to your desired tenants?
This needs to be an area that your tenant will be able to afford.
Carefully consider how much rent to charge. Ideally this will be competitive for the area.
If you’re renting to students or younger tenants, they will be unlikely to afford high rent prices. You need to calculate the percentage of rent return compared to your mortgage rate.
What is the neighbourhood like for insurance premiums? Is the house likely to be broken into? Will you need to pay excess? These are all questions you must ask regarding your property.
Do you want to buy a rental property that is close to where you live or work? Being close to your property will allow you to monitor it if your tenants need assistance. However, there may be better areas further afield. If your property is not in a convenient location, you can hire a property manager to look after it.
Decide which cities to invest in by researching average rental yields. Invest in Manchester or areas surrounding London. Colchester, Essex had the second best rental yield after Manchester.
Choosing The Right Tenant
Deciding who you will rent your property to will inform what kind of property you will invest in.
It is important to choose the right tenant. These are some factors you need to consider about your tenant:
- Their age
- Is it a family? (E.g. single family or two income family)
- What is their financial situation?
- What do they want out of a rental?
The type of tenant you rent to will affect decisions you make about decorating your property, where the property will be located and the type of property you choose. To secure the best tenants, perform a tenant reference check.
Is it worth renting to students? If you decide to rent in a student area, you need to be aware of the benefits and pitfalls of this. There will be a consistent turnover of tenants who will keep your property from sitting empty and generate cash flow. However, students can be unreliable and do not always treat the property well. Maintenance of the home may cost you more in the long term.
The Type of Property
The type of property you choose will dictate what kind of tenant you will have. If you invest in a HMO (house in multiple occupation) property, it will likely be occupied by tenants aged between 22 and 30. A four bed house will be well suited to families or, you can convert a house into several flats and have multiple tenants.
This depends on what kind of landlord you want to be. Do you want to be hands on or would you prefer to outsource to a letting agency? Consider your schedule and your expertise.
What is the Condition of the Property?
You need to think about how much upkeep your property will need. If you want to invest in a property that needs renovating, you need to take into account the amount of time and money a renovation will take. In the long term, you may be able to charge a higher rent which will be a better investment.
Choosing to buy a home that needs little upkeep will be better for landlords who wish to receive a passive income. Tenants will not require as much assistance and you will not need to be too hands on with your property.
The Tenancy Agreement
Creating a good tenancy agreement is fundamental to your investment. Seek legal advice before choosing a rental property. This contract will set out what is expected from your tenants and how you will be expected to act as a landlord so it’s important to get it right.
For a standard tenancy, ensure your agreement covers the following:
- A full inventory of the home
- Clauses regarding the deposit and when it can be withheld
- How you expect the tenants to treat the property
- When the tenancy can be terminated
If it is a HMO property then you may need a license from the council. Your property may fall under the general definition of a HMO but might be exempt from licensing laws. Seek legal advice if you are unsure if this applies to you.
Seek out a tenancy template that will help you draw up your contract and familiarise yourself with the relevant bylaws.
It is important to prevent void periods. Choose trustworthy tenants who will occupy the home for long periods and try to be an organised and efficient landlord. If a tenancy is coming to an end then be sure to advertise your property as soon as possible.
How to Market Your Property
Once you have bought a rental property, you need to be able to market it successfully. You will find the best tenants by thinking about how to market to them.
- Advertise the area your property is in and the benefits of that location according to what your desired tenant would be interested in. For example, a group of professionals are likely to be drawn to somewhere with good transport links for commuting
- How is your property decorated? Is it furnished? What kind of facilities are there?
- What is the length of the tenancy and how much will the rent be?
- Describe the property as accurately as you can
The easiest way to market a property is by using a letting agency. They will be able to do the work for you, such as arranging newspaper advertisements and showing prospective tenants round the property. Agents will also be in charge of collecting deposits and rent payments and drawing up tenancy agreements.
Using a letting agency does not mean you won’t be involved with the management of your property. You can choose how much work you want to delegate to an agency and how much you want to do yourself.
It is important to look after your investment. For help with your property, use No Letting Go inventory services. We can conduct full reports on your properties so you can be confident that your investment is secure. Browse our full list of services to find out more about how we can help.
For any budding landlords out there, you’ll be excited to know that No Letting Go will be attending this year’s National Landlord Investment Show!
Taking place in Manchester on the 9th October 2018, the show will be running for its 5th consecutive year, with industry experts giving seminars on a wide range of topics.
Here you’ll find an overview of the event and what you can expect to gain from it:
What is the Event?
The event is effectively a hub of valuable information for any upcoming or established landlords.
Running from 9am to 3.30pm, there will be a range of seminars covering several different topics, as well as a morning networking event being held prior (between 9am to 10am).
Here’s what you can expect:
- Hear from leading industry experts across 15+ seminars held throughout the day
- An opportunity to meet the team to help guide you through the process
- The ability to meet other prospective, alongside already established (and successful), landlords
- Gain valuable guidance and insight into the current industry trends
- A tour of the stadium (if you stay after 3.30pm!)
How the Event Can Help You
There will be many complimentary seminars taking place, being led by experts in the industry. This is the perfect place to keep up to date on industry trends in a face-to-face setting with those at the forefront of their field.
The structure of the event has been proven to help landlords maximise their property investments after networking with both professionals and peers. The morning preceding the event is a fantastic opportunity to share experiences and discuss local issues.
You’ll be privy to a lot of in-depth information which can only serve to improve your acumen as you move further forward in your career!
5 Top Tips for Landlord Investments
Keeping in the spirit of the event, here are 5 top tips for landlord investments which you may find useful:
Research the Market
Keep yourself informed on both the risks and benefits involved with each investment you go into. Make sure it’s an investment you’re absolutely sure of.
Use Some Outside Guidance
It never hurts to employ some outside guidance – an agent who’s an expert in property management will be able to give you advice on best practice regarding rent, maintenance costs and other areas of property management.
Find Good Tenants
It may seem obvious but finding the right tenants can make your life a whole lot easier. Finding tenants who are responsible and unlikely to cause problems means less money and time being spent on maintenance or chasing unpaid rent.
The next step is securing long-term tenancies!
Know Your Rights
Knowing your rights as a landlord is extremely important. Being well informed on both your rights AND those of your tenants puts you in a better position to avoid any potential legal issues (which can set you back significantly).
Make Sure You’re Covered
Make sure you’re thoroughly insured to avoid any surprise issues. Landlord insurance will cover you for a wide range of unprecedented problems, so don’t make any assumptions – make sure you’re covered!
There are a lot of challenges you’ll face as a prospective landlord – events like this can be extremely helpful. Our services can also help you face these challenges – you can find out more about these services here.