Many landlords make the mistake of skipping out on tenant reference checks when renting out their properties. However, this can actually lead to problems later down the line if they should find themselves letting to a rogue tenant. It might seem like an extra bit of faff, especially if you get a good vibe after meeting them in person during the viewing stage, but it’s well worth your time to do tenant referencing. Here’s why.
The sad reality is that not every tenant turns out to be a good one, and many experienced landlords will have come across the odd rogue tenant or two in their time managing an investment property. The trouble is, it’s so hard to tell what a new tenant will be like until they move in, which is often too late.
The signs of a rogue tenant aren’t hard to miss. If suddenly their rent payments start to become increasingly erratic and unreliable or have been left unpaid for months on end, this is a sure sign that there are likely to be some challenges ahead. Also, if there is damage to the property or your neighbours start complaining, it’s not hard to do the maths. You should use this as your wakeup call – if things continue down this road because you could potentially be dealing with a nasty eviction dispute.
The simple and painless process of referencing your tenants before they move in will help you sort out the honest and reliable tenants from the rogue ones. The tenant referencing process will typically include a reference from a previous landlord, which will highlight if a potential tenant has a history of bad behaviour, and provides landlords with some background knowledge when they’re choosing a future tenant.
There are a few different components to a decent referencing check. Here’s a quick look at the key elements.
Checking somebody’s credit history is an important part of deciding whether they’ll be likely to pay their rent in full and on time, which can be a common headache when letting to rogue tenants.
A full credit check should give you a rough idea of how much disposable income the tenant has, and therefore if they can afford the rent of your property. It will also cover any history of late payments on relevant credit criteria. Depending on the credit reference agency, this might include phone bills, gas, electricity and water bills as well as credit cards and potential loans.
You also want to look out for bankruptcy filings and active CCJs as these are common red flags that the tenant will be unreliable.
As part of the tenancy process, you should ask your tenant for the contact details of their previous landlord to run a landlord reference check. However, depending on the tenant referencing service you are using, the landlord reference might be done by the company, so you won’t need to worry, just sit back and try to relax as you wait for the results to come in.
If you speak to a potential tenant’s previous landlord, consider asking these questions:
If all is well and you are satisfied with the information then wait until the rest of the tenant referencing results come through before you make your decision to let to them. However, if this conversation has highlighted any red flags, then you can either wait until the rest of the tenant referencing checks come in to give them the benefit of the doubt, or you can decide to let your property to someone else.
The important thing to remember is that you, the landlord, are ultimately responsible for the tenants that you are letting a property to, so if at any time you’re feeling unsure about a prospective tenant, then it’s advisable to trust your gut and let them down gently.
It’s important to check that a tenant can afford to pay the monthly rental costs for obvious reasons. If they are on a full-time salary, then this should simply involve a quick conversation with their employer to ensure that they are paid the amount that they have told you.
If they are self-employed, however, you may need to request invoices and bank statements from potential tenants in order to ensure the amount of money they have coming in is enough to cover your rent price.