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Naming and Shaming Tenants

For some landlords it can be difficult to determine whether your prospective tenants are of good character and reliable when it comes to rent payment. Checking references is the more obvious solution to this predicament but you need to trust that the person and the information they are giving you is honest. Not only this, but a tenants previous good behaviour is not a guarantee that it will continue. With many people finding it difficult to secure a long term job, the property market has seen an increase in the number of people looking to rent.

This is good news for landlords but at the same time, it increases the risk of receiving financially unreliable tenants. However with the right landlord insurance, they can be protected from any unexpected problems which are not their fault. But even with this protection, there are calls for a trustworthy system that can help identify good and bad tenants.

Referencing Systems

Experian’s Rental Exchange programme provides a system that can support both landlords and tenants. It allows landlords and letting agents to see information on a tenant’s rent repayment history, thus giving them a truthful representation of their ability to pay rent on time. This subsequently gives tenants a better chance of receiving mortgages and a good credit rating – if they are prompt payers. Having paid access to this database gives landlords and letting agents increased confidence in their decision to let a particular tenant rent their property.

A similar service is provided by the Landlord Referencing (LRS) website. This community has around 20,000 members preventing any bad tenants from taking advantage of unknowing landlords. A tenant’s name and value of their rent defaults and property damage costs, among other things, can be published.

How Reliable Are They?

While these systems provide a great warning, others see it as a ‘tenant blacklist’ which eliminates the chances of these tenants finding a new home. Some tenants even argue they could be at risk of slander but the founder of LRS, Paul Routledge, is adamant his system is reliable. “The site is data controlled and we vet the information we are given. The site is basically to make sure landlords turn down tenants who left their last property owing rent or having trashed the place. We don’t just add tenants because they’ve been a pain, because they got orange paint on the carpet or owe £30, for example. They have to be pretty bad.”

For some landlords who have a storied history of troublesome tenants, advanced and detailed referencing systems like this are a relief. However it is easy to become too reliant on outside information and ignoring your own better judgment which, before the internet and data revolution, served most landlords well.

Renting is becoming a popular choice

For generations people have aspired to be a home owner. However, in the current climate evidence shows it may be a better idea to rent. In the past there was an expression of horror when anyone admitted to renting a property as though a swear word had been uttered.

To get on the first rung of the property ladder today, requires a minimum deposit of something in the region of £20,000 and unless a young couple can rely on their parents for help, it will be almost impossible for them to buy a new home. Both the recession and the stagnation of the housing market have meant that during the past three years the United Kingdom is increasingly becoming a nation of renters. Property prices may well be slowly falling, but they still remain out of the reach of the average wage earner, particularly now that the building societies and the banks have both tightened up their mortgage regulations.

For generations, everyone was told that an Englishman’s home was his castle. Even the Prime Ministers since the late 70s have all told us how home ownership should be the ultimate aspiration of anyone who seeks both social and financial stability. Margaret Thatcher had this belief when she introduced legislation in the 80s making it easier for anyone to buy their own council home. At the time she compared the business of government to running a household.

There was an attraction to owning a home as it gave a person a stake in something bigger as well as a sense of self respect. We were even encouraged in the love affair with bricks and mortar by endless programmes on the television that tempted us to greater excesses with the allure of home improvements. Times have changed and renting is not the taboo that it used to be. There are those who still believe that renting is throwing money down the drain as there is no return on it, or being in the trap of paying for rent and bills and not having any money to save for a deposit to buy a house.

On the plus side, the landlord who will have landlord insurance will be responsible for all repairs, maintenance and decorating. It is also much easier to move when renting compared to owning the house. Unless the current climate changes, renting is set to become even more popular.

Low interest rates here to stay?

With the latest predictions of low interest rates being with us for years to come, landlords will be wondering what exactly the future holds for the residential letting sector.

Ernst and Young, a leading UK economist group and sole sponsors of the Independent Treasury Economic Model (ITEM) club, are predicting the current Bank Rate of 0.5% will be staying with us until 2014.  The prediction is based on the present government holding firm on its commitment to spending cuts of around £40 billion and the loss of jobs that will go with it.

Although inflation is still way above the Government targets of 2% and the end of year increase in VAT threatening to push it higher still, the group feel the spending cuts will then kick in and push inflation closer to 2%. A relief then for the Governor of the Bank of England who will then be able to stop writing letters to the Chancellor of the Exchequer explaining exactly why inflation is above government plans. Not for long though, as interest rates will then have to stay low to stop the nation slipping into deflation.

With interest rates staying low and new borrowing rates remaining high, one can only anticipate home-owners without a big deposit will stay exactly where they are. Several mortgage brokers are reporting a good increase in loan enquiries but from personal experience, a lot of these enquiries will fall by the wayside when prospective home-buyers realise the interest rate on a new loan will be much higher, compared to the tracker mortgages they already have. This perhaps is confirmed by reports showing a fall in prospective buyers registering with agencies.

The result could well be house prices start to slide again; already one report is showing prices have fallen for the first time in over 12 months, Hometrack, the property data company, reported a 0.1% fall in June. If that is the case then the buoyant rental market could be here for some time yet, giving ambitious landlords, with an eye for a bargain, more reason to spend time looking for cheap landlord insurance to cover new properties they are willing to invest in.

Getting a fridge freezer for your rental property

As any landlord will know, there is always a thin line to tread between profit and fitting a rental property out well enough to attract the type of clientele you are looking for. Always be on the look out for a good deal, whether it be cheap landlord insurance that fits your needs or replacing white goods that not only look good but do the job . The old fridge freezer in one of my properties died quite suddenly after some 15+ years of service so I had to find a new one quickly. I did a little research and plumped for a Beko CDA543 Frost Free as a replacement. It came in at £320, which included delivery and turned up at the apartment within 3 days which for an online store is quite good.

With a rental propery you’ll want to consider more than just the price – although this particualry product wasn’t the cheapest product available, it keeping with the rest of the kitchen for the tidy apartment it was needed for. The space available was only 60cm wide so it fitted well being 54.5 cm wide and makes efficient use of the space. The tenant was keen to have plenty of freezer space so four freezer drawers made him more than happy. Be very wary of trying to economise by providing a fridge with an ice-drawer only, as few tenents want to buy their own white goods, and thus expect all their basic requirements be already catered for. A further consideration is maintenence – you can’t guarantee that a tenent will look after your facilities well, and thus would be wise to install goods that self-maintain easier – the frost free feature of this product was particulary useful.

The fridge has 4 good sized glass shelves so there is plenty of room for cool air to circulate around your food.

There is a full width salad drawer at the bottom, which is ideal for storing items like rhubarb and leeks without having to cut them down.  In some models this drawer can be difficult to get out because of the door shelves but Beko have designed it with rounded rear corners so you can slide it out at an angle – easy.  There is ample door storage too including an egg tray.

Overall I am very pleased with my purchase and it is a rated as an added bonus. As with any rental property, landlord insurance should be a consideration to protect your investement.

Best Practices for Landlords Obtaining Tenant References

Before you let your property to new tenants, it’s in your best interest to obtain references for your them. This will help you to avoid any potential risks – e.g. tenants who have defaulted on the rent before, or damaged properties which they have lived in previously.

Additionally, some Landlord Insurance policies may be rendered void if you let to certain types of tenants -  as such, obtaining thorough, accurate references from your tenants is essential, as if you do not, it may affect your ability to claim on your insurance policy.

Below are 5 best practices to use  when obtaining references for your new tenants:

1) Previous Landlord Reference
Do you know what the person looking to rent the property was like as a tenant previously? Can their previous landlords give them a good reference in terms of regular payments and property maintenance? Were there ever any problems with the tenant during their tenancy period? Furthermore, how long has the tenant been renting for? Are they new to renting or do they have a long history in renting a property?

2) Work References
What is the prospective tenants employment status? Are the prospective tenants able to provide you with work references to validate their employment status, income and employment history?

3) Proof of Income
Can the prospective tenant provide you with income details? Ideal references to check would include wage slips and bank statements. You could then verify the payment consistency along with their working references to show that they have a stable income.

4) Identification Reference (ID)
Are you able to verify that they are who they claim to be? Ideally you need to see a form of ID from a registered authorative source or organisation. Examples include:

- A drivers license from the DVLA

- National Identity Card or Passport

5) Guarantor
In some instances you may want your tenant to have a third party guarantor who you can deal with in the event of rental default. An example of a guarantor may include a family member.

Whilst these best practices go some way to protect yourself against lettings risks, landlords might also consider obtaining additional insurance cover on their property. Rent guarantee insurance will cover you in the event that your tenant is unable to pay their rent, and rent loss insurance will cover you in the event that your property becomes uninhabitable – e.g. as the result of a fire or flood.

Click here for a competitive quote on your Landlord Insurance.

Rent Loss and Rent Guarantee Insurance Explained

Rent policy cover should be considered if you are leasing out one of your properties to protect you from any threat that may affect your property. Below, we have provided a simple explanation on the types of cover options available.

Rent Loss Insurance Explained

Rent loss insurance refers to the loss of rental income or rental value due to property damage caused by an external hazard that leaves the property unsuitable for habitation.

Rent Guarantee Insurance Explained

Rent guarantee insrance is a type of insurance cover that protects landlords against the threat of losing rental income whereby the tenants default on their rental payments.

When a policy is taken out, a premium is paid which is approximately 3-5% of the total rental income received. There is usually an excess that will need to be paid on most claims. Some policies also offer cover for any expenses associated with eviction.

The majority of insurers will only let you obtain rental guarantee insurance once the tenant is comprehensively verified.

Why Is It Important To Take Out A Rent Insurance Policy?

If you have a mortgage on a property whereby the primary source of paying off the mortgage is from your rental income, it might be in your best interest to have ’Rent Guarantee’ insurance. This policy protects you against the loss of rent from tenants that refuse or are unable to pay the rent as agreed in your rental contract.

Landlords should also consider taking out a ‘Rent Loss’ insurance on their property to protect the landlord against the threat of rent loss due to the property being left in an uninhabitable state from external hazards. Some policies can cover the landlord for up to six months if their property is subject to uninhabitable living conditions. Examples of potential causes include:

- Malicious damage
- Flooding
- Nuisances or Tresspassers
- Civil action events that cause damage to the property

Who Is Entitled To Apply For These Types Of Policies?

1.  An Individual

2.  Property Owning companies

3.  Property Management Companies

4.  Residents Associations

What Are Some Of The Factors That Affect the Price of Your Premiums?

Typical factors that would affect the premium for the rental insurance policies include:

Property location
The postcode for your property will affect the premium you pay based on the amount of risk that is associated with the area. (For example, flooding.)

Insurance sum
The premium amount for the property will be based on the rebuild cost associated with the structural rebuild cost of the property. Furthermore, other things to consider when insuring your property is whether your property is a part of  a block, conservatory area or a listed/heritage building.

Types of tenants
If the property is being used for sharing options such as a house share (HMO’s) or for those claiming Housing Benefits, the price of your premium will generally be higher.

If you as the landlord have a history in large or multiple insurance claims, the price of your premium will be affected.

Vacancy periods
How often is the property vacant within the area and for how long?

What Are Some Precautionary Measures That I Can Take Against My Property Whilst Letting It?

Some measures that landlords can take include:

  • Reference Checks – Check up on the references that are provided and find out about the credibility of your tenant and their tenancy history.
  • Sizeable deposit – Get a suitable deposit to cover for any loss of rent or damage to the property.
  • Payment facilities – Set up a payment account in the form of a direct debit.
  • Set expectations – Let your tenants know what you expect from them and the guidelines that they need to follow whilst they are letting out your property. Furthermore, let them know the consequences that they face if they fail to abide by the guidelines that have been stated.