Rent arrears are a landlord’s worst enemy. No matter what you do as a landlord, there is always the potential for tenants to miss payments or to find themselves unable to make them. Fortunately, there are some things that you can do as a landlord to protect yourself against the problem of rent arrears.
Check References
Every landlord asks for references, but some are better at checking them than others. In fact, a lot of landlords don’t bother to check references at all. Checking references is a quick and simple process and enables you to instantly weed out the most problematic tenants. When you consider the time involved compared to the time you could potentially save yourself in the long run, checking references is an obvious thing to do.
Vet Your Applicants Beforehand
Checking references is a good start but there are other checks that you can and should carry out. For example, checking into the financial and credit history of your applicants will alert you to any that are likely to default on payments and leave you holding the bag.
Get a Guarantor to Sign the Lease
A guarantor is someone who agrees to pay the tenants rent if they fail to for any reason. Adding a guarantor to a tenancy agreement can enable landlords to take on tenants that they would otherwise pass over and also gives people with a poor financial history a chance at finding a stable home. If you are unsure about a tenant, ask them about adding a guarantor to a loan.
Investigate Local Rent Guarantee Schemes
Guaranteed rent might sound too good to be true, but guaranteed rent for landlords is possible thanks to landlord rent guarantee schemes. These rent guarantee scheme for landlords involve leasing your property either directly to a local authority or to a third-party who works for a local authority. By letting to a housing association with guaranteed rent, or to a local authority, you are in effect receiving government-backed rent.
Unsurprisingly, a growing number of landlords today are buying a flat with rent guaranteed thanks to a rent guarantee scheme. The rent guarantee for an apartment rental can make a buy-to-let apartment a much more attractive purchase for a prospective landlord. If you have always thought “I would love to rent my house with guaranteed income” then rent guarantee schemes make this a reality.
Get Rent Guarantee Insurance
Rent guarantee insurance is different from the rent guarantee schemes outlined above but it is designed to serve the same purpose. Rent guarantee insurance protects landlords when their tenants fall on hard times and are unable to keep up with their rent payments. Even if you carefully vet your tenants or use an outside agency to do so for you, there are always going to be circumstances beyond your and your tenants’ control. Rent guarantee insurance keeps you protected when this happens.
You won’t ever be able to eliminate the possibility of rent arrears entirely. However, you can reduce their likelihood and the impact that they have on your finances. Stick to the advice above and you will have at least some protection from arrears.