Protect you BTL assets (Part 1)

Part 1 – Why you need References, Guarantors and Deposits.

Whenever letting a property, as a landlord you should always fully reference your prospective tenants and take a security deposit – before handing over the keys. Referencing a tenant means conducting credit checks, employment and previous landlord checks - where applicable. However, in these times of economic uncertainty it is also advisable to seek a ‘home owner’ guarantor – especially for some sectors of the rental market.
Landlord and Employer referencing can tell you a lot about a person’s character and habits, and credit checks can tell you a lot about a person’s financial position - but as we all know this can change very quickly in this economic climate.
Even if the references are satisfactory, you will still need to ascertain any risk in letting the property to them. This is more difficult to judge and usually where a guarantor comes in. I usually ask for a ‘home owner’ guarantor (in addition to the deposit) if the tenant is under 30 (this is usually their parents), a student, in receipt of LHA or earns less than £20k. In my experience this is sufficient to prevent any problems arising during the tenancy. No level of referencing is 100% watertight - but in the event of a tenant going off the rails, a guarantor may step in earlier to resolve any problems on the basis they would want to reduce their own liabilities.
Deposits are also key to protecting your property against damages. All landlords will be aware that they are responsible for the maintenance of the structure and services to their property but it can be difficult to control how the tenant treats the property internally. Regular inspections should identify any issues early on but a deposit is the financial security that should cover the cost of any damages - caused by the tenant during the tenancy. In the rare event that the deposit doesn’t cover the damages you will still have the guarantor to fall back on.
It takes time, money and effort to follow these procedures correctly but good management involves high levels of skill and time commitment to minimize the risks associated with letting property. Sometimes it is simply more economical - when weighing up all the factors - to outsource the management to a reputable regulated agent. The benefit of outsourcing these management functions is a lifestyle choice that for many, definitely outweighs the costs.

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Your questions answered by specialist Letting and Management agent Richard Pennack. Managing Director of iQ Property (Hull) ltd and a member of ARLA. Specialising in Residential and light commercial property Lettings, Management and Investments. www.iqpropertyhull.co.uk