GL #1: What makes a good tenant?


Suzanne Smith and Richard Jackson kick off this new podcast by discussing with what’s important to any business: our customers. And for landlords, that’s our tenants. For their inaugural episode, they talk about what makes a good tenant and what our red and green flags when we look for tenants. 

This is an introductory episode on good tenants, focusing on affordability and what to look out for. Richard and Suzanne cover tenant selection and the application process in detail in GL #2: How to select good tenants.

>> Submit a question for Suzanne and Richard: Click here for question form

4 good tenants abotut to enter a front door

1. What is a good tenant?

With the Renters Reform Bill turning tenancies into longer term relationships, it’s important for landlords to be very careful when choosing tenants, even if they use letting agents.

But what is a good tenant? For us, a good tenant has the following basic attributes:

  • Affordability: they can afford to pay the rent – it’s never going to end well if they live beyond their means and can’t afford the rent.
  • Responsible: they will look after the property, let you know when something needs fixing, and comply with the tenancy agreement.
  • Long-term: they want to live in the property for a long time, keeping your voids and re-letting costs to a minimum. Choosing someone local or with a good reason to live in the area might point towards them being long term tenants.

That’s all well and good in theory, but what does it actually mean in practice?

2. What does affordability mean?

Affordability means that the tenants can afford to pay the rent out of their net income and any benefits. The received wisdom is that tenants need to have an income of at least 2.5x the rent. However, this is quite tight, and depends on their spending habits. We’d ideally like more than this, say 3 or even 4 times the rent as an ideal. It’s easier to meet the affordability criteria if there are two tenants with an income.

We also look for renters with stable jobs, outside of a probationary period. LinkedIn is useful to seeing how often the people move jobs, and Facebook is useful for showing what they spend.

The implication of the Renters Reform Bill is that landlords are likely to be more conservative when it comes to choosing tenants who have an adverse credit history, with previous CCJs or IVAs.

Many landlords take out rent guarantee insurance on their tenants, and to do this, the applicants need a good credit history.

3. Why landlords should ask to see applicants’ credit report even if they use agents

In view of this long-term relationship between the landlord and tenant, the landlord should look at the credit report before making the decision to go ahead with one of the candidates, so they know if there are any adverse entries on the report, which the agent might not disclose.

Sometimes letting agents are reluctant to share the credit report with landlords. However, from a legal perspective, the landlord is the “principal” and the letting agent acts on behalf of the principal. So long as the landlord is registered with the Information Commissioner’s Office (it costs £35 – see below for more details), the letting agent cannot refuse to hand over the credit report. Of course the landlord needs to store the report securely and have a privacy policy, but it is wrong to say that landlords should not see credit reports.

This is part of a wider theme that landlords can’t “let and forget”. They still need to be actively included in the decision-making, even if they use agents. And landlords need to be know their rights when it comes to dealing with agents.

>> Related podcast episode: GL #4: Tips for signing up with letting agents

4. What are green flags when choosing tenants?

Here are some examples of the sorts of things that we see as green flags when looking for tenants. None of them are conclusive, but help to build up a picture of the applicant’s suitability.:

  • Good reason for leaving current home.
  • Good reason for wanting to live in this area.
  • Presentable, turn up on time, polite and not overly familiar.
  • Ask good questions about the house, maintenance and area.
  • Good employment history
  • Their household isn’t too big for the property.

5. What are red flags when choosing tenants?

These are the sorts of things that make us think twice when we’re choosing tenants. Again, it’s important to look at red and green flags in the round, as none are conclusive on their own:

  • Previous history of rent arrears without a good explanation.
  • Poor credit history, especially if they have CCJs, and they don’t have a good reason for them.
  • Paying a large amount of rent upfront when they are a working professional, without a very good reason.
  • Asking to sub-let or do a “corporate let”, which is rent-to-rent. (I want all adults to be joint tenants on the tenancy agreement unless they’re a full-time student living with, and don’t allow sub-letting).
  • Frequent job changes without a good explanation.
  • Being cagey about giving landlord or employer references.
  • Unexplained gaps in rental history that appear in the credit report which they never mentioned.
  • Lying or misrepresenting something to you (eg lies when they say no previous rent arrears or CCJs).
  • Being overly interested in the cellar or attic (it can be a sign they want to set up a cannabis farm).
  • Wanting to pay rent upfront without a very good reason.
  • Needing to move in urgently.
  • Being generally pushy.
  • Wanting two households in a single let in an area with additional licensing, making it an HMO.
  • Overly and unreasonably demanding during the viewing or after.
  • Reacting badly when told about six-monthly maintenance checks.
  • Reacting badly when asked questions.
  • Shouting and swearing at their children.
  • Evasive about their pets. (Most pet owners are only too happy show off photos on their phone of their adored pets!)
  • Making racist comments.
  • Being rude about the neighbours or the area generally.
  • You feel uncomfortable with them.

6. Golden nugget

It’s really important to choose the right tenant, even if this means having a void. It’s best to wait for the right tenant, than to rush, as the wrong choice can cost you more in the long term.

Next week’s episode

In next week’s episode, we share the processes that we both use to screen and select tenants, sharing tips about how they go about selecting good tenants the right way, without falling foul of the law.

This includes the tenant application forms we use (which you can find in the Resources section below as well), the rules on holding deposits, what selection criteria you can and can’t use for tenants from a legal perspective, and how to vet tenants. 

Here is a link to next week’s episode: GL #2: How to select good tenants.

Resources

>> Alphaletz: Tenant application form

>> The Independent Landlord: Tenant application form

>> Join: The Independent Landlord Community Private Facebook Group (landlords only)

Credits

Music: “Paradise Found” by Kevin MacLeod of Incompetech. Licensed under Creative Commons: Attribution 4.0 License.

Group of young tenants about to enter into a door of a rental property

4 thoughts on “GL #1: What makes a good tenant?”

  1. Fantastic, practical advice and sharing experiences that actually resonated with me. There were golden nuggets ALL the way on this podcast. Well done.

  2. Really enjoyed the first episode. Its reassuring as a fellow landlord that I agree 100% with your thoughts on this subject. Thanks

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