LESSON 2 - Vetting & referencing your tenants

Once you have a set of tenants that you are happy with. Then you will need to vet and reference them to make sure they are not the tenants from hell.

You should always credit reference your tenant to make sure that they are not serial debtors.

A landlord should obtain an employers reference as a way of ascertaining their affordability of the rent. For example how will a tenant on twenty grand going to be able to afford to pay a rent of £1000 per month? This should set a landlord’s alarm bells ringing.

A great tip!

If you really want to ascertain the credit worthiness of your tenant – ask them for their last 6 months bank statements. This will immediately give you a great insight into your prospective tenant’s real financial circumstances. If they refuse – the chances are that they hiding something and you will be best off without them. Look out for irregular payments or excessive credit card payments. This could indicate a tenant is over leveraged and is struggling with too much debt or even a gambling problem. This isn’t going to be good news for the regular payment of your rent.

Do I need bank references?

Some landlords look to get a bank reference. To be honest it’s not worth the effort. Getting info out of the bank is like extracting blood from a stone. When the reference does arrive it will be couched in such no committal tones that it will not tell you anything about the tenant. Use instead my tip on the bank statements. This will be far more revealing!

A landlords reference will perhaps add a little bit more background about your prospective tenant but don’t necessarily rely on its’ accuracy. The reference may sing the praises of the prospective tenant. This may reflect their suitability. It may also be a sign that their existing landlord is dead keen on getting rid of them!

Landlord insurance