Strategies to get and keep the best tenants and maximise buy-to-let profits
Residential investment property owners have several common issues. One of these is the cost of tenant turnover. However long the void period, getting a new tenant is expensive. If your tenants are constantly changing, it is probably down to one of three reasons.
In this article, we discuss those reasons and the strategies that will help keep your tenants for longer and reduce the cost of tenant turnover.
The cost of tenant turnover in residential investment property
Every time a tenant leaves your buy-to-let property, you’ll need to replace them. It means a heap of costs:
- You’ll have to market the property.
- You’ll need to vet prospective tenants and check their backgrounds with employers and previous landlords.
- Then there’s the tenancy agreement to write – best you get this checked by a solicitor experienced in residential property investment. If you don’t, you could find it’s not worth the paper it’s written on.
- You’ll need to make time to conduct viewings and tenant interviews.
According to ARLA, the average letting agent fee charged to tenants to cover the above is £202. According to Citizens Advice, tenant’s letting agent fees can be more than £1,000. If you must bear these costs (which is possible under government proposals to ban letting agent fees to tenants), the expense could run to hundreds of pounds per tenant change. It is before the cost of tenancy voids is considered. Then you’ll have the costs of repairs and cleaning to get the property ready to re-let.
In short, a high tenant turnover rate could destroy your buy-to-let profitability.
Why do landlords suffer high tenant turnover?
Tenant turnover is inevitable. People’s lives change. Your tenant may be offered a promotion which necessitates a relocation. They might be expanding their family. These reasons are out of your control. They happen. But you’d have to be very unlucky for them to happen consistently.
If you find your tenants are leaving your buy-to-let property regularly (every six to twelve months is certainly unacceptable), then the problem probably lies elsewhere. Either:
- Your tenant-finding process is flawed; or
- Your property is substandard; or
- You’re a terrible landlord.
Strategies to reduce tenant turnover
Once you’ve accepted that a high tenant turnover is most likely because of one of the three reasons above, you can put in place the strategies to slash the rate at which your tenants leave your properties.
Vet your tenants properly
It’s imperative that you get the best tenants, and this means conducting vigorous tenant vetting. You’ll need to use the best methods of finding tenants, and then make all the background checks needed.
Beware of sites that allow you to advertise your property for rent free of charge. Professional rogue tenants tend to target these sites – they know the investor is trying to cut costs and bet that proper tenant vetting procedures won’t be followed. The checks you should make on prospective tenants include:
- Employment history – contact their employer to confirm they are working. It’s unlikely the employer will tell you more than this.
- Tenancy history – contact previous landlords, and ask of their experience with the tenant. Be wary of what you are told by their current landlord (it could be that they want to get rid of the tenant). Prior landlords are usually forthcoming about any potential problems you might have.
- Credit check – you will want to know that the tenant has a good credit history, and especially that they pay their bills on time.
Write a watertight tenancy agreement
The tenancy agreement should reflect everything that you have discussed with the tenant. It might include your policy on pets, rent review processes, and tenant and landlord responsibilities. Other essential conditions include:
- Details about the deposit, and circumstances under which it can be withheld (e.g. damage, property loss, and cleaning costs).
- What bills the tenant must pay.
- Tenancy break clauses.
- Conditions on lodgers.
You can buy an ‘off-the-peg’ tenancy agreement from stores such as WH Smith. My advice is to resist the temptation to use such paperwork. UK property law is in constant flux. Off-the-peg tenancy agreements are out of date almost as soon as they are put on the shelf.
Don’t be tempted to write your own agreement, either. If problems arise and you need to go legal, the chances are that you will be laughed out of court.
The cost of an experienced solicitor is worth every penny when it comes to tenancy agreements.
Make your tenant feel at home and welcome
Your tenant may be moving into a new area, as well as a new home. Make them feel welcome:
- Ensure the property has been professionally cleaned, and that there are no belongings from the previous tenant left in the property.
- Ensure the garden is tidy and pruned, with the grass cut, too.
- Clean the windows.
- Make certain that all minor repairs and other issues have been taken care of before the tenant moves in.
Provide a welcome pack, too, detailing useful information such as:
- Direction to local amenities
- Utility information
- Appliance instruction manuals
- Refuse collection schedules
- A neighbourhood guide
Include a tenant’s pack with a copy of the tenancy agreement, emergency contact details, and how to report any repair or maintenance issues. You may also want to include details of what your landlord insurance covers, and what insurance the tenant should take themselves.
Conduct regular property inspections
You must conduct regular property inspections. There are rules with regards to these. For example, you must get the tenant’s permission to enter the property. Always make certain that the time you inspect is convenient for your tenant.
While inspecting, compare the current state of the property, appliances, and fixtures and fittings against the property inventory. If there are any maintenance issues that need attending to, arrange to do so. And ask the tenant if there is anything else you can do for them.
Employ an investment property manager
Finally, instead of taking all the above on board yourself, why not hire an investment property manager to do the legwork for you? They are the professionals. They are used to dealing with tenants – and boy, some tenants can be difficult!
An experienced investment property manager will have strict tenant vetting procedures in place. They’ll know the questions to ask, and they will probably have a list of potential tenants on their books. You’ll probably suffer a shorter tenancy void and get a better quality of tenant.
Because it’s their business to keep your property tenanted, an investment property manager should have in place all the bells and whistles to ensure regular property checks are undertaken. They should have a tried-and-tested system for repair reports and keep in touch with both you and your tenant.
Using a good investment property manager should ensure that you get the best tenant and that the tenancy agreement is up to date and legally binding. They will arrange to inspect the property regularly and ensure that maintenance issues are alerted to you and taken care of promptly. Instead of the hard work of being a landlord, you get to enjoy the rewards of being a property investor as you benefit from effortless property management.
In short, whether you hire an investment property manager or take the DIY landlord route, give your tenant a good customer experience. Do this, and your tenant will be more likely to stay on your property, and you will maximise the profit from your residential investment.
Want to know more about effortless property management, and how to reap the rewards of property investment without the hard work of being a landlord? Contact one of the Gladfish team today on +44 (0)207 923 6100. We’re here to make investors’ lives easier.
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