Tenants
Now you have the Landlords and the properties, what about filling them? Easy right? Certainly not.
You only have part of the jig saw, you need the right tenant in the right property. We all want an easy life and by not doing the basics right, it could lead to more trouble than it’s worth
How to find tenants
This will depend on what type you are trying to attract. Since we started Castledene over 2 years ago, pretty much every tenant that has come through our doors, we have asked how you came to hear about us or where did you see the property you want, advertised.
You will be surprised to hear that only 28% saw it on the internet and 65% saw it in the paper or a “To let” board. The remainder were told about it or phoned up on the off chance etc.
We find that, our type of tenants, are best found in traditional paper advertising but why? You have to understand your target market. At Castledene, our bread and butter property is the investment property and our investors want the best return they can get. LHA rents are higher (even after the cuts in April) than professional in our area and that is if you can get a professionally paying tenant to live in an investment property in the first place.
Once you understand your target market you can start to see where they would look for properties. Most of our tenants get a “free paper” of some sorts every week, with quite a large property section, these normally come out towards the back end of the week in most areas and i guarantee that on Thursdays and Fridays our phones ring off the hook.
Now internet advertising does have its place and we do subscribe to the main property portals and ill cover those later in this article, just don’t be fooled into using these companies that use 100 property portals and think you will find a tenant IF your target market is at the lower end. Despite what the government and these companies are telling you, not everyone uses the internet, it’s simply not true, although subscribing to the main ones is recommended.
Advertising in the paper is expensive, especially if you advertise in several papers on a weekly basis as we do. However you do need to advertise every week, if you can afford it, in order to get the trusted response from the tenants. Our response rate, since we stepped up are paper advertising has been tremendous and has easily paid for the additional costs.
Internet portals
Internet portals do have their place and are extremely useful. One of the agencies we recently acquired deals with higher end properties and mostly professional tenants. This agency gets most of its tenants via its website and also the main property portals or Rightmove, Find me a property and Zoopla. The type of tenant they are aiming for DO use the internet (apart from LHA tenants who seem to use it for facebook)so do place more emphasis on the internet to find properties. Since we took over in August we have not got enough data to give a true representation of the percentage of tenants searching on the internet but so far around 80% look on the Internet to find a tenant either on our website or the property portals we use.
The main property portals that we use, collectively have over 76% of the internet portal market. There are other ones but they are so small and not well known so in my opinion not worth using. Yet again it comes down to return on investment, time putting properties on the portals being the investment against the leads you get from it. We have used them in the past but get very little from them.
So you have to make a choice, and its always going to be based on cost and benefit. Do i spend money on these property portals or on paper advertising or both. There is no magic formula and what works for us might not work for you. It will be a learning process, but all i can say is do the market research. When a tenant phones up ask how they heard about you, its imperative you know what works and what doesn’t. It will save you money in the long run
Non traditional Methods
Due to the type of properties Castledene manage we employ some tenant finding methods less well known. We have links to several charities and homeless organisations around the North East and if we have any properties that are in less desirable areas, we work with these charities to find a suitable solution. These organisations more often than not, offer bonds and other securities, against rent or damage. Its obviously horses for courses and we only use this route if the traditional methods don’t work. Some of the investors we are coming across have been terribly mis-sold properties back in the day from unscrupulous sourcing companies and have bought real “dogs” in rough areas, so we have to consider all methods to get the property back in use. Don’t forget whilst they are untenanted, the landlord is responsible for council tax, service charge on utilities and the property is open for vandalism.
We also offer incentives to existing tenants if they can put us in touch with family or friends looking for a house and they pass our checks etc. If we have an empty house, we will also introduce our self to the neighbours and see if they know anyone who may want to take the property. This works extremely well as it not only gets the neighbour to act as a temporary security guard as they now know you and put a face to the company name but also they are trying desperately to find a tenant as they are now in control of who they get as a neighbour, plus they earn a little for doing it.
The Paperwork
As with everything in business, paperwork is of paramount importance. As a letting agent the more you know about your tenant the better. Not only does the landlord want an easy life as in the tenant stays and courses no trouble but also as a letting agent you want a well behaved tenant who pays their rent on time. We don’t get paid any more for visiting the tenant or for phoning them up asking them to behave. So the initial selection process is important for both Landlord and Letting agent.
Vetting and References
When dealing with LHA tenants the traditional Credit checks are not the ideal tool to use. The majority of tenants, who we have come across, that claim housing benefit have in some point in their life had bad or poor credit and this will come back on their credit report and they will fail, so as an indicator of how good they will be as a potential tenant, its not ideal.
One of the more appropriate methods, which i highly recommend is ask for Landlords references. Ask the previous Landlord by all means but also ask the landlord before that as they are more likely to give a true representation of the tenant. The previous landlord might say anything you want to hear so their tenant moves into your property. You could ask for a full housing history from the tenant and ask the council and ask the neighbours and ask everyone else who ever knew the tenant but whilst this is going on the landlord is losing out. Don’t forget, this is at the lower end of the property ladder so the chances of you getting a doctor or lawyer wanting to live in a 2 bed house in “Billy Elliot” country are pretty slim. The likelihood that once you say no to this tenant the next one will fall down on your “extensive checks” for the same reasons.
Bonds and Guarantors
This is another part of the business that is horses for courses. We have several agents in our area dealing in the types of property we do, that say tenants MUST have a bond. Guess what? Their properties are still empty. As an agent it’s our job to get a suitable tenant into the property so that the Landlord gets the rent to pay his mortgage. By making it difficult to match a tenant to a property its the landlord who suffers. I don’t mean put any drug addict in a property, we all have procedures to follow, and if you don’t you should, but we have to be flexible and more importantly realistic.
At Castledene we don’t take bonds unless instructed by the Landlord, which is almost never, we always give the landlord the choice though. What we do ask for is a home owner as a guarantor. We need to meet the Guarantor, visit them at their property as we do with ALL our prospective tenants, and also ask for a copy of title deeds for the property they own or a solicitors letter confirming this. We explain the guarantor agreement fully explaining that they are fully responsible for arrears or any damage. We used to ask for a guarantor in full time employment, but quickly realised that if they lost their job, some are in no rush to get another one and they are basically useless as a guarantor. By having a home owner guarantor and explain the seriousness of it, in our experience they are more reasonable when it comes to paying of rent arrears. We have NEVER chased a home owner guarantor and not got a payment plan in place.
At the “higher end” agency we have, we ask for 1 months rent up front and 1 months bond AND a home owner guarantor but we have great success with it. We can afford to ask for those things as the properties we manage at this agency are the higher end and attract professional tenants with more money
The Inventory
One article i recently read was that 95% of inventories will NOT stand up in court if challenged for very simple reasons such as no photographs, not signed, photographs were not date stamped, hand written inventory that could have been done any time. We have introduced a “tablet” inventory system that you can take date stamped photographs, complete a template inventory and get the tenant to sign for it there and then. You can then download the inventory and a comprehensive report that independent solicitors have said they would go to court based on it. We are fortunate never to have to go to court to present it, but its a comforting thought that should the situation arise we are covered.
Hope these articles give you an insight into setting up and running a letting agency and the potential pit falls you may face. It is hard work but also a lot of fun and if done correctly can be financially beneficial. If you have any comments or queries about this or any previous articles please contact me on john@thecastledenegroup.com Don’t forget to follow me on twitter and facebook.
John has recently opened an agency in Halifax and one is planned to open in Leeds in April, if you have any properties in those areas and would like to talk to John about managing your properties please get in touch.
This article appears in Your Property Network Magazine, April 2011
