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HOW TO PROTECT YOUR INVESTMENT? Part 1

The protection of your property investment is at the forefront of our priorities. The primary obj...

The protection of your property investment is at the forefront of our priorities. The primary objective is not only to keep ongoing costs of your investment property down but also to maximise long terms gains. Firstly, and arguably your most important defence is tenant selection. Being very thorough in who you allow to take up residence in your property is one of the most critical aspects of your investment. Poor tenants selection can easily result in unpaid rent, property damage or even expensive legal bills. Our first recommendation is that you utilise a high quality referencing agent. Lettings agents with an established business and sound legal backing are able to this service when finding you a tenant but be sure that you are getting a thorough service. Over the years, we have seen that an applicant tenant with a tainted credit rating will avoid approaching landlords through the better agents and prefer to look in the classified columns of free newspapers. Note, that this referencing process should not cost the landlord anything at all and should be covered by the tenant charges. Any references taken up should include;
A Credit Check
Be sure your future tenants does have a history of not paying their bills. A thorough credit check will show if your tenants have any CCJ’s IVA’s or Bankruptcies and if they are struggling with a heavy debt burden.
Employment reference
You need to be sure that you tenants are earning enough money to afford the rent as well as other associated living cost. A rough guide is that a tenant should earn as a guaranteed income a multiple of his monthly rent. This calculation is based on all living costs. Be sure that this is not made up of commission or overtime as this cannot be taken as guaranteed income and if it is irregular, the tenant may leave you under pressure further down the line.
If you are looking to take on a self employed tenant then ask for an accountants reference or bank statements to show their income.
You also need to consider their employment status, we suggest that you don’t sign a fixed term contract that supersedes the contracted length of any tenants employment, after all if a tenant is only employed on a six month basis then there is no guarantee that they will be in a position to pay the rent for a whole 12 month fixed term contract. Also consider the nature of their employment; will they be running a dog sitting business from home, or a childcare nursery and if so are they right for you?
Landlord Reference
Perhaps the most important aspect of your tenants referencing process is the backing of their previous landlord. You want to know that they have always paid the rent on time. That they have looked after the property and that they were easy to deal with during their tenancy.
If you reference well and find that your tenants have passed with flying colours then you are likely to be much more relaxed about their occupancy and less likely to be the subject of a property investment horror story.
This is the first step and most important step in protecting your investment. Next week, I will dwell on the next most important consideration in protecting your investment property.

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