TOP 5 reasons Landlords get into financial trouble.
Welcome back to Kreiga Blog. This time we are going to look at the TOP 5 reasons landlords get into financial trouble and what we can help you do to help prevent these things happening in the first place.
We will cover the TOP 5 reasons landlords get into financial trouble starting at number 5
5 – Rent Arrears
If a tenant runs into financial difficulty it’s can be an extremely complex situation to deal with, which is why it’s first on our list of the TOP 5 reasons Landlords get into financial trouble.
All is not lost however, as there are things that can be done.
At the start of the tenancy, any reputable agency should perform an affordability check. This is to make sure that the tenant can in fact afford the cost of the rent.
Now that might sound simple, but you’d be surprised at the amount of people who don’t complete this task. What some agents’ fail to understand are individuals’ outgoing expenditure; they simply see an annual salary and believe that the rent is more than affordable.
Here at Kreiga, we take the time to perform a comprehensive affordability check on all tenants to help guarantee that rents are affordable and other costs are manageable – taking into account priority debt – to alleviate any unnecessary problems from the start.
What we also proactively consider is that people also can have a change in circumstances. This could be a result of all kinds of things, but most commonly these days, it’s due to redundancy, or a relationship break-up.
Now, while as a landlord other people’s’ personal issues are not normally your concern, here at Kreiga we find that it’s imperative to take into consideration people’s circumstances on an individual basis, as this works wonders for resolving potential issues you may face further down the line.
If identified early, then these issues could all be resolved sooner than you think if the relationship with your tenant is strong enough, Now some landlords manage their own portfolio, and that’s great, but if each tenant is just a monthly payment instead of a person, then relationships can be hard to maintain.
Early intervention is key. Any reputable agency should know all tenants who let properties through them, and as such can build and maintain strong relationships with them. In instances of financial trouble, an affordability review should be undertaken again.
it might actually be possible to clear any arrears with something as simple as a “Rent plus” agreement;
This is where the tenant pays their monthly rent, along with a top-up of an agreed amount for the arrears each month.
However, if it’s not that simple, then this area of tenancy management can become a minefield.
The next on the list of the the TOP 5 reasons landlords get into financial trouble plays a huge part in sustainable tenancies and financial growth for landlords, and that is;
4 – Tenant Matching
When you have a property left empty, it’s a financial strain on any landlord which is why it’s important to get tenants in and paying rent as soon as possible. At times though, the need for a tenant overtakes the tenant profile list that you may have in mind; think working professionals, no smokers, no pets etc. especially when the financial strain hits.
When the head overtakes the heart (so to speak) you rush to get the property occupied and this could lead to issues further down the line. (see point 1. Re: affordability, as well as issues with referencing).
Tenant matching is key to sustainability as both a landlord, and as an agent. If you are lucky enough to perfectly match your dream tenant and they are long term, then being a landlord seems easy…! For a lot of us, that’s not the case.
This is why Tenant matching is a MUST DO task and not a “might do”.
Kreiga go the extra mile to take into account all of our landlords requirements to make sure that we find the most suited match for you. So not only does this fill the vacant property and start earning you money, but
it also makes your life easier, taking the stress away.
3 – Trust
Now this might sound like I’m telling you something you already know, but trust is a key factor in sustainable tenancies. As a landlord you must have complete trust and faith in your agent (if you’re using one) to get the job done with as little hassle to you as possible. If you don’t use an agent, then you should expect to deal with as many issues as a tenant raises and not get frustrated at them when trying to report them – This sounds a bit like a telling off I know, but it’s not. Trust me.
Agencies worth their salt should have in place an agreement for costs of repairs with the landlords of any property. Some landlords don’t like this idea and much prefer to deal with issues themselves, however here at Kreiga we try to make everyone’s lives a little easier.
This amount can be anything the landlord deems as acceptable, however, an amount of around £250 would be agreeable to most agencies should the need ever arise – this does of course depend on each individual circumstance.
You may wonder why I mention a repairs fee when I’m talking about trust, but this is all connected… you see, if your tenant doesn’t feel secure in the relationship with you or your agent, then they are less likely to report any issues meaning they can get much worse and extremely costly to fix once the problem has been identified.
We’ve all seen those landlord and tenant programmes where properties are in disrepair and a lot of the times, although the tenant has been at fault, it’s due to the trust they had in their landlord or agent thatthe situation got that far.
If the trust is there from the start, then these things can be entirely avoided. At Kreiga we undertake a duty of care to both our tenants’ needs, and the properties we look after. This involves property inspections (usually quarterly, but can be completed monthly if desired). This not only gives landlords peace of mind, but also trust that we are looking after your best interests. As an agent it’s also important to build our tenants trust too, so these inspections give us the time to build that trust and maintain relationships throughout.
2 – Deposit Protection Scheme
Failure to register your tenants deposit with a Deposit Protection Scheme means that your tenants can apply to a county court if you don’t use a tenancy deposit protection (TDP) scheme when you have to. They can do this at any time during the tenancy.
This shows on our list of TOP 5 reasons Landlords get into financial trouble as if the court finds you haven’t protected the deposit, it can order you to either
- repay it to your tenants
- pay it into a custodial TDP schemes bank account within 14 days
The court may also order you to repay your tenants up to 3 times their original deposit within 14 days of making the order. The court may also decide that your tenants don’t have to leave the property when the tenancy ends if you didn’t use a TDP scheme when you should have. For more government help regarding DPS, you might want to visit the government site here.
1 – Eviction
I’ll not talk about this in too much detail as all the information you need regarding eviction processes and notices can be found here
Now you’ve read all of that, it’s worth considering how you might end up in this situation. A lot of the time it’s down to preparation. You’ve heard the old saying “Failure to prepare, is preparing to fail”. Never has truer word been spoken. Especially when it comes to your time in court.
The preparation we are talking about here is record keeping; from in depth inventories, to rent statements, and DPS proof of deposit. If you did end up in the unfortunate situation of evicting a tenant, then it can be an extremely lengthy and costly one. To assist you, your agent should keep exceptional records of everything related to that specific tenancy (and all tenancies for that matter). Again, if you do this yourself, then this is where some landlords come unstuck. Most of the cost of eviction is spent on solicitors fees, serving notices and court applications, and can run into the thousands of pounds. Kreiga are not only a letting agent, but also have a fully legally qualified team of eviction specialists to help with the full end to end management of these processes.
It’s worth knowing that we don’t even have to be your letting agent to help you with this, and the fact that we do it all in house means the savings stay with YOU.
So that’s it. Our TOP 5 reasons Landlords get into financial trouble
If you like this, or require further information on how Kreiga can help you with all aspects of tenancies, then don’t hesitate to get in touch with us.
In line with all points raised above (if we were looking after your property), should the need for eviction proceedings arise, we would already be in the perfect place to assist, meaning it’s less likely to lead to litigation. Find out more about our FAST TRACK EVICTION specialists by clicking HERE