4 tips to letting your Buy to Let property at minimal cost and risk

I was a little distraught when the tenants of one of my buy to let rental properties emailed me six weeks before the end of their tenancy to let me know that they would be leaving.

They had been really great tenants, always paying the rent on time and keeping the property in pristine condition. But, of course, a good thing never lasts forever.

So I had to find new tenants as soon as possible to avoid the dreaded “void period”, which is neither good for the soul nor the bank balance.

When I became a buy to let landlord a few years ago, I employed a managing agent to handle everything for me. But because I’m a bit of a control freak, this didn’t really work out well for me.

The letting agent always seemed to choose short-term tenants, so I ended up paying the re-letting fee far too regularly. The bills I got for repairs always seemed too high as well.

More importantly, I much prefer to meet with prospective tenants to find out whether we are likely to get along. An agent will often have less of a vested interest in finding the perfect tenant than I do!

So after a couple of years I parted company with the letting agent and started doing everything myself. By developing my own system, I was certain that I would achieve that much sought-after ‘continuous let’ at minimal cost. Besides, if I didn’t, I’d only have myself to blame.

I actually did succeed, so I thought I’d share the four main planks of my system to let you give it a go yourself – and hopefully do as well as I did.

1. Find a cheap way to get your property online

Firstly, it’s important to find a really cheap way to get your buy to let property on to all the main property portals such as Rightmove, Zoopla and so on. After a lot of researching I found an online letting company which gives you the first 7 days free and then charged the princely sum of £9 a week until your property is let – or you told them to take the advert down. Unfortunately that company was taken over by Strike and then PurpleBricks and no longer offers this outstanding deal.

A number of online letting companies have sprung up though such as  OpenRent and The Online Letting Agents  which will advertise your property on RightMove and other portals for under £100.

So to achieve my ‘Minimal Cost’ objective, all I had to do was to find a suitable tenant within a week of submitting my property.

2. Don’t overprice the monthly rent

If you try to charge above the market rent, you will get fewer applicants and substantially decrease your chances of quickly finding a great tenant.

I have been amazed at how much difference it makes when you add just £25 per month onto the asking rent. If you get it even slightly wrong, you’ll end up with viewers who are looking for more than you are offering. That’s both frustrating and time consuming.

When I tried this with a previous let it took me a month to find a tenant and it not only cost me a month’s rent (£875), but also a month’s Council Tax and all the utility bills. This is cost, hassle and risk you can do without. Bear in mind that an extra £25 monthly rent will only give you another £300 a year. That’s a lot less than a void month will cost you.

If you set the rent more fairly you’ll get inundated with eager viewers, and this time I received over 20 applicants in about five days.

3. Vet applicants thoroughly BEFORE agreeing to show them round your Buy to Let property

It’s a complete waste of time showing your buy to let property to every applicant, and your existing tenants won’t thank you if you show an endless stream of people around.

So how do you select the best potential tenants before showing them round?

What I do is create my own application form that gives me all the information that I need to be able to make an informed decision.

More contraversially perhaps, there is nothing to stop you asking to see bank statements of prospective tenants. This is standard practice for loan or mortgage companies and it is carried out for a reason. You can tell a lot about someone’s money management skills and verify income by looking at bank statements. A few tenants may object at this and regard it as an “invasion of privacy” but for every one who does, there are likely to be another five who are happy to be co-operative. They will understand the need for a good landlord to be careful and that well run tenancies are in very high demand.

These vetting systems are great at filtering out people with an attitude.

After about three days I had accumulated a small number of very cooperative potential tenants, including a professional couple of two partners who were employed full time on good incomes.

In the end this application was all that I needed and I only had to do one viewing. If the pictures and description that you place on the portals are good, comprehensive and accurate then serious applicants will probably love the property when you show then round.

4. Reference thoroughly and only take tenants for your buy to let who qualify for Rent Guarantee Insurance (RGI)

There are a number of online referencing companies around now such as the one provided by OpenRent and these aren’t expensive. Their comprehensive reference tales 3-5 days and costs just £20. You should also look at Rent Guarantee Insurance (RGI) to eliminate or reduce risk.

RGI from a company such as Boswells (there are many more companies offering this) costs from about £160 a year and ensures that if a tenant stops paying their rent for any reason then you get paid an equivalent sum by the insurance company.

In my opinion Rent Guarantee Insuarance is  a complete no brainer for a new tenant and removes most of the risk. RGI not only pays out for any unpaid rent, it usually pays all the costs needed to evict tenants who fail to leave or keep to the terms of your tenancy agreement. It may even pay for repairs if your tenants decide to wage a vendetta and trash your lovely buy to let property before they leave.

The referencing company you choose will already likely know from the initial application whether the chosen applicant is likely to qualify them for rent guarantee insurance; so if the referencing checks out well, you are pretty much home and dry. Many referencing companies will try to push their own RGI product but take the time to do your own research and pick a reliable company with good reviews.

One thing that I must point out, however, is that when it comes to the legal side you must get all your paperwork in order, register the deposit, do a full written inventory, hand the tenants all the information they are entitled to AND GET THEM TO SIGN TO SAY THEY HAVE RECEIVED IT. If you don’t do this properly, the RGI Company will likely just use it as an excuse to reject any claim.

A good source that will help you get all the paperwork done correctly is the National Residential Landlords Association (NRLA), which not only explains in great detail what you need to do but for a small fee also provides all the properly-worded templates you need, such as up-to-date Tenancy Agreements.

So, with the benefit of my system and with a little time spent applying it, you should hopefully be able to achieve a continuous let at minimal cost – and put in place a rent guarantee for the whole 12 months of the tenancy to minimise your risk.

As the A-Team’s Hannibal Smith used to say, “I love it when a plan comes together!”

You can find a lot more advice and tips for landlords by visiting our dedicated section here.