Letting property has many benefits. And these are not just financial. If you are away a lot, in a good tenant you also have a person who looks after the property and reports potential problems. Therefore, to find such a tenant, we have put together a short guide that will lead you to the ideal tenant, step by step.
You have a property that you would like to rent out. It would be nice to think that that didn’t have to be all too difficult. Nevertheless, tread carefully and this starts with the preparation. Firstly, you should ask yourself who you would like as a tenant in your property. This is so you can advertise your property accordingly. Families want a child-friendly neighbourhood; a lift is essential for older people; and professional tenants are perhaps looking for a central location and good transport links.
Another aspect is the estimated rent. In looking for tenants, you shouldn’t fall into the trap of wanting to use a high price to attract wealthy ones. Too high a price even acts as a deterrent to these people. What’s more, this strategy can backfire and attract tenants who will initially accept any price out of necessity and then prove to be unreliable payers or even rent nomads. Finally, the legal situation must also be taken into consideration. Because it is stipulated through the rental brake that rent is not allowed to be more than 10% over the comparable rent customary in a place. A look at the rent index provides a good framework regarding this.
Such a ceiling on rent prices no longer exists in Great Britain. It was indeed introduced after the Second World War, however since it brought negative consequences, it was abolished in 1988. The situation in the USA is less consistent. Here it is up to the states and cities; in many conurbations like New York or San Francisco, there is a “Rent Control”. Other cities like Boston have however abolished it in recent years. Therefore, it is vital to research the situation in your own town.
Step 2: Property viewing
Mass viewings are to be absolutely avoided. After all, you are not letting a flat share for students but want a long-term and stable rental relationship. What's more, in an individual visit the landlord has the opportunity to get to know the potential tenant better and in a subtle way clarify a couple of questions.
Because, as is well known, the devil is in the detail. So you can find out quickly in a nice conversation why the potential tenants would like to rent the property, how many people will live in the property and whether there are pets or kids next door who play the trombone. Also you can ascertain the reasons for leaving their current property or potential reservations they might have against a credit report.
Step 3: Documents
There are a few documents that you can ask potential tenants for. They are however not obligated to produce all of these documents. Potential tenants with no financial worries or debt problems in their current property usually have no problem with producing these documents. These include:
1. Voluntary disclosure: This is where the tenant (voluntarily) provides information on both their financial situation as well as on pets, hobbies and reasons for moving from their previous property. They are, however, in some aspects (such as, playing an instrument or planning to have children) not obligated to give a true statement. A false statement on these points is not grounds for giving notice. This information is true with differing emphases in most countries, as well as the USA and Great Britain.
2. Financial security: In Germany, credit ratings can be checked easily with a free credit report requested from the tenant. Potential tenants’ refusal to produce this should set alarm bells ringing. In the USA, the landlord also has the right to ask for “Renters’ Insurance” which pays for damages that may arise later. In Great Britain, it is also common practice to scrutinise the background of a potential tenant. In financial respects, you can also use “Credit Reference Agencies". They offer to check the payment behaviour of a potential tenant as standard.
3. Landlord certificate: This certificate issued by the current landlord is another opportunity to obtain information as to whether a tenant has regularly paid the rent and whether potential rental debts exist. In the USA and Great Britain, there is also the opportunity to request the landlord’s direct contact address and a reference from them. This personal contact is more common in these countries than in Germany. So not only can the questions about potential rental debts be clarified, but also information can be obtained about potential tenants’ other behaviours.
Anyone who wants to use a rental property as an investment, needs a reliable tenant. We enjoy supporting you in looking for a tenant and together we will find the ideal candidate for your individual property. Our many years of experience make Engel & Völkers the perfect partner and advisor for all questions regarding residential rentals. You will find initial information on our website.