Referencing Tenants – How we protect your property investment.

Who should do your tenant referencing?

At Bright Star Lettings we understand that your rental property is likely to be your biggest investment and biggest personal asset. Which is why we do everything in our power to protect, support and educate our landlords to ensure their asset is safe. Regardless of whether you have 10 rental properties or 1, we are always here at the end of a phone or email to support you.

One of the most important elements to protecting your rental property is tenant referencing. Referencing tenants allows you to ensure that they are who they say they are, helping to keep your rental property safe. Completing referencing yourself can be hugely tedious and time-consuming, but more than that it is so very difficult to properly and thoroughly reference your tenants yourself. How can you tell if the employer reference they gave is there real employer and not just their mate Bob from the pub?

This is why at Bright Star Lettings we use an external specialist referencing company to complete all the relevant checks to ensure the safety of your property investment. By using an external specialist company, we save our landlords time and money while offering a fantastic service.

What 3 things does an external tenant referencing company look for?

When it comes down to it, any referencing company is looking for three things, a credit check, a landlord check, and an affordability check. Let’s look at what each of these means in more detail.

Credit Check

When completing a credit check the referencing company is checking the potential tenant for their credit history and any possible red flags. This is also sometimes called a credit search. This is where information from the tenant’s credit report is looked at to understand their financial behaviour. It is important to remember than credit checks are just one part of the tenant finding process and should be reviewed alongside the other information about that tenant.

Landlord Check

The next stage for the referencing company will be the landlord check, they will contact the current/previous landlord of the tenant to find out how they behaved at their previous rental property. Once again it is important to remember that depending on the circumstances behind the tenant leaving this may not be the most objective review of their behaviour. Therefore, the landlord check should always be taken in the context of all the other information about the tenant.

However, it can lead to some interesting information about the tenant’s background and behaviour. During this check, the referencing company will cover general questions about the tenant’s behaviour and experience with the previous landlord. From if they’re a good payer to how well they keep the property.

Affordability Check

And the last one, which is possibly the most important one, is to do an affordability check. The affordability check considers how well placed the tenant is to afford the ongoing cost of the rent for a given property. This focuses predominantly on their employment, firstly checking that they work where they say they work and that their salary is as per they have stated. This also considers if this income is sufficient for the property in question. Normally, we would expect tenants to have an income of approximately 2.5 times the cost of the rent. However, depending on the circumstances this may vary between properties. For example, properties, where utilities are included, are likely to be affordable for those on an income closer to 2 times that of the total rent.

Tenant Referencing in the Current Climate

COVID, the most talked about topic for the last 12 months. At the moment, many people have complex, changing or new working situations. Some may be on furlough; others may have recently started a new job and so on. Normally, instability in the employment of a tenant might be a cause for concern when a landlord is reviewing a referencing report.

However, in the current climate, we have advised our landlords to have an open mind and to consider tenants as a whole package rather than simply dismiss them based on one element of their application such as part of their referencing report. Being overly narrow-minded about finding the ‘perfect tenant’ who is often as fantastical as a unicorn is likely to lead to you missing out on fantastic and ‘’ideal’’ tenants who would make long term and good tenants for your property.

The Perfect tenant

To me, finding the right tenant is really important. It’s really important for both sides. Because whether I’m managing the property or whether it’s the landlord that’s managing the property, I want everybody to be happy. I want it to really work. A happy tenant means that they’re going to stay there longer, which benefits both the tenant and it benefits the landlord. There are some wonderful people out there as tenants and I’m very lucky that most of my tenants, if not all of my tenants are lovely people. Most of my landlords are lovely people and I just want to make sure everything is right for them.