UK Property Investment Blog

Homeowners turning their homes into a buy-to-let properties appears to be the latest craze to hit the property market during the last 8 months.

According to a report published by the National Landlords Association (NLA), the number of ‘accidental landlords’ who have come onto the property market during 2008 has risen by 25%.

And who can blame them.

With property sales still down at 60,000 last month, choosing to take your property off the market and transform it into a rental property has proven to be a profitable avenue for many homeowners.

‘Accidental Landlords’ – what are they?

Accidental landlords are essentially homeowners who have: recognised the rate at which property prices are falling; have chosen to keep a hold of their homes and have instead chosen to turn them into rental accommodation, whilst becoming a tenants themselves.

Through renting out their own properties, the positive cash flow they generate helps them to pay their own rental costs, but more importantly enables them to move home.

Surely it is not that simple?

Whilst the buy-to-let market has flourished during the last 12 months, entering into the property market unprepared has resulted in some ‘accidental landlords’ witnessing rental reductions of 20-30% per week.* A cut that has left many struggling to cover their costs.

*Knight Frank

Yet it doesn’t have to be this way.

In a survey conducted by Paragon Mortgages nearly 33% of landlords never run a background check on their tenants – a check that could prove to be the pivotal difference between finding a quality tenant and a bad one.

Traditionally a landlord would be expected to perform a series of credit/ background checks to ensure that their tenants can afford their rental property. For example the following precautions:

Identity verification
Employment status
Credit/financial history
References

Yet as this report by Paragon proves a startling number of investors choose to not perform this search.

Continuing in their survey Paragon found of the 1,000 investors questioned that nearly 14% of them – at some point in their career – had been forced to evict a tenant due to them falling into arrears.

This figure is further confirmed by the National Landlords Association. In their annual company review they reported that 75% of their calls were from property investors asking for advice on rental arrears.

What can investors do to prevent this?

In light of the current financial climate, the surest way to secure your rental property and your monthly cashflow is to make your tenant fill out a Tenant Application Form.

By utilising this simple form you can acquire the following details about your tenant: their property details; employment status; previous/current landlords references and their bank details.