In these uncertain times of rising interest rates, potential rent freezes and the difficulties involved in evicting a non-paying tenant, what can you do to protect yourself and your property business?
Surprisingly, Landlords also feel the knock on effects of the cost of living crisis. The recent mortgage interest rate rises have put a serious squeeze on a large majority of Landlords.
Rent Protection Insurance (or Rent Guarantee Insurance) is a fantastic way to protect your investment from a tenant no longer paying rent.
So, here are a couple of very simple and low-cost ideas that could save you a fortune and help you sleep a little better at night!
What happens if a tenant stops paying rent?
If your tenant is at least 2 months in arrears, you can start the eviction process after giving two months’ notice, so in the best case you could get them out in four months.
That’s not even counting the extensive court battle you’ll need to go through to reclaim rent arrears.
You will need to issue a Section 21 or Section 8 notice and make sure you follow the process to the tee, or it could easily drag on for many more months. You can read about the differences of section notices here.
It won’t just cost you 4 months’ rent though, there will be legal fees, huge amounts of time involved and very high levels of stress which will make for a very unpleasant experience.
Secondly, you will have seen your costs rising so you may need to put up the rents. If you’re not sure what’s reasonable and how you should approach it, read our tips and advice here.
Consider Insurance
During Covid, Rent Protection Insurance (or Rent Guarantee Insurance) was pulled from the market and wasn’t available. Well, the good news is it’s back, and more valuable than ever before.
For example, a policy on a central London property with rental income of ÂŁ2500 per month could be fully covered for up to 15 months with zero excess.
Plus, the policy will cover legal costs of up to ÂŁ100,000 and even serve the correct section notices where required.
And the cost? Just ÂŁ18 per month for 12 months! You can purchase Rent Guarantee Insurance from our partner, Alan Boswell Insurance. Click here to purchase.
With the energy crisis going on, inflation at around 10% and a potential recession on the horizon, more and more tenants will find it very difficult to pay their rents. Insurance at this cost really is a bargain!
Run a Thorough Credit Check
Even before this stage you should pre-qualify your tenants with a simple tenant checklist if you are finding the tenants yourself.
Once you feel they are the right fit, get yourself a thorough credit check.
They stand at around ÂŁ18 plus VAT each. Typically, they check against the last 6 years of credit history and also validates employment and income affordability.
Don’t skimp on the cheap ones that only do surface level checks, it’s not worth the risk.
Set up a Direct Debit
GoCardless is a great way to collect and automate tenant payments with a direct debit, and is available in most countries worldwide.
By setting up an account with GoCardless, you will get a link to send to your tenant so they can pay rent directly into your account.
It will also send them a reminder that the rent is due and send you a notification when the rent arrives.
The best part? If the rent isn’t received, unlike a standing order, GoCardless’ system will automatically try to collect the payment again using artificial intelligence (or AI) to determine the best date and time.
This saves having to chase the tenant yourself!Â
There is a small charge per payment but its well worth it and will be fully integrated into the Alphaletz Property Management Software soon too.
Once implemented, the payments will also automatically update on the dashboard, reports and property pages, keeping you fully updated in real time.
So in summary, protect your rent payments with Rent Protection (or Rent Guarantee) Insurance, take out thorough credit checks and automate your rent collections. It’s easy to do and could save you a small fortune.
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