Rental arrears don’t have to be terminal for landlords
As any brokers who specialise in buy-to-let know, tenant arrears can be a financial fly in the ointment for landlords.
At best, they hinder a landlord’s cash flow in the short-term. At worst, they can lead to a landlord falling into mortgage arrears on the property in question. And unlike a void period, despite receiving no income, a landlord is unable to fill the property as it is already occupied.
In the last month, they have been on the rise. In June, 9.2% of all rent was late or unpaid, up from 8.9% in the previous month, according to LSL’s latest buy-to-let index. But it is the number of tenants falling in to severe arrears that is the biggest concern to property investors. Templeton LPA’s latest research showed more than 100,000 tenants fell more than two months behind with their monthly rent payments in Q2 2012.
Prevention is always better than a cure. Credit checking prospective tenants and securing references are crucial weapons in an investor’s armoury to limit the chances of arrears at the outset of a tenancy. Open lines of communication are vital too. A letting agent or property manager worth their salt will contact a tenant as soon as a payment problem emerges, helping to identify an issue early, often resolving it before the problem escalates.
However, given the current economic malaise and public sector job losses, not all arrears cases are preventable. But a severe tenant arrears case is not necessarily terminal for an investment. Landlords – and their lenders – do have options to prevent tenant arrears from building for months on end and feeding into long-term mortgage arrears for the landlord.
Read the full story at My Introducer
RentPro property management software enables you to see straight away when a tenant falls into arrears and also enables you to keep a full record of all correspondence with a tenant as well as any repairs or maintenance carried out on the property so should you have to proceed with a possession order you have all your information in one place.