Would you rent to tenants who have just started their own business?

ET1976

I am thinking of renting my property to a couple who run their own retail business but only started it in November. They have been very forthcoming with all info I have asked for (private and company bank statements etc) and everything seems to check out OK, but this still feels a bit risky. I am quite keen on them as tenants because they have been very good to deal with so far, and they can move in soon after my existing tenants move out, and are also not bothered about the fact that there are some major (external) repairs to the property about to start.

Has anyone got experience of letting to self-employed tenants? Should I be asking for a few months rent up front as security?

Thanks

MarieAAP

Hi ET

I have no experience of what your asking, but here are my thoughts:

The major Q would be, do you rely on this money coming in? Meaning if they can't pay for a month, will you be unable to pay your own bills, or can your savings offset this? If you do need, I think reliability is essential then.

I would definitely ask for a few months rent up front, possibly even 3, and a 2month deposit. Yes I know its a lot to gather when your starting a business, but they will not have the stress of thinking of rent money, and they can really concentrate on the business.

Good luck
M

franklee

Speaking as the tenant what I normally do is offer to pay the first six months rent upfront thereafter to pay monthly as normal. That's always been accepted. However in these days of landlords getting repossessed I'd be wanting to check the landlord is secure first. I'd be wanting to see recent proof that you have consent to let from your lender if you have a mortgage on the rental property and that mortgage payments are up to date. The reasons for asking these questions is to make sure the tenancy is binding on your lender as otherwise they could boot a tenant out ignoring the tenancy agreement thus meaning the tenant wouldn't get the use of the upfront rent.

MarieAAP

Ohh good point Franklee!

franklee

MarieAAP wrote: »

The major Q would be, do you rely on this money coming in? Meaning if they can't pay for a month, will you be unable to pay your own bills, or can your savings offset this? If you do need, I think reliability is essential then.

A landlord should never rely on on rent money coming in on time. Even normally employed tenants can get behind or lose their jobs. A landlord should have at least six months contingency IMO as that's how long it could take to shift the tenant from hell. Not forgetting those unexpected and costly boiler repairs etc.

adg1

I would ask for either a guarantor or rent in advance (6 or 12 months depending on the fixed term of the contract) to cover your losses if they happen to not make any profit for a few months.

Is this their only source of income? If so you're totally reliant on their ability to run a business rather than simply do a job.

ET1976

Thanks for the responses.

I don't rely on the rent money but equally I don't want to have the bother of getting rid of a tenant who isn't paying.

I provide tenants with copies of documents showing I have consent to lease etc as a matter of course just so they know everything is above board.

I think I will ask for 6 months rent (I do the standard 6-month AST contract). This seems to be what agencies commonly do.

Brallaqueen

Only with a large financial cushion in the form of 6 months rent up front.

Gorgeous_George

If I liked them, I'd give them the benefit of doubt and wouild settle for 2 months rent in advance and my standard deposit against damage of £500. I'd offer cashback for additional rent paid upfront.

But then, I give my tenant a free week at Christmas if their rent is up to date-ish.

GG

ET1976

how do you mean 'cashback'?

N79

If you want to be in letting for the long term, the one piece of advice that I could give with vetting Ts is this.

Never change your normal vetting criteria because of a T sob story. If they pass your normal criteria then great and if they fail then don't give them a tenancy.

Being self employed / employed / retired / unemployed or whatever may not matter provided you have decent vetting criteria.