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Landlords: Check Credit to Avoid Non-paying Tenants

Landlords: Check Credit to Avoid Non-paying Tenants

Date: 2016-05-13
Renting out your property is one of the many options available to make extra money. Ifyou're considering renting out your home, it can be a lucrative opportunity, but there are some things you should think about first - particularly as times get tougher economically.

According to the TPN Rental Payment Monitor, 20% of all placed tenants have never had a credit check. Thisis a shocking statistic - and one that needs to improve.

It is essential to have thorough credit checks done on prospective tenants, and that includes every tenant - as well as married couples - to avoid defaults on the rent.

The risk that tenants won't pay, however, needs to be a serious consideration in any rental bracket before signing on the dotted line.Correctly screening tenants can be done effectively through the help of a rental agent. Beaware that if a tenant is happy to shortcut a rental agent's fees and rent from you directly, they may also be happy to later short-change you on the rent.

Once a tenant has given permission for a credit check to be done, it means they can be checked again at any time during the lease period. Tenantprofiles can change monthly. With times getting tougher continuous credit checks show whether or not a tenant is keeping up with personal bills, and if accounts are suddenly not settled, it can indicate that the tenant is in trouble.

By being aware of whether or not tenants can continuously afford both the rent and their lifestyle, it is easier for landlords to make informed decisions about renewing leases, or if it comes to it, making sure they serve notice accordingly.

There are also insurance products that landlords can take out to mitigate the risk of a tenant defaulting.

One option involves the landlord paying a nominal fee for a policy providing access to three months of rental income, as well as to funds and resources if you need to pursue a tenant in court.

An eviction process can cost anything in the region of R25 000 to R100000, and can take six weeks to six months to settle, so it can be useful having a policy like this to protect your pocket.

Another product sees a portion of the rental income go to the actual rent and the other to an insurance policy, but the tenant pays the total amount. This is great for tenants who don't necessarily have the money for a deposit, so it is done in lieu of a deposit, but has the same insurance benefits protecting the landlord.