Tenants… You either love them or hate them, sometimes it can be a bit of both.
We recognise that good tenants can be a valuable asset though, regardless of their faults. They maintain cashflow, look after your property, and minimise your voids.
But finding that perfect tenant can be a hard job. We’ve worked hard to find the perfect process, so here are our five tips to get the right tenants for your HMO.
#1: Select The Right Tenant Type
Getting the right tenant type is essential when creating a profitable HMO.
There are some general rules we follow:
1. Don’t mix tenant types.
A similar age range and style of living is often the best choice to minimise friction and create the best living situation for your tenants.
You can’t really expect a middle aged professional, a student and someone claiming LHA to all want to live the same way.
By defining your tenant type and catering to that you can help eliminate disputes.
2. Look For A Balance
A lot of people fixate on getting all male or all female tenants and worry about what clashes might come up if you have 5 men, 1 woman for example.
Our general rule is to judge it in the context of the property and if you’re not sure, just ask your prospective tenant what they are comfortable with.
If in doubt, you can never go wrong with a balanced mix.
3. Suit Your Tenant Type To Your Area
The five main tenant types are:
High end professionals
– Younger and older professionals
– Post graduate (mature students)
– And LHA Tenants
Every group has their upside and downside and your choice may often be determined by the location of your property.
If you’re near the business district, you may suit high end professionals. Or if you’re by a campus, it may be better to target post graduates.
At Assets For Life, we focus on older and younger professionals, mainly people who are in full time employment.
This suits our area choices well, and it also means we attract people who can consistently pay the rent and are able to pass the relevant credit checks we do.
#2: Set A System For Finding and Checking Prospective Tenants
Once you select a tenant type, the next step is to find them!
Your options may differ depending on your tenant type, but we have found a lot of success with spareroom.com.
If you have picked the right area for your tenant type, you should find a high demand for your rooms.
But don’t be blinded by wanting to get tenants in straightaway and start getting the cashflow.
You need to select the right person and do the right checks.
Once a tenant has viewed the room and we have met them personally, we then ask for references.
We want not just their last landlord, but also the previous one before that. Sometimes to get rid of a tenant, a landlord will give a good reference, so by getting two separate references you can get a better view of them as a tenant.
We also ask for an employment reference, we’ve found that the way someone treats their work is often a good reference for who they are.
Always remember to do your checks before a tenant moves in, once they do, it’s much harder to get rid of them.
#3: Match Your Property To The Tenants
Once you’ve decided on your tenant type and where to find them, you need to furnish your property to match the relevant standard expected.
A student property and a high end professional property can be quite different.
At AFL, we do like to make sure that every property of ours is furnished to a high standard though.
Now, we’re not spending tens of thousands on Persian rugs, but we do add a few special touches.
We like to choose good quality furniture that we know will last and be durable. We also put a flat screen TV in every room. And we use inbuilt mirror wardrobes, these make the room look brighter and bigger, and the cost is neutral to normal wardrobes.
We use Fusion Furniture for all of our HMOs, they offer a variety of different furniture packs for both HMOs and Serviced Apartments, and we have found them to be excellent quality.
Appearance really is everything and it can really make a difference to your room rates, so take time to consider what standard of finish you want for your HMO.
#4: Decide On How To Manage Them
Now that you’ve found your area, tenant type, have dressed the property and filled your rooms, a big question comes up: are you going to manage the tenants or outsource?
Now, our advice for anyone who is looking to build a business is to outsource the management to somebody else.
For us, our time is better spent on growing our business, looking for new deals and connecting with investors.
So we have an in house HMO manager, who gets 10% of the gross rental monthly income.
For you, it may be a different situation. It all depends on your personal circumstances.
If you do have a HMO manager or you have handed yours over to a letting agent, we recommend doing a monthly review call and a weekly catch up. And then every month do a full round up of your properties.
We also like to select a “lead tenant” in each of our HMOs. This tenant, in return for a slight discount on rent, is responsible for keeping us up to date on any maintenance issues or problems in the property.
Another top tip, is to hire a cleaning service for communal areas. This gives us an honest view of how the tenants are taking care of the house and means we can act on any problems quickly.
#5: Treat Them Well
We all know that tenants can be a bit of a pain in the backside at times, but you do have to recognise that tenants are your most valuable asset.
They bring in your monthly cash flow and pay your mortgage, so it’s important to treat them well.
When an issue is raised we aim to respond in 24 hours and resolve the problem in 48-72 hours.
If we can create a happy, clean and secure environment for tenants to live in, then we know our voids will be minimised and rent will consistently come in.
Tenants are an important part of any HMO business, so make sure that you are finding the right ones to live in and take care of your property.
If you follow each of our 5 steps you can’t go wrong!