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Buy to let investors need to be wary of a potential rise in tenant rent arrears as rents rise yet wage growth continues to stagnate.
The latest data released from Your Move found that the number of tenants in arrears increased for four consecutive months between January and April. Furthermore, it was reported that the proportion of Your Move’s tenants in arrears rose from from 8.4 per cent to 9.4 per cent during this time.
This problem is not limited to one estate agent. Belvoir recently reported that a fifth of its offices saw four to 10 tenants in arrears during the first three months of the year.
RentalStep added that rent arrears collectively cost landlords an estimated £900 million each year. Landlords are becoming increasingly financially stretched due to changes to tax and regulation. However, by raising rents to combat this, tenants can end up in serious arrears, causing further burdens to landlords.
Founder and chief executive of RentalStep, Mike Georgeson, explained the importance of landlords carrying out comprehensive checks on tenants to avoid being caught out: ‘Rent arrears are a real and serious issue for the nation’s landlords and they need to do everything in their power to protect themselves from being seriously affected. Many industry commentators predict that rents could rise as a result of the incoming ban on tenant fees. Landlords need to be aware of how this could impact on rent arrears and prepare accordingly. One of the most crucial processes for landlords, therefore, is to carry out comprehensive checks on prospective tenants. Making sure you let to tenants who have been fully referenced and credit checked is absolutely vital.’
Georgeson continued: ‘Making it a formality for rent payments to be included in credit scores is key to securing the financial future of the next generation.’