Suzanne Smith and Richard Jackson kick off this new podcast by discussing with what's important to any business: our customers. And for landlords, that’s our tenants. For their inaugural episode, they talk about what makes a good tenant and what our red and green flags when we look for tenants. 

This is an introductory episode on good tenants, focusing on affordability and what to look out for. Richard and Suzanne cover tenant selection and the application process in detail in GL #2: How to select good tenants.

What we cover in Episode #11. What is a good tenant?2. What does affordability mean?3. Why landlords should ask to see applicants' credit report even if they use agents4. What are green flags when choosing tenants?5. What are red flags when choosing tenants?6. Golden nuggetNext week's episodeResourcesCredits

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1. What is a good tenant?

With the Renters Reform Bill turning tenancies into longer term relationships, it's important for landlords to be very careful when choosing tenants, even if they use letting agents.

But what is a good tenant? For us, a good tenant has the following basic attributes:

Affordability: they can afford to pay the rent - it's never going to end well if they live beyond their means and can't afford the rent.

Responsible: they will look after the property, let you know when something needs fixing, and comply with the tenancy agreement.

Long-term: they want to live in the property for a long time, keeping your voids and re-letting costs to a minimum. Choosing someone local or with a good reason to live in the area might point towards them being long term tenants.

That's all well and good in theory, but what does it actually mean in practice?

2. What does affordability mean?

Affordability means that the tenants can afford to pay the rent out of their net income and any benefits. The received wisdom is that tenants need to have an income of at least 2.5x the rent. However, this is quite tight, and depends on their spending habits. We'd ideally like more than this, say 3 or even 4 times the rent as an ideal. It's easier to meet the affordability criteria if there are two tenants with an income.

We also look for renters with stable jobs, outside of a probationary period. LinkedIn is useful to seeing how often the people move jobs, and Facebook is useful for showing what they spend.

The implication of the Renters Reform Bill is that landlords are likely to be more conservative when it comes to choosing tenants who have an adverse credit history, with previous CCJs or IVAs.

Many landlords take out rent guarantee insurance on their tenants, and to do this, the applicants need a good credit history.

3. Why landlords should ask to see applicants' credit report even if they use agents

In view of this long-term relationship between the landlord and tenant, the landlord should look at the credit report before making the decision to go ahead with one of the candidates, so they know if there are any adverse entries on the report, which the agent might not disclose.

Sometimes letting agents are reluctant to share the credit report with landlords. However, from a legal perspective, the landlord is the "principal" and the letting agent acts on behalf of the principal. So long as the landlord is registered with the Information Commissioner's Office (it costs £35 - see below for more details), the letting agent cannot refuse to hand over the credit report. Of course the landlord needs to store the report securely and have a privacy policy, but it is wrong to say that landlords should not see credit reports.

This is part of a wider theme that landlords can't "let and forget". They still need to be actively included in the decision-making, even if they use agents. And landlords need to be know their rights when it comes to dealing with agents.