Rent guarantee insurance

[JetSetWilly]

I let a property, tenants have recently moved out. I have agents searching for new tenants but in the meantime have been approached by the next door neighbour asking if she can move in.

I have asked two agents if they can set everything up for me for the ndn to move in but they're not interested presumably as they don't get their fee and managing fees etc. I'm happy to do everything AST agmt, epc, gas safety, inventory but I'm coming unstuck with the rent guarantee insurance.

Looking at policies the tenants need to be credit checked first. Fine. But the multiples in order to be accepted are ridiculous imo-2.5 of rent. Rent is £900 pcm so that is £2,250. I can't be certain of course but I just don't see how my tenant will have that sort of income (they will be claiming housing benefit)

Just don't know what to do. Would you risk placing a tenant in the property without the insurance? They have lived next door for five years so presumably are paying their rent although their rent is much cheaper where tey are now £640pcm. I've met them a few times now and they seem lovely. Just think it's a bit unrealistic and unfair to expect normal everyday workers to have this sort of income. Husband works full time wife works part time she is just about to hve a baby.

One thing to point out is that I will receive an extra £100 a month if they move in and I sort it all myself. If I didn't get the full Insurancw policy, just the one to evict if necessary then that's a saving of £1,300 over the year. My point is if I didn't get the full policy and I did need to evict them this extra income would soften the blow a bit?

Any advice thoughts or comments?

my agent also recommends that no-one commits to more than 40% of their income as rent. And I wouldn't personally commit to rent or mortgage of more than that.

regardless of a formal credit check, how are they going to afford the big increase in rent? Can you get them to show you figures? She is about to stop work so their income will decrease. Really don't see how this works.

bottom line; if they stop paying and won't leave it takes four months to evict them legally. If that happens, what happens to YOUR finances?

Yes you are right and I really appreciate your post and input.

Thing is though it's all a bit tricky talking about 40% of income when they will receive housing benefit. I just don't see how that's sustainable in London either. Example: lone parent family on minimum wage, however would they afford to live in London I don't get it?

Of course it would never be ideal if I had to evict them and ultimately stopped receiving the income. Not ideal but the outgoings on the property are c£400 so I would have to suffer that myself. I guess I would build up a buffer with the extra money I receive during the year.

I think I will ask them to go through a formal credit check. That way at least I can get an idea of their finances without having to actually ask to see their bank statements etc as I feel a bit uncomfortable doing that.

I guess another thing is if the agents don't find a tenant for me quickly then I will lose another month's income as well! Think I will speak to the agents tomorrow as well see how they're getting in with marketing the property

can I suggest that if you know that this figure is part of the credit check, you tell them that first? If it is 'no way' then why waste money on the check?

do they know what rent you charge? Do they think they can afford it?

hope it will works out for everyone.

Thanks again for posting, really helpful, I have nobody I can ask! Had a look on landlord zone but so much easier posting here :)

Yes I had thought of doing that-I want to speak to the insurance/referencing agency tomorrow just to check exactly what they do/need. Have had a reread and actually there is a bit more than can do if the tenants don't reach 2.5x rent. Eg guarantor.

Once I find out I think I will explain to the tenant how it works, what we need to do and the 2.5x rent issue and ask them to pay for reference do you think that is fair? They would normally have to if they went to an agency wouldn't they.

Yes they are adamant they can afford it. I've said I will need one month for a deposit and rent paid in advance and always been very clear about that and they have said yes it's affordable every time.

seems reasonable to me - the reference fee has to be less than what the agencies charge (and you'd both be paying agency fees).

I'd still be somewhat nervous, so it seems particularly important that you get the RG insurance. Anyone can lose a job (HB or no), or get ill. It might not even be a case of 'won't pay', it could be 'can't pay' and then you are still stuck until they leave.

best that all parties know exactly where they stand. Might also help to tell them the council tax and the rough bills incurred by previous tenants so they have a good idea of their full costs.

Yes you're right, think the reference is £70 whereas through an agent it's £250 holding deposit which includes the reference. Have just told prospective tenant by text as was unable to get hold of her by phone today

To be honest I'm swaying towards letting the agents deal with it. It's just such a hassle trying to sort this while working full time and two little ones.

Apparently there has been lots of interest in the property and some can move in straightaway rather than giving a month's notice. We shall see. Think I will just go g

Oops

Think I will just proceed down both avenues and whoever is signed up first gets the flat.

Thanks so much for your help :)

Should say however I proceed I will only proceed with eg insurance in place