Why I’d prefer a non-paying tenant over an empty property.

I know. I sound insane. But we all have to make business choices, and this one is mine to make. Keep reading and I’ll explain more.

I’ve been reading more and more about landlords who are scared to rent their properties right now. They’re worried the tenant won’t pay and they will have a nightmare to evict them.

All of these things are true.

There is nothing I can say to make that situation any better.

Maybe rent protection insurance? I have no idea if it works or what the small-print says because I’ve never taken a policy.

Not even now.

Not even now in these uncertain times.

The reason why I don’t?

I believe in active and close management. That means no matter what, you always, always ensure lines of communication are kept open.

Trust me, I know it’s hard when emotions get in the way and you think/ know you’re being fleeced. But communication is really the only way to solve any issues.

So, I’ve had a property come empty lately and we’re about to tenant it again. Unsurprisingly, it’s going to somebody on benefits (lost their job through Covid) and to be honest I feel happier with that.

Now, I know a lot of landlords don’t like taking tenants on benefits, but I gotta say, right now that is a pretty secure option. Even if you do take a tenant on who’s got a job, you have to be mindful they are only one pay check away from being made redundant.

I know that sounds harsh, but this is the reality of the situation.

To be frank, this was always the reality, but I don’t think a lot of people realised it.

So, why am I still willing to rent a property even if the tenant stops paying?

Because empty properties are expensive properties.

When you have an empty property it is you who’s footing all of the bills: council tax, water, electricity, gas. They’re all yours to pay. And then you have the mortgage and the insurance – which by the way for an empty property – will increase in premiums and lower in the risk coverage.

Empty properties are also a target for thieves and squatters. Scrap metal is still a booming business and opportunists will take any opportunity they can to strip your place of copper, lead and anything they think they can get any value from.

In March this year I had a property empty for one day.

One day.

Later that night, thieves broke in and stripped the wall lights, the plastic cover of the electric shower and the bathroom door. I have no idea what was so special about this list of items – but what I can tell you is the resulting bill to put these things right was thousands. I ended up having to rewire, install a new shower (frustrating given the one that was in there was just a few month’s old) and supplying and fixing a bathroom door.

It sounds bad and maybe you’re thinking the property is in a high crime area – it’s not.

I got unlucky.

The agent (now fired) had left the lean-to door on the yale lock and not locked the kitchen door with the mortice lock (invalidating my insurance policy). That evening a freak wind storm brought down the back fence panel leaving the property exposed and on view.

All it took was a random passer-by with bad intentions to apply a little pressure to the yale lock and bingo – full access was theirs.

Unfortunately, unbeknownst to me at the time, I wasn’t aware the previous tenants had taken all the curtains and so to anyone passing by, it was quite clearly an empty property.

And so, as I say: empty properties are expensive properties.

Which brings me back to my earlier point and why I’d prefer a non-paying tenant over an empty property.

And it’s to do with risk assessment.

An empty property will always be a risk. There is always a risk something may happen. Somebody may break in, somebody may illegally move in, the roof may leak and you may not know about it, the boiler may blow up and you don’t know about it.

Every which way I cut this cake: an empty property is a risk – and it’s one that costs me money rather than making me money

A non-paying tenant?

The risk, I believe, is smaller.

Firstly, most tenants are paying their rents. That means you already start out with more chances of getting your rent than not.

Secondly, landlords should thoroughly reference check and get a guarantor where you can.

Thirdly, welcome people on benefits and feel secure in the knowledge the state is paying.

I know these are scary times and the world is shifting, but it’s critical to assess the risks. Not doing anything, can also be a risk.

The buck has to stop somewhere, is it with YOU?

The buck has to stop somewhere, is it with YOU?

I was talking with a landlord friend this morning who told me their tenant had asked for a 20% rent reduction.

‘What could I say?’ He said.

‘You could have said you’ll defer the rent?’ I suggested.

‘But I don’t want to look like a dick,’ came the reply.

‘But you don’t want to be treated like a dick,’ was my reply.

Unsympathetic?

Uncaring?

Unfeeling?

You can accuse me of whatever you want, but the fact remains, you as a landlord can’t call up your lender with your begging bowl and say ‘Please sir, times are hard, can I pay 20% less?’

Banks are not charities, they are businesses. Landlords are being told to be nice (while removing the legal course to evict a non-paying tenant!). But don’t be fooled by all this nicey-nicey free-money tree, because there’s no free money a-going on anybody’s mortgage. No matter what this government says, there’s no free money for any landlords anywhere.

Extra interest.

That’s the bottom line. Any mortgage holiday you take/ need/ want will only result in more interest being payable or potentially a longer time frame. Either way, it’s more interest you’re paying. There’s no free money.

Let me just repeat that.

NO FREE MONEY.

I didn’t want to appear an uncaring dick with my friend so I finished the call and spoke to my other half. I said, ‘I don’t think they even asked the tenant what cutbacks they’ve made before they agreed to the request to pay less rent. What’s the betting they’ve still got the top broadband package along with all the premium TV channels and latest mobile handset?’

I wanted to say more, but conscious I might appear the biggest prick-dick I didn’t say, ‘And anyhow, who the fuck is still managing to spend 80% of their salary nowadays? There’s nowhere to go and nothing to do, if you can’t budget during these times there’s no hope.’

‘The buck’s gotta stop somewhere,’ she said.

Yeah, I thought, and if you can’t pass the buck to someone else, it obviously stops with you.

So that’s the lesson: Look around. Take note.