The number of tenants falling behind with their rent payments is likely to rise if rents continue to increase and wage growth remains sluggish, according to RentalStep.
The PropTech startup is warning landlords to take note of the fact that some tenants may find it more difficult to meet their monthly payments which could cause long-term problems for those who invest in the buy-to-let sector.
The number of tenants in arrears increased for four consecutive months between January and April, according to data from Your Move.
The estate agency reported that the proportion of its tenants in arrears increased from 8.4% to 9.4% during this time.
Meanwhile, Belvoir recently reported that a fifth of its offices had four to 10 tenants in arrears during the first three months of the year.
RentalStep estimates that rent arrears collectively cost landlords somewhere in the region of £900m annually.
Mike Georgeson, founder and chief executive of RentalStep, commented: “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," says Mike Georgeson, founder and chief executive of RentalStep.
“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 added.
RentalStep has created the TenantPassport for precisely this reason. The digital rental history profile, which includes a tenant’s rental history, employment details and references, can be shared with landlords and letting agents.
Georgeson continued: “We’re aware that it can be time-consuming and expensive for landlords to carry out the right checks on prospective tenants and that's why we've developed an free and effective alternative.
“At RentalStep, we are also passionate about making sure that all tenants' rental payment histories are included in their all-important credit scores.”
This may partly explain why RentalStep, which allows landlords to list available properties on Rightmove, Zoopla and PrimeLocation for a fraction of the normal cost, has recorded landlord user growth of around 150% per month since the start of 2018 and expects to have over 5,000 tenants using its platform by the end of the year.
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