Utopia of Finding the Best Tenant
Everyone wants the best tenants It is undeniable that we all want decent tenants living in our properties. Unfortunately, not all of us are experts in the property world or simply do not have enough time to dedicate to the search. Seeing as one’s property (or properties) is likely to be one of the most valuable assets owned, we want someone just like us to respect it and enjoy living in it. The question arises — How do we find those stellar tenants?
Short answer: we trust Letting Agents to source tenants. But how do Letting Agents separate the good from the bad, the signal from the noise? Enter tenant referencing. Now, we know that tenant referencing has been around for long and there is an established consensus around the methodology. Although, how relevant and powerful is that methodology?
Tenant Referencing If we think critically about each component of tenant referencing, the two major components are obtaining a previous landlord’s reference to make sure that applicants have previously been decent tenants and verifying tenant’s income to ensure that they can afford the rent. Let’s imagine, we have access to a tenant’s rental payments history and income data. Suddenly, we are in a position to make an assessment about whether the tenant has paid rent in full and on time. Moreover, we can determine their affordability through a stable and consistent income. Sounds too good to be true, right?
Well, no and yes. But first, let’s be informed about macro developments in the property industry. Investment and regulatory changes are major contributors of radical change and the proptech (property technology) industry has enjoyed both. According to Forbes, 2018 and 2019 saw an investment of $22,5bn being poured into the PropTech industry. These years also saw significant governmental incentives being introduced in property and banking industries such as the Tenant Fees Act 2019 (tenant fee ban) and Second Payment Services Directive 2018 (PSD2) respectively. Open Banking Without getting too technical or boring you, Open Banking is a government initiative to improve financial transparency and control of personal banking data. In other words, individuals are now in a position to share their transactional and balance history with third-party companies to enjoy additional products and services. But what does all that have to do with tenant referencing? With this technological advancement, we are now in a position to make assessments on any tenant’s income and rent affordability as well as their previous rental performance instantaneously.
Tenants can share their information directly through their online or mobile banking interface for instant referencing. Thanks to Open Banking initiative, tenant vetting has shed its skin. This all sounds dreamy, but…how safe is this? Why would anyone want to share their banking information, that’s sensitive, right? What if the person is just starting a new job? What if they are new to the country?
All of them are fair and valid questions. A brand new way of referencing Open Banking leaves no room for vulnerability and is done entirely through the tenant’s own banking interface. Letting Agents prefer this method for tenancy referencing. A decision is made instantaneously and with greater accuracy. Homeppl, a tenancy data validation company that uses Open Banking, says that 30–35% of tenants prefer this method of referencing as it is faster and does not require them to share any income documents. This technology will not be applicable for tenants with new jobs or for those who simply do not wish to share their details – that is a big majority. Thus, it is important to never lose the human intervention element and pick up the phone when needed .
If you’re a Letting Agent who: 1. Embraces technology and innovation, 2. Wants to offer a seamless customer experience, then you should consider introducing Open Banking in your tenancy referencing process. It could be what helps you to identify the best tenants and give everyone the equality of opportunity to show their true creditworthiness.
Written by Rakiya Suleiman