How To Assess A Potential Tenant’s Suitability
Buying an investment property for a good price, with growth and income potential is the first step towards building wealth, but it only gets you part of the way to your goal.
The other major factor is making sure you have the right tenant. Not only are they providing your rental income, but you must trust them to look after your asset.
Census figures show renters now make up more than 30% of Australian households, so there are many tenants to choose from, but you won’t always have the best options at your disposal.
Take a look at who is applying to rent your property and try to make a smart choice, based on the following guidelines.
If you want to attract tenants who take pride in the presentation (and preservation) of your property, you need to lead by example. You should think of rental open houses the same way you think of an auction. If you were selling, you would want your property to look and feel as good as possible to give it the chance to fetch the best potential price. Do the same for a rental inspection and you will give yourself the chance to fetch the best possible tenant. The bonus to this is that you will be justified in asking the best rental price too.
The next step, if you haven’t done this already, is to get a property manager on board. For a reasonable weekly fee, a professional will screen tenants, give advice and feedback on the market, organise professional photos, list the property for rent online and amplify on social media, plus take care of minor repairs and superficial improvements.
Good property managers often have a database of high quality tenants they know are in the market for a good rental. The knowledge and experience property managers bring to the table can save you hours of time, emotional energy and sometimes weeks or months of lost rent while you would otherwise be trying to fill a vacancy.
They can also give you advice on a realistic asking rent, when you might be able to raise it and when it would be wise to lower it to meet a difficult market.
Attend property inspections and check out the people that come through. Maybe there is someone with their form filled out and months’ worth of rent ready to go in advance. Maybe someone else tramps dirt across your carpets. Remember who presents well and makes a good impression so that if it ends up being a choice between the two, you go with the ones you had the best gut feeling about.
When your property manager presents you with a shortlist of tenants, think about their suitability for your property. If you have a family home in the suburbs, choose a family to live there. They will be much more suitable than a single student or professional looking for a six month lease. They are likely to stay put longer and treat your home as if it were their own.
On the flipside, if you have a furnished studio apartment in the city, a family is not going to be a good fit, as they will quickly want to move somewhere more suitable.
You wouldn’t employ someone at your own business without checking with past employers, so why would you put them in charge of your precious asset?
You want at least three reference checks before green lighting a prospective tenant. If they haven’t had three prior rentals, then ask for a reference from an employer, or a character reference from a respected member of society.
Find out how long they have stayed at past properties. If they were at one property for five or six years, they are likely to be more solid and reliable tenants than one who has gone from six month lease to six month lease.
If you don’t get the ideal tenants, don’t rush to settle for one of the applicants you didn’t like. Go back to the drawing board, consult your property manager for advice and organize another inspection. Sure, you may be losing money each week that your property is vacant, but if you get a loyal, reliable and respectful tenant, it will be well worth the wait.