How To Pick The Right Tenant
When starting out building a property portfolio, first time property investors spend a lot of time researching locations and specific houses or units and putting most of their focus on the actual purchase of an investment property.
But they soon find out that the purchase is only the very beginning of the journey. It is the gateway to a financial partnership of up to 30 years. A partnership between you and the people who are going to help you keep the investment property and make money… the Tenants.
When you think about it, tenants are pretty important, but apart from anecdotal evidence and a quick look at vacancy rates, property investors often don’t think too hard about who is going to live in their rental properties until the deal is done and the time comes to start servicing the mortgage.
Ideally, an investment property will come with the perfect Tenants already there on a long term lease, but that’s not always the case. So, here you are with your investment property…how do you find the right Tenant? One who not only pays your rental income, but also takes good care of your asset?
Census figures show renters now make up more than 30% of Australian households, so there are plenty of fish in the sea, but you won’t always have the best options at your disposal.
Take a look at who is applying to rent your investment 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 investment property, you need to lead by example. You should think of rental open houses the same as if you were selling. If your property looks and feels as good as possible when selling, you can fetch the best potential price. And when renting it out, you can fetch the best possible Tenant. The bonus is that you will be justified in asking the best rental price too.
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 investment property for rent online and amplify on social media, plus identify and coordinate necessary repairs and maintenance.
Property managers often have a database of quality Tenants they know are in the market. The knowledge and experience property managers bring to the table can save you time, energy and lost rent while you would otherwise be trying to fill a vacancy.
They can also give you advice on a realistic asking rent and when you might be able to raise it.
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 between the two, you can make an informed choice.
When your property manager gives you a shortlist of tenants, think about suitability. If you have a family home in the suburbs, a family will be more suitable than a student or professional looking for a six month lease. They are likely to stay longer and treat your home as if it were their own.
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 give someone a job without a reference check, so why put them in charge of your precious asset?
You want at least three references before approving a prospective Tenant. If they haven’t had enough prior rentals, a reference from an employer can also work.
Look at how long they have stayed at past rental properties. If its several years per rental property, they are likely to be more stable Tenants than one who has stayed six months at a time.
If you don’t get the ideal Tenants, don’t settle for an applicant you didn’t like. Go back to your property manager for advice about organising another inspection, or to find out what other options may be available to you. It’s worth the short term effort or pain to get the right Tenant. If you’re a Tenant or Property Owner with any questions you want answered, chat to our Blink Property team.