One of the most important keys to success in the rental property market is finding tenants who will not only pay on time, but also take care of the property dutifully. How can investors find the best tenants for their properties?
After successfully purchasing a rental investment property and putting it up on the market, the next step to ensuring that the investor makes the most out of the asset is to find a great tenants through a thorough screening process.
Rent My Estate’s Michael Gilbert said that nothing can make the life of a property owner simpler than having great tenants, and there’s no greater nightmare than having bad ones.
According to him, like picking a property to invest in, finding tenants must also entail due diligence – no matter how easy it may seem to just accept the first applicant in order to avoid extended vacancy.
“It’s kind of like buying a boat – you can take the time to find a good deal on a good boat with a strong engine that will bring you home every time, or you can accept the one with a couple [of] small leaks and think ‘at least it floats.’” Mr Gilbert said.
“Which do you suppose is going to cost you more money and heartache in the long run?”
The property professional advised investors to find as many applicants as they can through good marketing.
Moreover, they should be willing to spend enough time and effort to actually read through and understand their applications.
Once the options are narrowed down, take time to meet the applicants for a building inspection.
“How they respect your property during the inspection is a good indicator of how they will during the tenancy. Be careful on that note, however. If your instinct tells you they were putting on a performance at the inspection, you’re probably right,” according to the property professional.
Among the most effective ways to get to know a prospective tenant is through their application, which is why it’s important to make sure that they provide only truthful information by doing an independent process of verification.
Some applicants tend to lie about a thing or two to make their application look good, especially if there is significant competition for the house or unit.
In order to avoid this, Mr Gilbert suggested looking for valid identification card and proof of income first and foremost – without these, the application may very well be considered invalid.
“Ensure that they have given 100 points of ID and proof of income, preferably their three most recent payslips and/or a bank statement highlighting their income,” he said.
To start the verification process, Mr Gilbert advised investors to take time to reach out to the applicant’s references in order to ensure that the information provided is true.
The most important phone call to make, according to him, is to the property manager or the landlord of the last place that the prospective tenant rented.
Some of the questions to ask are: How were they as tenants? Do they pay in time? Can we get a copy of the tenant ledger? Do they take care of the property? Was the bond refunded in full?
It may also do the investor well to speak with the applicant’s employer and inquire about their income as well as the supervisor’s impression of him.
“I believe good employees make great tenants,” Mr Gilbert highlighted.
“One of my favorite questions to ask employers is whether they think the applicant will be working for them in six months’ time. If they say ‘I hope so … ’ I know I’m getting close.”
Further, check the other references indicated in the application.
While they are likely to say good things about the applicant, the investor can use this opportunity to get to know the people who the applicant associates themselves with – a good indication of one’s character.
Ask these personal references whether or not they will lease a rental property to the applicant, and listen closely to their answer.
According to Mr Gilbert: “The answer is always going to be yes, but listen closely. If there is some hesitation in the reply, that’s a big worry but a cheerful genuine confirmation is a good sign.”
Once the information is verified through research and several phone calls, the investor can further investigate by commissioning an assessment from the National Tenancy Database.
Finally, Mr Gilbert advised investors to trust their gut – a lesson often learned by property investors the hard way.
“Go over everything and do a final gut check. If something does not feel right, it probably isn’t,” he concluded.
“It is a bit of work to ask a lot of strangers personal questions about another stranger, but I find that the time I invest saves me 10 times as much frustration down the line.”