Property investors often stress about finding and keeping the right tenant as much as they would when buying an investment property—and rightfully so, because a good tenant is one of the most vital keys to ensuring the success of one's property investment journey.
Lisa Indge of Let's Rent, who has worked as a property manager for years, describes a good tenant simply as someone who pays rent on time and stays on for the long-term.
"The first thing I look at is the stability of the application. In other words, how long have they been in their employment, how long have they been in their previous rental, how long have they know their references. That's the first check," she said.
She shares more of her agency's process in choosing tenants for their clients with Smart Property Investment's Phil Tarrant and Vivienne Kelly, reiterating the importance of good communication and self-education:
How will you describe the process of choosing the right tenants?
Lisa Indge: Obviously, reference-checking is crucially important... A tenant who is renting a property directly through the landlord is not as good a reference as someone who is renting through an agency who can demonstrate a ledger that shows when they paid their rent... We don't approve any application without a copy of the ledger because there's many agenc[ies] out there that believe that tenants are paying on time but they're not.
Obviously, we need to ensure that their salary is sufficient to pay the rent, which is key to getting to the next step.
Is there a specific income range that can determine the ideal tenant?
Lisa Indge: It's around 40%, which might sound very high, but with the demographic we're dealing with, they often have investment properties as well. They may have shared portfolios. So, you can't look at it in isolation. Additionally, if someone is self-employed, it is likely that their salary will not show as high as the reality of their [actual] income, so they'll put a lot of their expenses through the business.
What would elevate one applicant over the other?
Lisa Indge: The stability of the applicant is really important because you'll find that if they are in their employment for, let's say, five years, and they've been in their previous rental for three years, they've known their personal reference for 15-20 years, they are likely to be a long-term tenant, unless they're saying that they are just looking to rent until they purchase a property. [In that case], we might put them aside to some extent.
The other thing is talking to these people is really important. You can see so much in an application, but what about how the person responds to communication. Are they easy to communicate with, are they difficult—that often shows up quite early. If we're contacting them, for example, and we can't get hold of one of their references, we need their assistance to get their applications checked, [and] if they're very responsive to that, then that's a good sign. If they can't be bother[ed] with dealing with us... [it's an indicator] that they're not that interested [in] the property.
Should communication happen in person as well?
Lisa Indge: Talking to the applicant is really important during that process, but also talking to them at the property so that we're gauging what sort of person they are. Are they going to be great tenants or are they going to be walking through the door and pointing out every single little thing that needs to be done to bring it up to brand new?
Are early applicants generally the best ones, too?
Lisa Indge: The reality is that from one weekend to the next or one day to the next, there are a fixed number of people in the rental market looking to move within a short space of time. We only have, I would say, three weeks maximum to find a tenant, so we're coaching our clients through that time—we show the property, what is the feedback, how many people have we had through.
Tune in to Lisa Indge's episode in The Smart Property Investment Show to find out why pet owners can make great tenants, too, as well as when to be lenient in the leasing process and what to do when it all goes wrong.