It’s likely you’ve spent many years working hard to afford an investment property to help you build a secure financial future. The last thing you want is a tenant that risks that investment, whether that’s failing to pay the rent; damaging your property; or cutting the lease short so you have to start the tenant screening process all over again.
This is precisely why it’s important to find reliable, long term tenants who will look after your valuable property. To help you in this quest, here are some key tenant screening tips, along with a few important reasons why you might consider using a property management team, rather than risk going it alone.
Finding a tenant
There are a number of steps involved in finding the right tenant for your property. At a glance, these include:
- Composing the right rental ad to attract the most appropriate tenant applicants
- Tenant screening, which involves a number of extensive processes
- Tenant selection. If steps 1 and 2 completely thoroughly, you'll be choosing from a pool a quality applicants.
Each step requires time, but also some measure of expertise so you can make an informed decision about whether the tenant is being truthful; someone who is not merely presenting a front, and telling you what you want to hear in the hopes you will select them.
This is one area where a property management team can be of most benefit. With many years of experience dealing with this stage of the tenant screening process, they are often the best placed to spot authentic tenants that will protect your investment.
Steps involved in the tenant screening process
Let’s turn to the detail of what to do to vet potential long term tenants for your rental property
1. Write a great rental advertisement with the right rental price point
An essential part of attracting the right applicant for your rental is to ensure you present it in an honest manner. This includes an accurate written description, plus professional photos that adequately capture and highlight key features. Presenting your property in this way sets the standard for how it should be maintained. It should then attract tenants who are interested in keeping it that way.
Your rental price should be set in line with current market conditions, and be a reflection of the surrounding area and the standard of the property itself.
Should you feel unsure about writing your advertisement and setting the correct price, a good property manager can be of great benefit. A local real estate agent who specialises in property management is often a wise choice. They intimately understand your market and can offer sound advice about the right rental price, advertisement wording, as well as help with marketing your property including professional photography.
2. Ensure prospective tenants fill out a comprehensive application form
The most important part of the tenant screening process is the tenancy application. A thorough application covers an array of bases to help you adequately vet each tenant.
The essential components of a tenancy application include:
- Personal details including ID
- Income and employment information (including pay slips)
- Bank statements (at least last three months to determine expenditure)
- Rental history (two previous properties if possible)
- Bond details
- Personal references
If the applicant is reluctant, or very slow to provide these details, this could be a sign they are not the right tenant for your property.
You should also be aware that by law, there are things you can, and cannot include in a rental application. This is another area where a property management team can provide you with the right advice.
3. Use the tenant application form to thoroughly assess their suitability
Once you have all the completed application and required documents, take the time to carefully review the information provided. As you do, ask yourself these crucial questions:
a) Can you verify their identity?
Applicants must provide you with photographic identification, such as a driver’s license passport or student card. You can also request to see the visa status of those who do not hold an Australian passport to ensure they are legally able to take on a long term tenancy.
Any applicant that cannot show you these documents should be avoided.
b) Can they afford your property?
Generally speaking, if a tenant is likely to spend more than 30% of their income on rent, then they can’t afford that property. You will be able to work this out from their pay slips. It’s also wise to review their savings and/or transaction accounts to get an idea of their expenses and spending habits. This will help you make an informed decision about whether they truly have the funds to rent your property.
Apart from reviewing the numbers, you should also contact their current employer to confirm their employment status and job stability.
Some questions you could ask:
- Are they in a permanent role or temporary/contract position?
- How long have they worked for you?
- What are they like as an employee (loyal, reliable, punctual)?
- Are there any planned redundancies in their area?
Should they be self-employed, you may be able to ask their accountant for confirmation about their business status and financials for the past few years.
c) Are they stable?
The key to securing a long term tenant, thus a steady rental income, is stability. Tenants who continually switched jobs and/or move often may not be able to afford a long term lease, or are more likely to cut yours short, leaving you the cost and hassle of finding a new tenant all too soon.
d) Do they follow the ‘rental rules’?
Another vital step in the tenant screening process is to connect with their previous landlord/s. Uncovering what they were like as a tenant is one of the very best ways to predict what they will be like as yours.
When speaking to their landlord, confirm that the details about their rental history on their application form actually match up. Ask:
- How long did they rent your property?
- Did they pay their rent on time? We can request a rental ledger to discern whether rent is consistently paid on time.
- Why did they leave (it’s essential to find out if they were evicted for non-payment)?
- Did they provide the proper amount of notice?
- What was the state of the property when they left?
- Did they damage the property?
- Did you receive complaints from neighbours?
- Did they have pets?
- Were they easy to reach, and communicate with?
- Would you rent to them again?
Use this information, along with conversations you’ve had with their personal referees, to weigh up whether they are a good fit for your rental property.
A few more important considerations
Managing your rental property involves more than just finding a tenant and screening them. You should also make sure you are up to date with rental law changes, as well as your legal landlord rights and responsibilities. Landlord insurance is also imperative, as is having the time available to organise and perform regular property inspections, answer tenant queries, and respond to maintenance and/or repair requests.
Another area to consider is presenting your case for compensation or rental arrears at VCAT. While it is hoped things will run smoothly with your tenant, there is always the possibility of a disagreement that can’t be resolved, or needs to be taken further. Should this occur, are you comfortable handling this process?
TTS Real Estate can help
If you feel unsure about any of these areas, engaging the services of a property management team, such as TTS Real Estate, might be what you need to ensure your valuable investment remains safe and stable for the long term.
We specialise in keeping abreast of rental law changes and requisite legal responsibilities, as well as having a thorough and streamlined process for vetting tenants. We can also handle a host of other important tasks for you such as chasing rent, liaising with tenants, managing maintenance requests, and overseeing the change to VCAT process in the unlikely event things go wrong.