Selecting The Best Tenant - The Must Haves!
Once you have selected your Property Manager and advertised your property it is likely that you could have a number of applications from potential tenants – and it could be confusing as to who to trust to live in your investment property.
Selecting the best tenant is arguably the most important part of the tenancy process as it will lead to a smooth tenancy, or have the potential to cost you money and give you headaches. As part of the application process your Property Manager should carry out thorough reference checks to give you an insight into the background and circumstances of your potential tenant. Once this process happens, there are a number of key factors you should be considering when picking your tenant:
Income
This seems obvious but is important to note. The tenant should have an ability to pay the rental amount for the property, and consistent and reliable income should be sought. Whether it be income from employment, investment or government benefits there should be a demonstrated history in serviceability for the property and other expenses to avoid late or missed rental payments. A good rule of thumb is that the rent should represent no more than 25%-35% of the gross household income.
Suitability
You should ensure that the tenants are suitable to the property to minimise risk. This can be a number of factors, including the number of applicants, their socio-demographics and of course their living habits. For example, it would be impractical to consider a group of 6 adults suitable for a 1 bedroom apartment. Equally, a consideration beyond the property itself, including its location and neighbourhood should be factors taken into account. Of course, this should be done on the basis of facts and in a non-discriminatory manner.
Stability
Stability is an often forgotten but vital indicator of a suitable tenancy. If the applicant changes jobs regularly or moves very frequently, they may not be suitable for your plans with your property. Looking at this history of the applicant will give you a solid insight into their habits and reliability.
Rental References
Along with income, this seems quite obvious but must be a consideration. Adequate rental reference checks must be undertaken to understand the history of the applicant and their conduct in previous tenancies. If the applicant has rented privately, your Property Manager should seek evidence to support this. Rental ledgers, verbal and written references should all be sought and verified.
Employment References
Whilst an applicant may be suitably employed it is crucial to undertake employment checks to understand on a more wholistic level the status of their employment. If the job is likely to be terminated in the near future, or the tenant conducts themselves inappropriately in the workplace this should be uncovered during this process and are important factors in determining the suitability of the tenant.
Evidence
Evidence of the applicant and their claims should be sought, and can include identification, payslips, bank statements, reference letters and other supporting documentation. These should be examined carefully to ensure they are genuine and support the claims of the applicant. They can also uncover important considerations such as affordability, past residencies, and the overall reliability of the information provided.
Importantly, after meeting your potential tenant and processing their application, your Property Manager should be able to offer advice and guidance as to the suitability and potential for a conducive tenancy and future relationship. It is important to keep in mind that it is in the Property Manager’s best interest to select the most appropriate tenant as they will be managing the tenancy – but you should never proceed with a tenancy you are not comfortable with. As the owner, the decision and consequences of your choice will sit with you – so it is worthwhile spending time to understand the application and have faith that they are the best choice for your property.
At Visser Estate Agents, we understand the importance of undertaking thorough reference checks for all of our
potential tenants, and believe that this process is key to achieving a successful tenancy. We will then offer our each
client unbiased advise as to whether to proceed with the tenancy based on all of the information available to us. 