15 Feb 13
Every investor with a rental property wants a good return on their investment. Having the property occupied most of the time by quality tenants is the best way to get that consistent return. However, it only takes one poor tenant who does not pay their rent, neglects or damages the property and uses the fullness of the time allowed by law before they vacate, to cause a serious shortfall in cash flow.
Getting the right property manager to secure the best tenants for a rental property is absolutely essential to maintaining the value of the property and keeping that cash flow coming in. With the rental real estate market being very competitive there is really no excuse for poor tenants to be placed in properties when there are so many good tenants looking for properties to rent.
Proven Steps to Protect Investors from Bad Tenants
So what should a property manager be doing to select the best tenants to occupy their clients' property? The most reliable agencies have a rigorous selection process that reduces the risk of taking tenants with a poor rental history onto their databases. Their management systems provide the operational support that the property manager needs to make the important decisions and to confront the unique challenges of property management on a daily basis.
Given that the property manager is working for such an agency with these systems, there are several steps that would be taken as a matter of routine to ensure that only reliable tenants make it through the selection process. The first is to have an application form created that captures all the information the property manager will need to start some background checks on the applicant. Most agencies these days have application forms available online to speed up the process.
A thorough property manager will require a number of documents, such as photo identification, driver license/passport/proof of age card, Medicare/Health card and the usual basic personal details. They will also expect to see previous rental history and rental referees, or a copy of a rates notice if the applicants have never rented because they owned their own home. Rent accommodation receipts or a copy of a previous lease should be requested to provide some proven payment history.
Look for Evidence of Capacity to Pay
Utility accounts and recent bank statements also provide some evidence of an ability to make regular financial commitments. Proof of income through either payslips or other documents showing means of income should also be sought, along with employment confirmation, a statement from Centrelink, or a tax return if the applicant is self employed. Applicants who can produce all these documents are already demonstrating that they have the financial capacity to pay the rent and a well-earned reputation for reliability and honesty.
Having the tenant physically attend the office and undergo a tenancy induction where the lease is explained and signed, all queries answered and the rent payment methods described in detail is another step that will eliminate anyone who is not serious about their tenancy. Asking the tenant to pay the rent via a direct debit from their bank account is a good way of ensuring that the payments come in regularly, although it is not foolproof. However, it does set some boundaries and establishes in the mind of the tenant that this agency will not tolerate rental arrears.
There are other steps that could be taken, but the main object here is to weed out the undesirable tenants before they can cause any damage or disruption to both the property and the reputation of the agency. These are basic steps that most companies would require for someone to open any kind of account with them, and a rental situation is no different. They are simple to implement and will save a lot of heartache.