Every investor wants to ensure they find good tenants for their property, but this doesn’t always happen and we hear lots of horror stories. Selecting good tenants is a key in property investment, it will reduce both emotional and financial stress for you. It will also likely keep the property tenanted for longer and will reduce maintenance for you . The goal should be to find tenants that will treat your property like it’s their own.
Some important tips to finding good tenants.
1. The property should be well presented. This includes how the property appears online and if you have professional photos then this will attract more views on the web and likely lead to more people inspecting the property. The property should be clean, tidy and all repairs attended to prior to the first inspection. If you’re busy and want to undertake more than a basic update, we have formed an alliance with a company that can take care of it for you.
2. Rent set below or at market rent. We find that setting the rent below market is the most effective way to attract more applicants, using this strategy alone usually results in multiple applications. If you set the rent above market then you attract the wrong type of tenants and likely to only have 1 applicant to select and it’s very common that you will have issues.
We just leased a 1 bedroom apartment in Paddington on the first inspection with 3 parties applying for the property, rent was set to market. There was 140 competing properties in the suburb and surrounding suburbs in a similar price range.
3. Finding the right Property Manager. This is the another key to property investment, not all property managers are the same. Selecting the right property manager will make you money, whereas the wrong property manager will cost you money. Most investors just tolerate dealing with a property manager that they are not happy with. It’s easy to move and if you’re looking for a new property manager we can email you a list of questions to ask.
4. Don’t have young property officers showing your property. In the real estate industry, it is very common for people aged 21 or younger to be showing properties. Unfortunately you need more life experience and they generally think everyone will be a good tenant.
5. Monitor applicants throughout the whole process. This starts when an applicant makes an enquiry on the property, continues to the time of the inspection and follows to when the applicant applies and leads up prior to a deposit is paid.
Recently we held an inspection on a apartment in Darlinghurst that had about 10 people lining up to have a look at the property, one party said they will wait outside and let everyone else in before they would go inside. We viewed this party as a positive trait to consider for a potential tenant.
6. Assessing the application. You need to be thorough with the application from checking references to asking for supporting information. Ideally you are looking for stability both at their work and their last property.
If someone moves every 6-12 months then they are likely to do the same. You want to find someone that will stay longer than 12 months. Another big factor is the rent ratio to income, say for instance an applicant is applying for a $500pw property and is earning $50,000 pa, then the rent ratio to income is more than 50% and this would indicate that the applicant could not afford the rent and likely to have difficulty. Sometimes an option is to have an applicants parents also go on the lease.
A lot of owners that lease properties themselves take people on face value and don’t check or verify any information.
A warning sign is an applicant that has rented for a while but doesnt have any real estate agent references.
7. Trust your instincts. You have to listen to you gut, sometimes you pick up that something that is not right. Our property managers do this everyday and get a sense of an applicant or a particular situation. Making a decision at this early stage will save you in the long run.