Finding the right tenants for your investment property can be hard. Not all tenants are reliable, and some even damage property. So, how can you, as an investor, avoid these issues?
Problems that Tenants Can Cause
There are a number of issues that can be caused by tenants; some are easier than others to resolve. The most common problems you may encounter are as follows:
1. Late rent payment
Some tenants are poor at managing their finances, which makes it difficult for them to keep up with weekly or monthly payments. As a landlord, you need to keep on top of this issue to ensure that rental payments do not become a bigger problem and stretch out over months.
2. Property damage
Holes in walls, floors and curtains, and broken blinds and other fixtures are common issues. To avoid this, always ask a prospective tenant about their previous rental history, and for a list of referees that you can contact before you agree to lease them your property.
3. Refusal to pay for water
A tenant is typically responsible for paying for their water use, in some states they may also be accountable for the supply However, not all tenants will pay this on time. To get around this problem, pay the bill yourself and then send a copy to the tenant. Giving them a 4-week payment plan to clear their debt may also help ease the burden of an extra financial commitment.
4. Unauthorised changes to the property
Some tenants think of your property as there is. They will paint rooms without asking, change door locks and can even decide to remodel your home. This issue can be catastrophic if they do not know what they are doing, with D.I.Y projects costing far more to fix than the rent that you are collecting. To avoid this problem, make sure you conduct regular home inspections. If you notice any unusual activity, then highlight the Tenancy Act and how the tenant legally is not permitted to make such changes without authorised permission. Also, inform the tenant that making some changes to a property when you are not licensed is an offence.
Finding the Right Tenant for your Investment Property
While the problems that a tenant can create are numerous, there are five ways that you can avoid having to deal with these. Lets look at these now.
1. Interview or meet your prospective tenant: Always meet prospective tenants, even if you have a property manager. By meeting a tenant in-person, you can ascertain what type of person they are by reading their body language and mannerisms. If you feel uncomfortable dealing with this person, then move on.
2. Read between the line: Always read through all applications for your property. Shortlist those that present better than others. For instance, if an applicant has moved four times over the last 18-months, then this may indicate a problem.
To uncover the truth, look to see if full repayment of bonds have occurred. If they have not, then this could indicate a poor rent payment history, or property damage, resulting in tenancy termination.
3. Always present your property well: Excellent property presentation will attract quality tenants. If you do not maintain your property, then it is harder for you to ask a high price for rent, and you will attract tenants that have lower expectations. After all, if you cannot care for your property, then why should they?
4. Conduct regular inspection: Even if your tenant has been in your property for years with no problems, you must still carry out regular inspections. Not visiting the property makes your tenant complacent. Therefore, the tenant begins to view the property as theirs, and this leads to problems. By you conducting regular inspections, you remind the tenant that the property belongs to you.
5. Go with your gut feeling: If you do not have a good feeling about an applicant, then move on. If all applicants are similar, then readvertise the property. Its better to wait than have a bad tenant.
Written by eChoice
Since 1998, eChoice has helped more than 50,000 Australians secure a home loan through its network of over 25 lenders and hundreds of loans. Best of all our service is cost and obligation free!