I still remember the pain.
I would wake up in the middle of the night, wondering if the next rent payment was going to come in. Will the kitchen or the new carpet be ruined? It almost killed me.
My worst tenants ever, and they were only in the house for two months. Those two months felt like two years! EVERY DAY I worried what the next day might bring. After I got court orders to kick them out, they graffitied the whole house from top to bottom. I will never go through that again. Never!
On the flip side, there isn’t much to say about the other 99% of the great tenants I’ve worked with. They are simply nice people with whom I do business with. They always pay the rent on time, they look after the house like it was their own, and many stay for two or more years. The time and effort I spend on good tenants is a fraction of what I spend on bad tenants. It’s not just saving money, it’s also your precious time.
Over the last nine years, I’ve focused my energy into finding great tenants, and now I’m happy to share my 15 step checklist with you to help you find the great tenants you’ll never have to worry about.
Some of you may think that these steps are a bit of work, but I can assure you that each one is crucial if you want to attract the BEST tenants possible.
In a rush? Click here for the checklist summary.
This is not in order of importance (they are ALL important) but in order of the process so you can easily follow it from start to finish.
1. The Right House for the Right Tenants
To attract the type of tenants you want, the property has to suit their needs. For example, you will be pushing dirt uphill by trying to find a professional working couple who wants to move into your huge house with the massive backyard which requires a lot of maintenance. If you have not already purchased a house, consider what your preferred tenants will want. That way you can buy a house which will sell itself to them.
Here are 5 universal things that 99% of good tenants want in a property:
- A clean place
- Well maintained property
- Heating and/or cooling (depending on climate)
- Close to amenities (shops, schools and transport)
If your property ticks all of these boxes, it is well on its way to attracting a great tenant.
2. Prepare Your Property to Impress
You may have noticed that the hard work begins even before you start advertising and screening your tenants…
The #1 thing good tenants need is a clean and well looked after property. Your hard work now will pay off for years to come. So, grab your tool belt and make any repairs that need to be done. If you suspect that a tenant will ask about it, fix it before they even see it. Tenants are hard wired not to believe what you say, they need to see it to believe it. Paying a tradesman to get the job done quickly and professionally can pay off big time.
Next, grab the bucket and mop and clean the house from top to bottom.
3. Pricing to Attract
Price your property TOO HIGH and it won’t attract good tenants. Instead, you’ll attract desperate tenants who may end up not paying.
Price your property TOO LOW, and you’re doing the property and your hip pocket an injustice.
In order to attract enough good quality tenants to your inspections, you will need to set your price at or just below (even just $5 below) similar properties that are currently on the market. Tenants will determine if your property represents good value when they compare yours with others currently on the market. This means you will need to jump on realestate.com.au and do some research.
4. Get Good Photos
Before you start advertising, you need to get some good photos of your house. Good tenants will be attracted to good photos. I generally recommend hiring a professional to get photos of your house, but there are also times when pictures snapped with a smartphone work just as well. Getting good pictures with your phone requires a little extra thought and effort.
Here’s 5 quick tips for taking your own photos:
- Turn HDR mode on (if using your iphone)
- Take photos on a good day (while its light and bright with blue sky)
- Turn on ALL lights, open doors and blinds to let as much light in
- Remove clutter (you want just the basic furniture – nothing else)
- Remove all tea towels and bath towels etc etc
5. Advertise your Property – Shout from the Roof Tops, Bang the Drums and Tell EVERYONE about Your House
A smart person once told me – “You can’t sell a secret”. Keep this in mind when you’re renting your house.
You never know where great tenants are going to come from, but here are the two most critical things you will need to find tenants:
- Advertise on realestate.com.au
- Put a “For Lease” sign out the front
Here are three more good ideas which are worth considering:
- Think about upgrading your ad on realestate.com.au to a Highlight Property. They attract more attention and always appear near the top of the list.
- Print up some brochures to pop into mailboxes around the block. Your neighbors may know someone they would love to have living near them.
- Get your ad on as many other real estate websites as you can. This will also help Google to show your house to tenants searching the web.
PS: Don’t forget your own network – Share on Facebook.
6. Act Promptly to all Enquiries – GOOD Tenants won’t Muck Around
When good tenants find a house they like, they will inspect it and have the application all filled out and ready for you within 24 hours. Within 48, they are ready to sign the lease, pay the first lot of rent and move in. It can be just that simple.
When you get a call that sounds like a very good tenant, don’t waste any time. Get them through the house ASAP.
Hint: If they sound less than great on the phone, direct them to your next open home.
Make it easy for working tenants to view your home by holding an open house right after work during the week. 5:30 – 6pm is usually good if it is still light. I also like to hold open homes on late Saturday mornings, around 11am.
7. Use the Inspection to Get to Know Your Potential Tenants
If you’ve followed my steps so far, you should have a house full of potential tenants who want to rent your house. Now, it is time for you to start picking up on the signs of a great tenant.
I recently held a webinar on how to screen tenants. One of the first things I discussed was good and bad signs to look for at the inspection.
Inspections are a time for the tenants to get a look at the house but it is a good chance for you to get a first impression of the sort of people they are. Don’t get into their renting history or other screening issues at this point, just get a feel for the type of people they are.
8. Make Sure You Have Good Application forms Ready
Here’s a good one you can use. This one’s even better than most because you can email this to your potential tenants and they don’t even need to print it out as they can fill it out on the computer. You want to make it easy as possible for your tenants to apply.
9. Shortlist Your Applications for a Quick Response
There is not a lot of time to waste. Your ideal tenant may have gone to two or three open homes today, and put in an application at each of them. Who calls them back first wins!
10. Get Proof of Income & 100 Points of ID
Once you have selected the application (or two) that you want to screen, make sure you have proof of income and 100 points of ID.
Sometimes this step is left for the end of the screening process, but I think that is a mistake. Asking for the information now motivates the tenants to provide it promptly (so they can get approved).
Proof of Income – This might include all of the below:
- 3 most recent payslips
- Bank statements (just showing their income is fine)
- End of year Tax Returns
I do not accept invoices as proof of income from self employed tenants as they are not proof that money is actually coming in, but a bank statement is a good alternative.
100 points of ID is self explanatory, but we sometimes forget to explain why we need it. At this point, you will need it to check your tenant on the National Tenancy Database, but you will also need to be sure that the people you rent to are actually who they say they are. This information is on the application for the tenants to read.
If they ask when the latest they can get the information to you, remember that you are trying to have the application approved within 48 hours. If they cannot get it to you by tomorrow, you may want to move to another application.
Hint: Even though you are screening applications at this point, do not stop advertising and showing the house. The tenants you are looking at may look great, but who knows what will come up. If you are not allowing new applications to come in, you may lose precious time.
11. Get your Mindset Right
When you are going through an application, it is important not to be sidetracked by your own personal thoughts or any other form of discrimination (it’s illegal, if nothing else). Your tenant screening is focused on two very important questions:
Can they pay the rent?
Will they look after the property?
Keep this in mind at ALL times while you are checking the application. You’re running a business here, don’t let it get personal!
12. Calling ALL the References
The most important person to speak with is the agent or owner your potential tenants are currently or previously rented through. If your tenant was a good tenant before, they are likely to be a good tenant for you. If they were bad rent payers, they will be again.
Since they are pressed for time, many real estate agents think it is OK to fax or email references. I am NOT a fan of the practice. I always prefer to call and actually speak to the person who was in charge of the property, whether it was the owner or an agent.
You can get a lot of facts from an email, but for really getting a feel for what someone thinks, a phone call is a lot better. On the phone you get to hear all the silences, umming and arring. Sometimes these can tell you more than their words.
Hesitations can tell you a lot. If you ask an owner if they would rent to their previous tenant again, they are likely to say yes. But if they hesitate before giving a soft yes, what are they really telling you? Probably that they were a borderline tenant and not worth renting to.
Some agents may want to give a bad reference, but don’t want to put it in writing because someone might show the tenants the reference. So they are often more candid on the phone.
Never Forget to Ask These Questions:
Did they pay the rent on time?
Find out if they ever missed a rent payment. This may mean discussing this topic a little further. Ask for an email copy of their rent ledger, there is nothing like seeing it with your own eyes.
Would you rent to them again?
This is my favorite question to ask. It is especially effective if the person you are calling has the same high standards for great tenants that you do. If you get an unhesitating Yes, you know you have a winner!
The next person you need to talk to is their current employer (the previous employer is good to talk to as well, if you can). I have always found that if a tenant is a good employee, they are more likely to be a good tenant.
Don’t forget to ask these questions:
Do you think they will be working for you in six months time?
Not only do you need to know that they can pay the rent now, you need to know that they can pay the rent six months down the road. This can also show what the supervisor thinks of your tenant. If he says “I hope so”, you know you are onto a winner!
If you had a rental property, would you rent to them?
This is a single question that can eliminate about five others. If you get a definite ‘Yes’, great. If you hear a hesitant ‘Maybe’, you’ll want to dig some more. Most of the time ‘Maybe’ is a polite way to say ‘NO’.
Hint: Don’t forget to confirm their income!
Here is a full list of all the questions
13. Check your tenants on the National Tenancy Database
So you’ve called all their references and your tenants still sound good. The next step is to check them on the NTD (National Tenancy Database). An NTD search looks for:
- If they have ever been a ‘bad tenant’ for someone else.
Owners and agents can list tenants who have previously left a property with money still owing after the bond has been used. For example, if the tenant left a property that had a cleaning bill that was more than the bond and refused to pay the extra amount, they could be listed on the NTD.
If the person has declared bankruptcy in the last seven years, it will show up on the report. This is a good way to find out their past financial history.
- ID Verification
A full tenant check through the NTD also verifies their ID against 20 other databases, so a fake ID is likely to show up.
- Court orders and judgments
If the tenants have any court orders or judgments against them, the NTD will pick them up.
The one problem with the NTD is that it is only available for real estate agents to use. However with a service like Cubbi you can do a tenant check anytime you’d like. A search costs $29, but the peace of mind is priceless. You can learn more about tenant checks with Cubbi here.
14. Follow your GUT Instinct
I believe that in many cases, your instincts about a person can be more accurate than raw data. Sometimes I get to this stage of the screening, and everything indicates that they should be good tenants except for a nagging feeling I just can’t shake.
Here’s an example:
I once put a tenant into a house even though I had a gut feeling that something was not quite right. After taking them to tribunal twice so that I could get them out (after less than two months), they managed to vandalise the property from top to bottom with graffiti before they left. If only I had followed my gut instinct about these tenants those 2 months of hell would never have happened. Don’t underestimate this step.
15. Approve your Tenant & Lock ’em in Quick!!
When you’ve made the decision to approve tenants to move into your property, do not wait around to let them know. Get on the phone and give them the good news right away with a follow up email to put the process in writing (lease, rent, bond, condition report and keys).
Don’t remove your ad until the lease is signed and the first lot of rent paid to keep their motivation high. For the moment put ‘Under Application’ as the heading in your ad.
Hint: Include the bond payment details and where the rent should be paid to in this email.
I’m a big believer that the single most important part of managing property is picking the right tenants. I realised a long time ago that by putting in the effort now and finding great tenants it just saves me sooo much time and effort down the track.
You should now be able to go through the whole process of finding some great tenants and then choosing the best one for yourself.