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Screen Potential Tenants With This Ultimate 9 Step Guide

Screen Potential Tenants With This Ultimate 9 Step Guide

#1 Take mental notes at the inspection

Screening potential tenants starts at the inspection.

Good tenants come across as:

  • Genuine
  • Slightly particular about the home (they care about the property they live in)
  • Healthy, clean and tidy. They look after themselves and their belongings

Warning signs:

  • They argue
  • They’re negative
  • They tell you their life story (desperate)
  • Don’t use the inspection as a complete screening tool. It just starts at the inspection. Take a mental note about each person that inspects your property.

#2 Good application forms on the ready

You can’t properly screen tenants without good applications forms.

You can grab a copy of a rental application form here and provide it to your tenant.

#3 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 for each of them. You should aim to get back to the tenant within 2 days.

Quick screening tips:

  • The total income should be 3 times the rent amount. Eg if the property is $500 per week the total income should be atleast $1500.
  • They love the property. They see it as ‘home’ not a roof over their heads for a few months.
  • The rent they are paying at their current property is not too dissimilar to your rent amount. Unless they have more income to support the move (pay your higher rent).
  • The number of adults moving in should be equal or less than the number of bedrooms otherwise there is a high risk of overuse (more maintenance costs for you).

 

#4 Proof of Income & 100 Points of ID

Once you have shortlisted your potential tenants, you want to 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

You should do not accept invoices as proof of income as they are not proof that money is actually coming in, rather a bank statement (or tax return) is a good alternative for self employed people.

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.

#5 Get your Mindset Right

When you are going through a request to rent, 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:

  1. Can they pay the rent?
  2. 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.

#6 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 to the Current and Past Owner/Agent:

1. 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.

2. 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 to the Current and if possible previous employer:

1. 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!

2. 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!

#7 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.

Bankruptcy

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.

A search costs $29, but the peace of mind is priceless. You can request a NTD check through Cubbi, a local online property management company for a one of cost with no strings attached. Click here.

#8 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.

#9 Approve your Tenant & Lock ‘em in Quick!!

Approve your tenants as fast as possible, because remember good tenants will be snapped up quickly. Once done you can move on to signing the lease and organising the first period rent and bond to be paid from the tenant.

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How to lodge a rental bond in Australia: the ultimate state-by-state guide

How to lodge a rental bond in Australia: the ultimate state-by-state guide

Getting ready to rent out a property? Here’s a tip:

Never give your new tenants the keys to your property unless the bond has been paid in full.

Harsh? Maybe. But for a good reason: regardless of how good the tenants are, it’s good peace of mind for you to make sure everything is set and ready to go for your property, including the bond, before the tenants take possession.

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