Finding a Good Tenant
Recently there have been a few articles on the topic of finding a great tenant for your property investment. We don’t mind giving you a summary of what to look for according to these experts but this really goes against the grain of long-term passive investment which is a big part of the long-term investment philosophy of Lime. So, before you waste time reading the rest of this article, lets explain in a very few words how to get the best tenants!
- Buy in a good socio-economic area; you very rarely hear of bad tenants in good properties on the lower north shore, or inner west or the eastern suburbs!
- Employ a good and experienced rental agent who will ensure you get an excellent tenant.
That’s it finished!
The following was a brake down by someone with experience in managing properties and also a blogger by the name of Michael Glibert of Cubbi. Each section is abridged and I’d suggest you find the blog for yourself if you are really interested in doing a part time job as a professional property manager.
“Hours spent managing a property with a Bad Tenant:
- Advertise & Inspections – 3 hrs
- Lease & Condition Report – 2 hrs
- Routine Inspections – 4 hrs
- Repairs & Maintenance – 4 hrs
- Rent Collection & Arrears – 8 hrs
- Vacating & Bond – 10 hrs
- Re-advertising & Inspections – 6 hrs
- New Lease & Condition Report – 4 hrs
Total of 41 hours for a year spent managing a property with bad tenants in it.
Now, here are the hours spent managing the same property but with a Good Tenant:
- Advertise & Inspections – 6 hrs
- Lease & Condition Report – 4 hrs
- Routine Inspections – 2 hrs
- Repairs & Maintenance – 1 hr
- Rent Collection & Arrears – 1 hr
Total of 14 hours for the year.”
Remember, even doing a job you are not qualified to do, that is a rental manager, is still going to take you time and effort but getting a professional to do the job will increase your negative gearing, save you time and let you forget about your investment property until tax time!
I’m not sure if all the following of Michael’s suggestions are covered in the assumed 14 hours of your valuable time … and this is abridged
- Who is the right fit for your house?
When you know who the most suitable tenant for your house is, you can start preparing your property and creating an effective advertisement focused to attract those types of people….. Keep in mind you can always make a couple of small adjustments or additions to the property in order to attract the right tenants.
- Get your house tenant-ready
You’ll have to roll up your sleeves and get your hands dirty if you want good tenants fighting over your house. Get these completed even before the photos are done: Any small additions to help attract the type of tenant you’re after, e.g., installing an air-conditioner. General maintenance jobs such as unfinished painting or replacing missing light globes. Clean the house from floor to ceiling and front to back and make sure the garden is manicured and inside everything works!
- The price is right (note – not sure if anyone other than an experienced local agent can actually do this?)
It’s understandable the temptation to price it at $15 more as that’s nearly $800 a year extra. That could pay for your landlord and building insurance in one hit.
The problem with pricing your house too high is the extra time it takes to lease it and the desperate tenants you might attract at that high price.
I have found that pricing the property at or just below (around 3-5 per cent) (this is where you really need a local agent … is it 3% or 5% or 4 %?). Here are the benefits:
- Find a tenant quicker. Little or no vacancy between tenants
- Find a tenant who pays rent on time and looks after the house
- Spend less time managing the property
- Less stress
- Longer term tenants. Less likely to re-advertise again in six to 12 months time
- Show great photos in your ad – (so maybe you need the skills of a professional real estate photographer?)
The photos in your ad play a big part in getting the right people to inquire about your property. Not making the effort to get good photos of your house on property websites can backfire.
- Create a killer advert (and the skills of a professional marketer/!)
You know who is most suitable for your house. Your house is in presentation-perfect condition. The price is all sorted. The photos are done.
All you need to do is put everything together. Upload your photos and enter in the rent amount.
- Proactive tenant approach to showing your home
Alright, your ad is live and you’re getting heaps of calls from potential tenants. This can die down quickly, so don’t take them for granted. If you or your agent are slow responding to inquiries or are not getting tenants through fast enough, you are losing good leads that you’ve worked hard for. Besides, your house does not stay clean forever. If you are busy, create multiple open homes for when your most suitable tenants are likely to be available. For example, if you want a working couple, don’t set an open home in the middle of a working day. Set it after work while it’s still light enough for people to see all the good things your house has to offer, or late Saturday morning, at around 11am. Advertise your open home at least two full days before the inspection. Longer is better.
- Screen applications like a ninja
If you have done everything correctly, you should have a bunch of high quality applications ready to be checked. You need to be cut-throat here. You need to prove what they told you in the application is correct, and calling referees and viewing evidence such as bank statements and payslips is critical.
I always prefer to speak to all referees on the phone, including past and present employers, and owners and agents they have rented through. Also, call any personal and professional referees you can get your hands on as well.
- Go with your gut
I could not leave you without telling you about your gut instinct. It’s powerful – listen to it!
…. And all of this done within 6 hours! All good advice if you have the skills to implement. It’s much easier to just find a professional who will do all this and more for you.
