If you’re a landlord there is one key step when it comes to ensuring the security of your investment properties and that’s choosing the right tenants. A great property manager will always have a strong focus on this step because they understand how important it is for your investment. Of course, whether you’re using a property manager or not, it’s a good idea to understand what goes into the process of selecting the right tenants. Here are our top tips.
Be on the lookout for someone with a good track record
References exist for a reason and when you’re trying to find great tenants for your property you should absolutely be checking them. Where possible, you or your property manager should speak to prospective tenants’ former landlords or their property managers to get an idea of what they were like as renters.
Things you should ask include:
- Did they pay bills and rents on time?
- Did they report any property issues in a timely manner?
- If they’ve already left the property, were there any issues regarding their notice period or exit?
- Did they ever cause significant damage to the property?
- Were they respectful of neighbours?
- Most importantly, would they rent to them again?
Be fair and follow the law
All possible tenants should be evaluated equally and without bias. It’s imperative that you do not discriminate against tenants based on things such as their gender, race or colour, national origin, religion, disability status or family size. This is in accordance with fair housing laws on both federal and state levels.
Consider their income carefully
Where possible, your tenants should earn at least three times the amount of their rent per month. This is an unofficial rule of thumb that ensures that they are able to pay rent on time without any issues. Checking that they have good credit history is always helpful, as is checking if they have a stable job and work record.
At minimum you should ask for at least one of these three things:
- Bank statements showing that they have sufficient savings and income – this is particularly useful for self-employed people, as they won’t have payslips.
- 3 recent payslips
- A recent tax return
Trust your gut
Sometimes your instincts will tell you someone isn’t quite right for your property. Don’t discount this, especially if there are other red flags in their application that are telling you they might not be the right choice. Your investment property’s value is underpinned by reliable tenancy; so if you think something is wrong then don’t go ahead with the rental contract.