How to find good tenants: 5 tips for selecting and keeping good tenants
Private landlords have the choice of who they approve to rent their premises. This decision is sometimes scary as no one wants a bad tenant. Sometimes even tenants who tick all the boxes can turn out to be the wrong tenant. Being proactive in selecting tenants can help to reduce risk.
What is a bad tenant?
A bad tenant is the wrong tenant for your property. Bad tenants don’t pay the rent on time or don’t pay it at all. They damage your property, walk out on leases, and don’t have any respect for rental procedures and documentation.
Minor issues with tenants may include a tenant who brings a pet into the property without your permission. Significant issues could include abandonment, trashing the premises, or total destruction of your property due to it being used as a drug factory! That’s a landlord’s worst nightmare. So, what’s the best way to find good tenants?
What is a bad landlord?
We can’t say there are bad tenants, without acknowledging there are also bad landlords. Who are these landlords? Well, they are the landlords who run with their own rules. In other words, they ignore legislation. Bad landlords don’t respond to tenants’ requests for repairs, allow the rental premises to become unsafe, don’t give notice before arriving at the premises, and harass tenants when they deal with them. Bad landlords are usually aggressive and disrespectful of tenants.
For more types of landlords, see our article, What type of landlord are you?
It’s not the luck of the draw whether you get good or bad tenants. There are actions you can take to minimise the risk. Efficient and effective processes and the right attitude can assist landlords in recognising the warning signs, acting quickly, and making the right decisions when it’s needed.
Five tips for landlords to select the right tenants for their rental properties
Ask screening questions
Screening tenants starts with the first contact, whether it be an email response to your rental advertisement or a phone call. Start asking questions to establish who the tenants are and what their needs are for a rental home. The issue with automatic applications is they are just words on paper. Tenants can look great on paper, but still turn out to be bad tenants. Ticking the boxes is a start, but you still need to establish if these tenants will look after your property, pay the rent on time, and meet the legislative requirements for tenants.
At first contact you may ask questions like:
- When are you looking to move in?
- Where are you currently living?
- How many people will you need to sleep?
- Why are you moving from your current home?
- Have you rented a property before?
- Have you rented from a private landlord before?
- How many vehicles will you need to park at the premises?
- Do you have any pets you would like to keep on the property?
- What is your job/form of income?
- Where do you work? Have you been there long?
Screening is about getting to know who the tenant is and whether they are suitable for your rental property. This doesn’t suggest discrimination. It means gathering information to find the perfect match between tenant and property. In our article, How to screen tenants before showing private rental property, we discuss how to avoid discrimination when screening and selecting tenants.
Check references verbally
Check references! Don’t rely on the boxes being ticked. After a tenant has attended an open inspection and they submit an application, it’s time to check references and other information, including the previous landlord and employment details as documented on the tenancy application. See rental documents for links to rental forms used in each state/territory in Australia.
Warning! Sometimes references are fake
A landlord in Queensland, had experienced issue after issue with a tenant. Unfortunately, the landlord had not signed a lease with the tenant when they moved into their garage/studio. The landlord wanted the tenant to leave because they were damaging property and behaving inappropriately. As a last resort, the landlord agreed to write the tenant a good reference in order for them to move out!
When you contact the person who wrote the reference, you will soon be able to identify if there are any underlying issues with the tenant. Ask direct questions relating to the tenants maintenance of the previous property, their timely payment of the rent and if there were any issues with them during the tenancy.
When you contact the employer, remember you are checking if the tenant is employed with that business and if they receive a full-time/part-time or casual income. As a landlord, you want to establish the ability of the applicant to pay the rent on time and for the duration of the lease.
Use a tenancy database
The use of tenancy databases and how they operate are regulated by the rental laws in each state/territory of Australia. Tenancy database operators have strict rules for adding and removing tenants from the database. The rental authorities in each state/territory also play a role in adding and removing tenants. If a tenant is on the database, it is an indication that they have been bad tenants during a previous tenancy. Tenants generally stay listed in the database for up to three years.
Accessing a tenancy database is going to cost money. First, you will have to pay for your initial membership, and once you use up the allocated searches, it will cost to do each additional search. You can expect to pay approximately $200-250 for your initial fee and then between $15 to $20 per search afterward, as well as an annual administration fee.
If you decide to use a tenancy database, you will use it after you have done all your other checks. It would be your final tick of approval for an application.
You must tell all applicants when you issue the tenancy application or at the conclusion of the open inspection that you intend to use a tenancy database. This means you must, in writing, provide the name and contact details for the tenancy database with the application. It’s important to check the legislation for the relevant state/territory where the rental property is located regarding the exact procedures to follow when using a tenancy database to check tenants.
If an applicant is blacklisted on a tenancy database, you will need to tell the tenant that they were listed. The tenant can contact the tenancy database to check who and why they were listed. Sometimes tenants are unaware they have been listed, and they have the option to request to be removed from a database. However, for you, the landlord, you can decide whether you will continue with the applicant or not. The fact that the tenant has been blacklisted on a current tenancy database is probably enough evidence to discontinue processing the application. Time to start the selection process again!
Better to be prepared than to be caught off guard. So, document and keep records of everything. Keep a diary and file or save paper and electronic correspondence and forms used.
What should be documented?
- Initial enquiries received, notes from conversation, questions asked
- Open inspections, who attended, screening questions
- Applications issued, to whom, when
- Date applications were received and from whom
- Phone calls made, information collected
- Tenancy database used, results from searches
- Emails or phone calls to applicants, details of conversations.
Be thorough with your record keeping. Why, because you just never know, one of those applicants may interpret your rejection of their application as discrimination. And before you know it, you are defending your decision not to select them as tenants. If you are efficient and effective in documenting your processes for selecting tenants, you will have the evidence to prove you were operating within the boundaries of the rental laws.
Have a positive attitude
Yes, your attitude counts as a landlord. There’s a saying, “You get what you focus on, so focus on what you want!” Stay positive and treat tenants/applicants with respect. Tenants come from all walks of life, and at the end of the day, people are trying to find somewhere to live where they will be safe and can call home.
You get what you focus on, so focus on what you want!
People usually mirror back the behaviour and attitude they receive from others. As they say, the honey attracts the bees. Good tenants will shy away and avoid landlords who project any form of aggressive, rude, or entitled attitude.
If you want to find good tenants, then you also need to believe that not all tenants are bad. In fact, it is only a small portion of tenants who are bad. Unfortunately, everyone loves a bad tenant story with pictures or videos of a trashed rental property. But what about all the good tenants that you don’t hear about? The ones who do everything right. They are out there too!
A final thought!
Another thing to consider is if you buy a rental property in a district where there are high unemployment, above-average domestic violence, and high crime rates, you may struggle to attract the “good” tenant. So if you have made an investment in a district with issues, you will need to be diligent in your selection processes to reduce the risk of a bad tenancy.