How To Choose The Right Tenants!

stick-man-tenant-selectionFollowing on from my recent blog “Should I Meth test my rental property”, the most critical thing that you can do as a landlord to protect your rental investments is to chose the right tenants (or better still, get me – a professional Property Manager to do it for you!)

Gone are the days when you could rely on “gut feeling” or conduct a quick reference check by calling the previous landlord.

The meth epidemic has taken things to a new level and we now need to go to extreme lengths to screen and vet potential tenants. Meth doesn’t align itself to any particular socio-economic group, nor discriminate by location – it can be found in South Auckland, Remuera, Massey or Takapuna. Criminals considering using a rental for illegal actives are choosing “softer” targets, the private landlord, as they are conceived as not being as thorough or having access to the tools utilized by most professional Property Managers.

Tenant selection in my business, is paramount! A casual chat with a potential tenant may give you a feel for how suitable they are. While this is important, we need to be methodical when selecting tenants. Did you know that your landlord insurance policy might even require you to show how you selected your tenants if you make a claim?

So how do I conduct a methodical approach when selecting tenants?

Some things I take into consideration are………

  • How the potential tenant communicates with me?
  • Are they on time for their viewing?
  • How do they present themselves?
  • Do they ask the right questions?
  • Is their car clean?
  • Do they have sufficient funds to cover the move-in costs?
  • Yes, they may seem like small things but they start to paint a bigger picture.

I apply a five-step approach when vetting potential tenants.

1) Pre-tenancy application

A pre-tenancy application form gathers important information that helps decide if a tenantMan Silhouette With Yes, No, Maybe Think Sign And Shadow - Isolais right for the tenancy. Potential tenants provide referees and previous landlord/ Property Manager details on the pre-tenancy application form. 

What to ask a referee?

I ask questions to get an idea of the potential tenant’s behaviour.  If the referee is a previous landlord, I might ask if the tenant: 

  • Let them know when maintenance or repairs needed doing?
  • Returned calls promptly?
  • Kept the place reasonably clean and tidy?
  • Was ever overdue with the rent, and what they did about it?

When listening to the referee, be alert to:

  • Unusual hesitations
  • Ambiguous or evasive responses
  • Negative or vindictive responses
  • Overly enthusiastic responses 

2) Background Checks

A background check gives you everything a credit report can’t provide due to restrictions imposed by the Credit Reporting Act.

This includes information relating to Tenancy Tribunal records, news articles, company results, violent offenders, bankruptcy information, and several other data streams. This helps you to confirm that the information provided in an pre tenancy application is correct. You can also verify if a “previous landlord” is legitimate by checking their background.

3) Social Media – Facebook

Facebook is a great way to get a quick snapshot of the potential tenants lifestyle and the company that they associate with.  If there are inappropriate photos/comments perhaps the tenant is not suitable.

4) Employers

If tenants have just arrived into New Zealand, they may not have a rental history and there is little point conducting a credit check, as they will have no credit history in NZ.  I often ask to see a letter of offer from their employer and also check that they have the correct documentation, visa etc. to work in NZ and/or for residency.

5) Credit Check

A credit check will give you specific information relating to the person’s credit file.

The report draws from a range of sources, including the industry-standard Centrix database. Centrix has a reciprocal agreement with most major credit control companies – their data is fed directly into the Centrix system. Most major debt collection companies, banks, power and telecommunication companies use Centrix for this reason.

The most important information provided in a credit report is:

  • Credit default data
  • Judgments
  • Insolvency notices

So as you can see there is quite a bit involved in the selection of good tenants.  I treat my client’s properties as if they are my own and therefore would not recommend a potential tenant if I would not offer them my own property.  Your rental property is likely to be one of your largest investments.  Take time to ensure you protect it!

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