This article was last reviewed and updated on 03 September 2020.
Must be punctual with rent paid on time and in full… Needs excellent communication skills to help keep the landlord and property manager updated if any issues arise… Is respectful of other people’s property and happy to maintain the home as if it were their own… Willing to sign a lease for at least 12 months… If this sounds like you, please submit your tenancy application without delay!
When you list the qualities a landlord or real estate agent looks for in the perfect tenant, it all starts sounding a bit like a personals ad. This is fair – renting a property can get a bit personal. After all, once the lease is signed, the tenant will be trusted with a very valuable asset.
While there is always an element of uncertainty when it comes to selecting a new tenant, it is possible to narrow the field of what-ifs. This can be achieved with a clear and thorough vetting process, which helps you filter through all those applications to find a perfect match. An applicant that ticks all the boxes on a ‘dream tenant wish-list’ makes for an obvious choice. On the other hand, a little bit of research may raise important red flags to help avoid the heartache of a tenancy gone sour.
Now (more than ever) state governments are urging tenants and landlords to communicate openly and support each other during the COVID-19 pandemic. Ideally that communication will start even before leases are signed and keys handed over.
There are basic details and references a landlord and agent are completely within their rights to request from a tenant when they apply for a new rental.
Here are some top tips for vetting tenants:
- Ask all potential tenants to fill in a rental application form and scrutinise the information they supply.
- Look over all identification (ask to see their passport and/or driver’s licence and sight utility bills in the tenant’s name).
- Speak with previous landlords and property managers and ask:
- Is any rent still owed?
- Was there a history of late payments?
- Did they leave any major property damage?
- Were there any recorded issues with neighbours or police?
- Did they get their bond back?
- Would you rent to them again?
- Check references thoroughly (landlord, employer and personal).
- Confirm current employment status including income and how long they have worked for their current employer. If they have recently changed jobs it could be worthwhile contacting their past employer to establish their employment record.
- Confirm income. Ask to see three months of payslips or bank statements, use a credit referencing service and ask to see evidence of assets. The total income of the household should be enough to cover rent plus normal living expenses.
- Review their deposit ledger which will show a history of rental payments (this will be available through the previous real estate agent).
- Search the National Tenancy Information Centre of Australia database to see if they’ve been listed there as a ‘bad’ tenant.
- If possible, arrange to meet prospective tenants in person to get a ‘feel’ for who they are before committing to a lease.
That’s a lot of information to go through and there will be signs along the way that could spell trouble.
Keep an eye out for these ‘red flags’:
- Tenants with a thin employment history may be a risk (e.g. a string of short-term jobs, gaps in employment and unstable or insecure income).
- Gaps in rental history including missing names and contact details for previous landlords.
- Reluctance to provide proof of income.
- Cost of living ratios are out. The ABS advise the spread of rent to income should be about 25-38 per cent at most. For tenants using 30 per cent or more of their income for rent alone, they may not be able to afford it.
- They try to negotiate the bond amount or ask to pay after they’ve moved in. A requirement of EBM RentCover policies is that a bond of at least four weeks must be paid and lodged with the relevant authority as per legislation.
- They can’t provide any independent references, only the names of family and friends.
- They offer to pre-pay rent and wish to pay in cash. This could indicate an intent to use the property for illegal activity like drug manufacture.
It may seem obvious but a word for the wise: Any checks you perform on tenants must be within the law. You cannot invade their privacy or seek unreasonable background information (note: it may be considered unreasonable to ask for copies of credit reports, visa validation, conduct criminal record checks or seek out sensitive information like medical records).
It’s important to consider that a strong vetting process protects landlords and tenants alike. Carefully selecting a tenant could help prevent or minimise a landlord’s loss through non-payment of rent, damage, or extensive cleaning and maintenance bills. It also may help tenants avoid over-committing on the amount of rent they can reasonably afford. Given the current economic climate, being able to identify a tenant who may be vulnerable before placing them in your property is important.
If 2020 has delivered just one lesson, it’s that no-one ever truly knows what’s around the corner. Even the best tenants on paper can cause accidental damage or have their lives turned upside-down by death, relationship breakdown, job loss or illness. So, while good tenants will usually try to make up any rent owed or repair damages, sometimes even the best intentions are lost to circumstance. That’s why it’s important to have specialist landlord insurance to protect an investment property against tenant-related risks and cover a range of scenarios that could lead to a claim.
Our Expert Care team is here to help talk through the policies we currently have on offer to cover for tenant-related risks. Give them a call today on 1800 661 662 to discuss your options.
*While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you need us we are there, contact 1800 661 662 if you have any questions.
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