Welcome to the Property Investors Handbook Podcast! In this episode, property management expert Colleen Sutherland shares valuable insights on choosing the right tenant for your investment property. Selecting the right tenant is crucial for long-term success, and Colleen provides expert guidance on the application process, due diligence, and red flags to watch out for.
Why Choosing the Right Tenant Matters
When it comes to managing investment properties, one of the most important decisions a property owner faces is selecting the right tenant. A good tenant not only ensures a steady rental income but also takes care of the property, leading to a harmonious and successful landlord-tenant relationship.
The Three Critical Criteria for a Successful Applicant
Colleen emphasises that a successful tenant needs to fulfill three major criteria: proving their identity, demonstrating financial capability to afford the property, and showcasing a history of looking after rental properties.
- Proving Identity: Applicants must provide valid forms of identification, ensuring they are who they claim to be and can be held accountable for any contractual obligations.
- Financial Capability: It’s essential to assess the applicant’s income and affordability. Typically, the rent should not exceed one-third of their combined income.
- History of Responsible Tenancy: Evaluating past rental references and conducting background checks helps gauge the applicant’s track record in maintaining and caring for rental properties.
Conducting Due Diligence
During the application process, property managers perform thorough due diligence to verify the information provided by applicants. This includes checking references from previous landlords or agents and verifying financial statements to ensure affordability. This process helps avoid potential issues and dishonest applications.
Red Flags to Watch Out For
Colleen shares some red flags that property managers and landlords should be cautious of during the selection process:
- Aggressive Behavior: Applicants who display aggressive or confrontational behavior during open house inspections may not be the right fit for the property.
- Inconsistent Financial Information: If the applicant’s financial information seems questionable or does not add up, it’s crucial to investigate further to ensure they can meet their financial commitments.
- Dishonest References: Occasionally, applicants may provide misleading references to mask previous rental issues. Property managers must verify references thoroughly to avoid leasing to problematic tenants.
The Value of Professional Property Management
Colleen underscores the importance of having a professional property manager to handle the tenant selection process. With their experience and access to specialised tools, property managers can make informed decisions, mitigate risks, and ensure a smooth and successful leasing process.
Begin with the End in Mind
Choosing the right tenant is not only about filling a vacancy but also about establishing a successful and long-lasting relationship between the tenant, landlord, and property manager. A well-selected tenant will respect the property, fulfill their rental obligations, and create a positive rental experience for all parties involved.
Selecting the right tenant is a crucial step in the property management journey. It requires careful assessment, thorough due diligence, and an understanding of potential red flags. With the expertise of a professional property manager like Sutherlands Property Management, landlords can ensure a harmonious and prosperous relationship with their tenants. Remember, a well-chosen tenant will play a vital role in the long-term success of your investment property.