Selecting a tenant for a rental property always carries an element of risk. A bad choice can cost thousands of dollars in unpaid rent, damage to property or both.
There are no guarantees in property, but it is possible to enjoy the stress-free experience of renting property and building your personal wealth. But remember, there are no dividends in taking the cheapest options.
Paying extra for a top-quality property manager who will safeguard your property from poor tenants and abuse is never a bad investment.
Likewise, spending a little extra to ensure the property is well maintained and professionally presented will reap financial rewards in terms of higher rent and, usually, a more reliable tenant.
Here are a few pointers to ensure your experience as a landlord is as stress-free as possible.
- Use a property manager. Do your research and see if you can get some personal recommendations from family and friends. The right candidate must be a qualified real estate agent who knows your local market.
- Make sure your property manager commits to regular inspections and has a network of tradesmen to ensure any problems with your property are fixed quickly at a fair price.
- Get up to speed on state laws regarding tenants’ rights, management of bond money and dispute resolution mechanisms. Knowing your rights and those of the tenant will help you make better judgments when issues arise.
- Go through the terms of the lease carefully with the property manager to ensure you have included all the rules you believe necessary. These likely include no sub-letting, no pets and no smoking. Obviously, an overly restrictive lease will scare away some potentially good renters.
- Use the experience of your property manager to set the best rental price. As their income is a percentage of the rent, they will be motivated to find the maximum level the market will tolerate. Expect their commission to be between 5-8%.
- Rely on your property management company to undertake the marketing of your property to attract desirable applicants. Make sure they have the processes in place to validate the claims of each potential tenant. Before spending any money, ask if they have candidates already on their database.
- Be sure you are happy with the screening process of candidates. Agents will use numerous sources, such as Equifax and the Tenant Verification Service to ascertain applicants’ ability to meet rental payments, their employment and credit history, and any property-related legal judgments set against them.
- Even after the validation process has been completed, you still have the right to choose your preferred applicant. By all means allow the property manager to do this, but ultimately the buck stops with you. Some property owners don’t get involved at all, others do. It’s a personal choice.
- Have your property manager pay all the bills related to your property. This will streamline paperwork and simplify what you must do to claim tax deductible items. Make sure you get an end of year invoice that outlines income, expenses and the GST that has been paid.
- With the property rented, put money aside to pay for maintenance issues as they arise. Two weeks rent should cover it. This will ensure your property remains in good shape and you retain a happy tenant. Any reluctance to fix problems will cause issues not only for the upkeep of your property but also when you want to raise rent, or keep a tenant beyond the initial lease period.
- Sometimes, a tenant will move on no matter how hard you try to retain them. So, work out a re-leasing plan with your property manager to reduce the time your property is empty. Depending on the mood of the market, it can take up to three months to find a good tenant – and that’s a lot of rent to miss out on.