Tenant Selection

Sarina Yang

The old tenants are gone.
The property is empty.
There is no rent coming in.
The bills are piling up.
Oh gosh oh gosh, I gotta get a tenant in STAT!

Sounds familiar? Being a residential landlord does expose you to the occasional need to tenant an empty property. Oftentimes the pressure of rental vacancy combined with mounting expenses can be overwhelming. So much so that we risk falling into the trap of grabbing the first guy who comes along and hastily entering into a rental agreement without much thought of the future. Well, before you shake his hand and say, 'My friend, mi casa es su casa.' I am asking you to hold your horses and hear me out.

Property investment is a business. You would not do business with someone who you know nothing about so why not take the time to find out a bit more about the tenant before signing on the dotted line? A bad tenant is no solution to rental vacancy. In fact, a vacancy quickly filled by a bad tenant will only expose you to higher risks of rent arrears, property damages and other niggly problems we can all do without. So you see, tenant selection is all about self protection and risk reduction and I am here to tell you how to make sure your tenant is the bee's knees.

Step One: Get the best pool of applicants to choose from

Tenants shop around. So make sure your property stands out from the rest of the bunch. Whether you are taking marketing photos or hosting open homes, think about presentation, lighting, ambiances and amenities. After all, tenants are looking for a home to come back to everyday. They want what all of us want in a home, somewhere that is warm, bright, well ventilated and with adequate amenities. The more presentable your property is, the more good quality applicants you will get.

As an added bonus, good presentation can also help drive up the rent.

Step Two: Meet and greet

Meet as many applicants as possible. Show them through the property personally and get a feel of their personalities. This is important. You are letting someone live in your property so you should feel comfortable with your decision. If you feel a particular tenant's personality does not gel well with yours, simply complete the open home and leave it at that. For those you feel you can have a good working relationship with, formalise their application by giving them a tenancy application form.

Step Three: Tenancy application forms

Tenancy application forms should include, at the very least, personal details, contact information, employment and accommodation history, required start date for tenancy, authorisation to complete background checks (verbal reference and credit checks) and photo identification so you know exactly who you are dealing with.

In addition to the above, you may want to include questions in there which address your personal preferences. Don't want a smoker or a pet owner on the premises? Then ask these questions before going any further.

The Residential Tenancies Act ("the Act") prohibits discriminations that are in contravention to the Human Rights Act. So make sure your application forms do not include questions that are discriminatory or intrusive to a person's privacy.

Step Four: Get checking

Once you have gone through all the applications and short-listed a handful of potential tenants, it is time to do a bit of a background check. Good tenants often get snapped up quickly so make sure you process these applications promptly.

Credit checks

A number agencies provide credit reports on tenants. Some agencies, such as Centrix, check across multiple credit databases as well as the Tenancy Tribunal database. These reports not only give you a picture of the tenant's credit worthiness, it also tells you whether a tenant has been to the Tribunal previously and owed an ex-landlord money.

'A credit report should not be the be-all and end-all of your selection process,' cautions Scotney Williams, Principal of Tenancy Practice Service. 'People have debts. By and large you are looking from someone who is acknowledging liability and paying off his/her debts.' Simon Allen of Allen Realty Limited believes that 'credit checks should be used in conjunction with references and Tenancy Tribunal database checks in order to make a decision as to whether a tenant may be suitable for your property.'

Verbal references

Accommodation references (i.e. ex-landlords) should always be followed up with a quick phone call for verification. There are two reasons to make these calls. First, you want a third party to give you a feel of what the applicant is like as a tenant. Secondly, you want to verify that the answers given to you on the application form are truthful. Simon says, 'When you call a tenant's previous landlord, you should be organised to ask a few more important questions as opposed to lots of questions that may not necessarily assist you to make a decision.' He suggests the below questions as a good starting point:

• Address of the previous rental? (make sure tenant and referee have the same answer)
• How long did the tenant reside there for? (make sure tenant and referee have the same answer)
• Rent amount? (make sure tenant and referee have the same answer)
• Was rent paid on time?
• Condition of property?
• Any access problems for inspections?
• Did they have pets?
• Any damages?
• Are they expected to get a full bond refund?
• Would you have them as a tenant again?
• Any other comments?

Step Five: Sign and seal the deal

Now that you have done your homework by gathering enough information, you are in a position to make an informed decision based on each applicant's merit. Contact the best applicant and sign a tenancy agreement with him/her. Although you should have a couple of back-up applicants in case your first choice has already signed with someone else in the mean time, you should never compromise on the quality of tenants. If you do not have any comparable back-up applicants, keep looking.