11 May 2015
It is assumed that anyone in the real estate industry knows how to check a tenant’s references. Correct? After all, securing quality tenants is a key component of a successful real estate investment. “In fact, too often it’s a case of a little knowledge is a dangerous thing,” Amber Drummond, Franchise Support of Raine & Horne SA said.
“Many property managers get overwhelmed and don’t know which questions to ask and how to read the information they receive. Your landlord needs to feel confident their property manager is experienced and understands your requirements. Maximising your properties income is reliant on minimising vacancy periods, rent arrears, water payments and ensuring repairs and maintenance are kept on top of to protect returns and capital appreciation over the life of the investment.”
Ms Drummond said that the two key checks are previous rental history and employment record.
“This may sound standard and simple but there are many traps for the inexperienced. You need to know what the information gained actually mean in terms of a tenants past performance,” Ms Drummond said.
“For example tenants may have left their last property with rent up to date upon vacating but may have been irregular during their tenancy. It is not unreasonable to request a copy of a tenant’s rental ledger from past agents. Current Residential Tenancy Act allows for tenants to request these records at any time and with sophisticated software packages allowing email & even online access to these records its simple to obtain. If someone is unwilling to provide this information it should give you reason to be hesitant” says Ms Drummond.
“It is also important to gauge a tenants upkeep of the property as evidenced thru routine inspections, often a good indication of the quality of the tenant is how well gardens are maintained between inspections. An idea of the tenants’ willingness or reluctance to report maintenance items is also important as it goes to show the tenants interest level and how they treat the property.”
In terms of employment Ms Drummond suggests that “Long term full time employment does not always guarantee a good tenant. In the reverse tenants on government benefits should not be considered high risk also, often they are on limited but guaranteed income. Private Landlords often get themselves too involved with potential tenants to be impartial which is why poor quality tenants often ‘target’ private owners.”
According to Ms Drummond two mistakes a lot of inexperienced property managers make is to either completely rely upon or completely discount personal references. “In my 15 years in property management I have only had one or two bad personal references,” Ms Drummond said. “Friends and business acquaintances don’t tend to say negative things about those close to them and prospective tenants are not going to list people as referees who are going to say bad things about them. In my experience you can tell a good deal about people by the types of people given as personal references, for example if they are friendships that have been maintained for 20+ years since school or met thru professional association opposed to the person they met at the pub last year.”
Careful screening of applications and making the telephone calls to all references provided will minimise the risk to your owner and ensure quality long term tenants are selected for their investment property.”