How to find the best tenant for your investment property

First, establish a good deal. Managed’s Thom Richards said that applicants for tenancy are on the lookout for the right property at the right price.

“Good tenants, obviously, they look for a good deal … They don't want something that's overpriced, they [also] don't want something that's underpriced,” he said.

Second, set up a seamless management process. Make all processes as convenient as possible—from the application to moving in and, hopefully, long-term tenancy.

Thom explained: “The biggest reason for a turnover, for losing somebody, would be poor management. It's the biggest killer and brings on vacancy.”

Assessing tenants

Whether an investor is working with a property manager or not, he must be able to distinguish a good tenant in order to avoid derailing his own investment journey. Aside from filling in and submitting all necessary documents, applicants must also pass two of the most important criteria—the ability to pay rent and the ability to take care of the property

According to Thom: “The application process … it's pretty arduous. There's a lot of information required and it's kind of bending over backwards to get bank statements and tenant ledgers and all those ... things together.”

“The two things you're looking for is their ability to pay the rent and their ability to treat the property as if it's their right—[that are the] two most important things from an agent’s [and an owner’s] point of view.

“[Look for] a tenant ledger from [their] previous tenancy and [have them back] that up with a bank statement to show that [they] can commit to a regular payment cycle, making [their] rental payments in full and on time,” he added.

For investors who might have the time, meeting a potential tenant face-to-face can also be helpful in assessing them. This is where a good property manager could come in handy, Managed’s Nick Bouris said. These professionals who have seen hundreds of property turnovers over a period of time has acquired a better ability to evaluate, assess, and pick the best tenant for your investment property. 

In contrast, self-managing investors may have only come across four to five people, which is really not equivalent to a good sample size.

Nick said: “It's less of a gut instinct with your property manager [because] they've got a much wider data set to draw upon … [as well as their] past experiences.”

At the end of the day, you, as a property investor, must be able to determine your goals, capabilities, and limitations in order to make the best decisions for moving forward and ultimately continue the growth of your portfolio.

“It's [a matter of making your own] recipe [where] you've got all of the ingredients for a right tenant. You've got to tick those boxes and make sure [that] there are no red flags,” Thom concluded.

Tune in to Thom Richards and Nick Bouris’ episode on The Smart Property Investment Show to know more about the best tools, tactics, and tips to manage your properties and make the most out of your investment.