How to find good tenants for your rental investment property

After jumping the hurdle that is acquiring your rental investment property, the next step to ensure that you make the most out of your asset is to find great tenants by setting up a thorough screening process. Much like purchasing any investment, you must not settle with a couple of so-so tenants, no matter how easy it may seem to just accept the first applicant to avoid an extended vacancy.

Michael explained: “It’s kind of like buying a boat—you can take the time to find a good deal on a good boat with a strong engine that will bring you home every time, or you can accept the one with a couple small leaks and think ‘at least it floats.’ ”

“Which do you suppose is going to cost you more money and heartache in the long run?” he added.

Find as many applicants as you can through good marketing and be willing to spend enough time and effort to actually read and understand their applications. Once you have narrowed down your options, meet the applicants for a building inspection.

According to Michael: “How they respect your property during the inspection is a good indicator of how they will during the tenancy.”

“Be careful on that note, however. If your instinct tells you they were putting on a performance at the inspection, you're probably right,” the property professional reminded investors.

A good application

One of the best ways to know your future tenant is through their application, so you have to ensure that they provide only truthful information by doing your own process of verification. Some applicants tend to lie about a thing or two to make their application look good due to the competitive nature of finding a good house or unit for rent.

In order to avoid this, make sure that the first thing you look for in every tenant application is a valid identification card and a proof of income—without these, you may very well consider the application invalid.

“Ensure that they have given 100 points of ID and proof of income, preferably their three most recent payslips and/or a bank statement highlighting their income,” Michael suggested.

Verification process

While the application could be a fair indication of the kind of tenant that wants to rent your property, you must also take time to reach out to several references in order to verify the information that you already have.

According to Michael, the most important phone call to make is to the property manager or the landlord of the last place that the tenants have rented. Some of the questions to ask are: How were they as tenants? Do they pay in time? Can we get a copy of the Tenant Ledger? Do they take care of the property? Was the bond refunded in full?

You can also call the applicant’s employer to inquire about their income and ask about the supervisor’s impression of him. “I believe good employees make great tenants,” Michael said.

The property professional shared further: “One of my favorite questions to ask employers is whether they think the applicant will be working for them in six months time. If they say ‘I hope so … ’ I know I’m getting close.”

Moreover, take time to check the character references indicated in the tenant’s application. While these references will most likely say good things about the applicant, you can use this opportunity to get to know the people who your applicant associates himself with—a good indication of one’s character. Ask these personal references whether or not they will lease a rental property to the applicant, and listen closely to their answer.

Michael said: “The answer is always going to be yes, but listen closely. If there is some hesitation in the reply, that’s a big worry … [but] a cheerful genuine confirmation is a good sign.”

Once you have verified their information through research and several phone calls, you may want to spend a little extra cash to make a further assessment through the National Tenancy Database. Lastly, trust your gut—a lesson often learned by property investors the hard way.

The property professional advised budding investors: “Go over everything and do a final gut check. If something does not feel right, it probably isn’t.”

“It is a bit of work to ask a lot of strangers personal questions about another stranger, but I find that the time I invest saves me ten times as much frustration down the line,” he concluded.