Congratulations! You finally filled the vacancy in your property and it’s time to watch your asset return on your investment. But how do you know that you picked the right people for your property? How can you tell if your ‘no-vacancy joy’ will transition to a rental headache? Here are three questions you might be asking yourself, and how to address these red-flags early on in the landlord-tenant relationship.
Will they keep your property in good condition?
The key to ensuring that your property continues to return on your investment is in the upkeep and maintenance of the apartment or house itself. Unfortunately, if you manage to sign an agreement (hopefully you did sign an agreement!) with a destructive tenant, it could spell disaster for the future of your property.
There are various ways to protect yourself early in the event you end up with a tenant who doesn’t take care of the place they are living in. These things include:
- Taking a bond from the tenant at the start of the rental agreement to cover any small issues they may create in the property
- Screening the tenant and using social media tools to your advantage to research the type of person that might become your new tenant
- Take out Landlord Insurance to ensure you’re covered in the event your property becomes damaged or neglected by your tenant
Will they continue to pay on time?
For you to receive a secure return on your investment, your tenants must pay on time. But what are your rights if they don’t? How can you tell if your new tenant has a spending problem?
During the screening process, make sure you collect the following information:
- Find out what the annual household income is of the tenant(s)
- Investigate what debt the tenant(s) might be in (loans, credit cards) that might make it tough for them to pay on time. Seek bank statements and confirm with their employer their pay details.
- Find out information about their lifestyle and/or spending habits - do they spend big on lifestyle choices? Does it put them in a position to struggle paying their rent on time?
What happens if - despite passing your test - your tenant still doesn’t pay on time? Here are your rights in this situation and how you can protect yourself here:
- Know the legislation – in NSW this is changing again in 2016
- Know the time periods in which you can act on a termination notice
- Have systemised processes when to communicate late rent
- Have accurate records - record rent receipts & any breaches
- Be prepared to go to Tribunal for any breaches
- Remember, preparation is key. Tribunal members heavily favour tenants and documentation goes a long way to determining a favourable outcome for you
All in all, being your own landlord is a tough gig. And when it comes to your tenants, things can get ugly and confusing real quick. To safe-guard yourself from any potential issues, have you looked into hiring a property manager?
For further reading, check out our eBook on the most common Property Management Nightmares, which can be found by clicking here.