Finding a tenant for your residential rental property could make or break the success of the investment. Here are some tips that could help.
In Australia, there are a few different ways a landlord could find a tenant for their investment property. The main two ways are:
According to the Real Estate Institute of Australia (REIA), the majority of rental properties – about 80% – are managed by agents (known as property managers).
Either way, aspects of the rental cycle that need to be managed include:
- rental appraisal
- advertising the property for rent
- managing and attending property viewings
- receiving and handling applications
- screening tenants, including checking their references and rental history
- managing the signing of rental agreements
- managing any pre-lease reports, such as condition reports, and repairs (if needed)
- collecting and lodging rental bonds
- issuing keys to tenants
- collecting rent and chasing up late payment of rent
- organising regular routine rental inspections
- organising tradespeople for repairs and maintenance
- complying with legal obligations
- dealing with tenant disputes. For example, this may include issuing a breach notice if a tenant fails to pay rent.
- managing the end-of-lease process, such as an exit assessment and return of rental bond
Expert tips: finding a good agent and tenant for your property
If you have purchased a residential investment property, chances are you will be on the hunt for a tenant. But how do you ensure that the person who takes out the lease is going to look after it, and by doing so help to look after the future of your investment? Canstar interviewed Real Estate Training Solutions educator Melanie Galea about the issue.
How do you engage an agent to manage an investment property?
It is always important to meet an agent at the property where they will be able to undertake a rental appraisal on the property [and] discuss a marketing strategy and their ongoing property management services.
Once you have determined the agency that is the right fit for you, you will then be asked to sign an exclusive managing agency agreement. This agreement is between yourself and the agency, which allows the agent to advertise and act on your behalf. Read this agreement carefully and if you have any questions at all, ensure you ask.
What should landlords look for when choosing a real estate agent to manage their rental property?
There are many things to look for when choosing a property manager to manage your investment property – it is important to know it’s not just about fees. I would recommend the following be considered:
- How will your property be marketed when up for lease? Where will it be advertised?
- What is their process around inspections and applications? How do they communicate with their enquiries?
- Who will be managing your property? This is an important question. More and more commonly there are agents who purely sign up ‘new business’ and then another Property Manager will look after it, which is fine, but, ensure there is transparency around this. At the end of the day, who is managing your property after the initial leasing process is also important
- Experience. How experienced is the agent who will be managing your property? However, don’t mistake experience for enthusiasm.
- Staff turnover. Ask how long the property manager has been with the company for. A high turnover of property managers can lead to inconsistency with the management of your property.
- How many properties is the property manager looking after? Some offices will overload their property managers and your property may not be cared for in the way you wish.
- Are they ‘portfolio-based’ or ‘task-based’? Meaning, will you have one property manager that you will be talking to, or a different person for leasing, maintenance, lease renewals and ongoing inspections? This is an important one, as this impacts the management style, and every landlord’s needs are different.
- Their processes:
- How often will routine inspections be carried out? For example, in NSW, inspections can only be carried out no more than four times per year.
- Ingoing inspection report: This is a crucial part of the process. Does the agent use a detailed report with photos? This potentially can save the landlord if there are any issues at the end of the tenancy.
- Rent arrears process: How soon does the agent act on their rent arrears, and at what point is the landlord advised their tenant is behind?
- Rent reviews and lease expiries: What is the agent’s process around lease expiries and reviewing the rent to ensure the rent meets market value?
How are prospective tenants screened during the tenancy process?
Generally, a prospective tenant is required to fill in a detailed application. This will include details such as their name, current address, rental history, employment history, evidence of income and personal references.
The things a property manager will check include:
- ensuring there is sufficient funds to pay the rent and job security.
- checking previous rental history, or previous places of residence.
Most ‘good’ agents also have a subscription to a tenancy database to search if a tenant has been listed as a defaulting tenant or has any debt outstanding.
[A property manager may] check personal references, in addition to employment and rental history.
What makes a good tenant? What can a tenant do to go the extra mile?
Some people consider a ‘good’ tenant as someone who pays the rent on time and keeps the house clean, which is true. There are some other qualities and actions that landlords and agents really appreciate, such as a tenant who:
- is accommodating – provides access to property inspections during the tenancy with minimum inconvenience to all
- is respectful and easy to communicate with
- cares for the property – advises the agent of any real maintenance issues promptly, to ensure the property is well kept for the investor
- follows the agent’s policies, such as providing requests in writing or using an online form, for example.
What makes a good landlord?
Over the years when I managed properties, I often found certain properties had a ‘higher than usual’ turnover of tenants, and often it was a result of the property being in disrepair, or landlords with expectations which didn’t align [with the tenants]’.
As a landlord, you have a responsibility to ensure the property you are leasing is fit to live in. Upon being leased, the property should be maintained, clean and free from any safety issues.
During the tenancy, if any issues arise, they must be dealt with within a timely manner by a licensed tradesperson.
In my experience, tenants also want a landlord [or agent] that respects their privacy. A landlord who is constantly attending to the property (attempting repairs, checking on repairs, plus attending all routine inspections) can often make a tenant feel like their privacy has been invaded.
Some tenants prefer to be in a fixed-term lease for security. To some, this is important and may affect their decision to stay. Not all feel this way, but it is important to understand what your tenants’ needs are also.
About Melanie Galea
Melanie Galea is the Student Support (Qualifications) Officer for Real Estate Training Solutions (RETS), which has provided vocational training for Australian property industry professionals since 2003. Melanie began her real estate career in 2005, and is a Licensed Real Estate Agent, Accredited Auctioneer, Licensed Strata Managing Agent, and Stock and Station Agent.
Cover image source: ALDECA studio/Shutterstock.com
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