Choosing the Right Tenants for Your Rental Property

Application Checks

Knowing who your tenants are and whether they are suitable requires careful checking. Some key steps include:

• Use the same rental application form for all prospective tenants (each adult who will be on the lease). Follow your state or territory’s rules if a standard form is required.
• Only request information that is allowed under residential tenancy laws. Avoid asking for personal details such as age, religion, health, or credit history unless permitted.
• Verify all information provided. Check ID such as a driver’s licence or passport and ask for utility bills in the tenant’s name.
• Ask about things specific to your property, such as pets or smoking, while staying within the law.
• Meet applicants in person to see if they are a good fit.
• Follow your state or territory rules if you charge or return an option fee.
• Handle personal data safely and in line with privacy laws.

Reference Checks

Leasing your property to someone you don’t know requires due diligence. Checking references from previous landlords, employers, and personal contacts can give you useful insights.

Tenancy history:

• Check tenancy databases if allowed and let the tenant know you are doing so.
• Contact previous landlords or property managers and ask about rent payments, length of tenancy, how well the property was cared for, and whether they would rent to them again.
• If the applicant has no rental history, ask for extra references.
• If there were issues in the past, such as late payments, talk to the tenant about what happened.

Employment verification:

• Confirm the applicant’s job, length of employment, and income.
• For self-employed tenants, verify their ABN and ask for proof of income such as bank statements.

Personal references:

• Ask how long they have known the applicant and what they can say about their character and reliability.

Financial Checks

It’s important to make sure a tenant can afford the rent. Even reliable tenants can face challenges like job loss or illness, but if the rent is already hard to afford, it may lead to problems.

Keep these points in mind:

• Follow all rules when doing financial checks.
• Confirm employment, salary, or other income.
• Ask for proof such as payslips or bank statements.
• Check for any past bankruptcies or unpaid debts.
• Review their rental payment history if possible.
• Only collect the information that is necessary.
• A tenant’s rent should ideally be less than 30 per cent of their net income to avoid rental stress.

Red Flags

Watch for warning signs that a tenant may be risky:

• Listed on tenancy databases or has a history of evictions.
• Hard-to-reach or unresponsive referees.
• Past landlords mention rent issues, property damage, or neighbour complaints.
• Unstable employment or income.
• Negative feedback about reliability or honesty.
• Gaps in rental history or frequent moving.
• Reluctance to share proof of income or references.
• Requests to pay bond late or negotiate it down.
• Poor communication or inconsistent answers.
• Offers to prepay rent in cash, which could be suspicious.

There are no guarantees when it comes to rental properties, but choosing the right tenant can greatly reduce the chances of financial loss or stress.

At the end of the day, the goal is to find tenants who respect your property and meet their obligations.

If things ever do go wrong, landlord insurance can help protect you and make the process less stressful. But taking the time to choose the right tenant from the start is always the best investment.