Best Practices for Tenant Screening and Selection

Identifying and Selecting Good Quality Residential Tenants

Selecting the right tenants is crucial for maintaining the value and condition of your rental property. Here are some steps and criteria to help you identify and shortlist good quality residential tenants:

1. Define Your Ideal Tenant Criteria

Before starting the tenant selection process, determine what qualities are most important to you. Common criteria include:

  • Stable Income: Ensure the tenant has a reliable and sufficient source of income to cover rent and other expenses.
  • Good Credit History: Look for a solid credit score and a history of paying bills on time.
  • Positive Rental History: Favor tenants with a track record of being respectful and responsible renters.
  • Employment Stability: Long-term employment, a stable job or a long-term pension can indicate a reliable tenant.
  • Tenant Lifestyle: Different tenant lifestyle choices can help maintain the property in better condition.

2. Use a Comprehensive Tenancy Application Form

Create a detailed application form that collects essential information, such as:

  • Personal details (name, age, contact information)
  • Employment history and income verification
  • Rental history and references
  • Consent for background and credit checks
  • Number of occupants and any pets

3. Conduct Thorough Background Check

i) Employment and Income Verification

Verify the applicant’s employment status and income to ensure they can afford the rent:

  • Request recent pay stubs, bank statements, a letter from their employer, or a signed contract offer from their employer.
  • Ensure their monthly income is at least 2.5 to 3 times the monthly rent.
  • Ask about the stability of employment and whether they are employed full-time or on a contract?

ii) Rental History

Contact previous property managers and landlords to inquire about the applicant’s rental history. Key questions include:

  • Did the tenant pay rent on time?
  • Were there any complaints or issues during their tenancy?
  • Did they take good care of the property?
  • Did the tenant have any pets? Did the pets cause any damage?
  • Were there any unapproved occupants?
  • Were there any breaches of the tenancy agreement?
  • Why did the tenant want to leave the property?
  • Did the tenant get a full bond refund?
  • Would the landlord rent to them again?

iii) Background Check & Credit History

Taking the time to assess a prospective tenant’s references and background thoroughly is crucial, and can save you from many headaches in the future. Run a background check to screen for any past negative history or other concerns that could impact the safety and security of your property and other tenants. Long periods without employment and lengthy periods without a fixed address should ring alarm bells. 

If you’re concerned about the financial stability of the applicant, a credit check provides insight into the applicant’s financial responsibility. If you decide to run a credit check, look for:

  • A good credit score (typically above 660)
  • Minimal to no outstanding debts or late payments
  • No bankruptcies or significant financial red flags
TICA Tenancy Default Database Search

4. Conduct Interviews

Meet potential tenants in person or virtually to get a sense of their personality and reliability. During the interview:

  • Discuss their rental history and reasons for moving.
  • Clarify your expectations and any property rules.
  • Gauge their attitude and whether they seem responsible and respectful.

5. Assess Financial Stability

Evaluate the tenant’s financial stability by reviewing their application, credit report, and income verification. A financially stable tenant is less likely to default on rent payments.

6. Consider Compatibility with Your Property

Ensure the tenant’s lifestyle, circumstances and habits are compatible with your property. For example:

  • Rules about smoking for all smoking to be outside to preserve your interior paint, carpet, and furnishings
  • No pets if your property is not suitable for pets, or verify pet behavior and care if pets are allowed
  • Respect for noise levels and communal spaces
  • Consider if your property is suitable to store all the tenant’s belongings, such as caravan, boat, trailer or multiple vehicles 

7. Make a Decision Based on Comprehensive Evaluation

After gathering all the information, compare applicants against your ideal tenant criteria. Prioritize:

  • Consistent income and employment
  • Positive rental and credit history
  • Good personal interview impressions
  • Compatibility with property rules
  • Compatibility with tenant belongings

8. Communicate Clearly with Shortlisted Tenants

Once you have shortlisted your preferred tenants:

  • Inform them of their selection status.
  • Clearly explain the next steps in the leasing process.
  • Provide a timeline for lease signing and move-in dates.

By following these steps and criteria, you can identify and shortlist high-quality residential tenants, ensuring a positive and profitable rental experience.

Tenancy Sign-Up and Management Recommendations

Effective tenancy sign-up and management is crucial to maintaining the value of your rental property and ensuring a steady income. Here are some key recommendations for successful tenancy management, updated to reflect recent legislative changes:

Setting Clear Expectations at Tenancy Commencement

Establishing ground rules for property care and timely rent payment at the beginning of each tenancy is essential. Here’s how you can achieve this:

1. Comprehensive Tenant Sign-Up Process

A thorough tenant sign-up process can set the stage for a positive landlord-tenant relationship. Here’s a detailed approach:

  • Welcome Package: Provide a welcome letter outlining bond payment requirements (no more than four weeks’ rent), advance rent payment needs (not exceeding two weeks for periodic tenancies or one month for fixed tenancies), and access to an online tenant portal for payment history, property maintenance requests, and other relevant details.
  • Rent Arrears Procedure: Clearly explain the rent payment schedule and the steps that will be taken if the tenant falls into arrears.
  • Inspection Schedule: Inform tenants about the frequency and purpose of property inspections, and what is expected from them in preparation for these inspections.
  • Pet Agreement: If applicable, provide a pet agreement detailing the tenant’s responsibilities regarding pet care and property maintenance.
  • Maintenance Expectations: Outline expectations for property cleaning and maintenance.
  • Additional Documents: Supply any other relevant property and tenancy-related documents.

Investing time in this initial process helps secure long-term, reliable tenants, reducing re-letting costs and benefiting all parties involved.

2. Ongoing Communication and Accessibility

Maintaining open lines of communication with tenants is vital. Ensure tenants can reach out to you or your property management team for assistance with various needs, including:

  • Government Services: Providing information or help with accessing government services.
  • Property Maintenance: Discussing and addressing property maintenance issues promptly.
  • 24/7 Online Portal: Allowing tenants to lodge maintenance requests and access their payment history and tenancy details at any time.

Strong tenant relationships, evidenced by positive reviews and feedback, can lead to more flexibility and cooperation throughout the tenancy.

3. Comprehensive Cleaning Guide

When tenants decide to vacate, provide them with a detailed cleaning guide. This guide should include instructions on maintaining the property’s original condition, which will help ensure the full return of their bond payment.

4. Regular Property Inspections

Regular inspections are crucial for ensuring the property is well-maintained and tenants adhere to their lease terms. Here’s a structured inspection approach:

i) Routine Inspections

Conduct routine inspections every 13 to 17 weeks to check that the property is being maintained as expected. Notify owners of any concerns, breaches, or exceptional maintenance by tenants. Following each inspection, provide landlords with a digital property report including photographs.

ii) Entry Condition Reports

Before a new tenant takes possession, perform a thorough inspection and prepare an Entry Condition Report (ECR). This report, with interior and exterior photographs, documents the property’s condition at the start of the tenancy, setting a standard for how it should be returned.

iii) Exit Condition Reports

After a tenant vacates, carry out a detailed final inspection and prepare an Exit Condition Report. Compare this with the ECR to determine any cleaning or repairs needed. Ensure tenants complete any additional cleaning or repairs as necessary.

iv) Additional Inspections as Needed

Conduct special inspections for maintenance, building assessments, quantity surveyor reports, property valuations, or market appraisals when required. These inspections can help you maintain and improve the value of your property over time.

By following these recommendations and adhering to the new legislative changes, you can effectively select and maintain great tenants, ensuring the longevity and profitability of your rental property.

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