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The step-by-step guide to avoiding bad tenants

Property Management

Property Brokers 10 Oct 2017

Blog-32-The-step-by-step-guide-to-avoiding-bad-tenants-726x504.pngWorried about missed rents or damaged property? Don’t fall into a tenancy nightmare; follow this step-by-step guide to avoiding bad tenants before they sign the lease.

Read more: Risky Tenants Guide

Step 1: Realign your expectations

Like most things in life, finding the right tenants is all about having the right mindset. If you’re a new landlord, you might have an idea of a picture-perfect tenant in your head: well-mannered and mild, and never late with payments.

However, the reality is that even great tenants can fall off the tracks every once in awhile. A financial issue could make a rental payment late, or a new job offer could send them across the country, leaving your property vacant. This doesn’t make them a bad tenant—it’s just part and parcel of the landlording life.

Realigning your expectations is the key to managing these situations. Before you even begin your search, know that you should hope for the best; but plan for the worst. Even if you do accidentally take on a bad tenant, this mindset will ensure you are ready to fix that problem and get back on track.

 

Step 2: Credit and reference check

Any good landlord or property manager is going to have a set pre-tenancy application check in place. You’ll be asking for names, previous addresses, identification, current landlord’s details, and so on. Perhaps most importantly, however, you’ll be asking them for references and a consent to a credit check.

The credit check will ensure that you’re not accidentally accepting the application of someone who is financially unstable (or can’t afford the rent), while the references will identify those people who might not give your property the respect it deserves.

All too often, amateur landlords miss out these checks and go on their ‘gut feeling’ instead. They are absolutely integral to the overall success of your rental property.

 

Step 3: Ask your interview questions carefully

These questions on the pre-tenancy application, however, are not going to be enough. Most of the information present on such documentation is useful for getting credit checks and gathering references (more on those later), but not great at telling you what kind of person they are; whether they could be a bad tenant or not.

If you’re interviewing a prospective tenant, you need to be careful with the kinds of questions that you ask. For example, you might ask how many people are planning to live at the property—and if any more might be joining them later down the line. If a two-bedroom apartment suddenly becomes home to three adults (or a new child arrives), that apartment might no longer be suitable.  You should also ask about pets and come to an agreement if there are to be any pets on the property now or in the future.

It’s not just about figuring out whether they are the right tenants for your property; it’s determining whether the property will be suitable for them as well. Formulate your interview questions with this in mind, combine it with your credit check, and you’ll have a good idea of who this prospective tenant is in terms of finances, personality and previous behaviour.

Read more: Why a distant landlord-tenant relationship is best

Step 4: Consult with an expert

If you have a property manager, you’re going to be presented with prospective tenants and weekly rental rates, rather than you having to hunt these down yourself. After all, the main point of hiring a property manager is that they can do all of the hard work for you.

But if you don’t have one on your team, it can be wise be ask the previous landlord (if available), about your prospective tenants. An easy question to ask would be “if you had the opportunity to tenant this person again, would you do so?”. If not, and the reasons why not are reasonable, you might have a problem on your hands.

This is also a good opportunity to consult a tenancy database if you haven’t already. These databases are used by landlords to warn other property investors of poor tenant behaviour. They might reveal something your reference checks didn’t!

 

Step 5: Accept or reject the application

If your checks have brought some potential issues to the surface, your consultant is saying that they are a bad bet and you found them stand-offish or shifty in the interview, it may be time to put that application to rest.

But there’s good news: there’s nearly always another applicant who is a better fit for your rental property. Don’t be afraid to walk away; but as we’ve said in step one, remember to manage your expectations with the kinds of tenants you are after!

 

Stop worrying about getting the wrong tenants. Arm yourself with the knowledge you need with our free ebook below.

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