How to Choose the Right Tenant for My Rental Property
When you rent property privately, you should check a prospective tenant’s rental history to ensure they are a good fit.
When you decide to rent out your property, the tips in this article will help you find a tenant who will respect and look after your home and is reliable and responsible, Many of these processes are the same as how real estate agents choose tenants.
Be aware of obligations under the Equal Opportunity Act
First things first. In selecting an appropriate house tenant, it may be tempting to make your choice based on whether you like them personally or share their values, but be aware that under the Equal Opportunity Act, you must not discriminate against any applicants based on their gender, age, race, religion, marital status, sexuality, whether or not they have children, are pregnant, suffer from a mental illness or a disability. (This is not an exhaustive list so be sure to check the legislation in your state to ensure you are compliant).
To cover all your bases, we recommend you ask for the following items from all your applicants. This list will help you a rental reference check and assess who is the right tenant for you:
- Government Issued Photo ID (driver’s license, passport,etc.)
- Employment / income verification (current payslip)
- Proof of current address (recent house bill, phone bill, rates notice, etc.)
- Professional Reference (employer, co-worker)
- Character Reference for Rental Property (friend, housemate, any non-relative etc.)
While most of these documents are essential, there are occasions when it pays to be flexible.
For example, if your property is ideal for students to rent, they may not have a current household bill with their name on it, so be mindful of bending the rules for unique circumstances such as these.
I have a list of prospective tenants – what do I look for when renting my property out?
Once you have a few applicants that appear to tick all of the right boxes how do you properly ensure you’re selecting the best person to rent out your property to? We recommend taking some time to reflect on your potential tenants’ applications after asking the following questions.
1 – Can They Afford It?
Ask prospective tenants about their job, income and how long they’ve been with their employer. General rules of thumb:
- They should earn enough to pay two and a half months’ rent; or
- Their rental to income ratio should be no more than 25-30% (which is their monthly rental divided by their monthly salary or wage).
You should also factor in whether they will have a flatmate or partner to contribute to the rent. We suggest asking for a current payslip or bank statement, or you can ring their employer for verification.
If your applicants are a group of students with a lower income, you can request that they provide a Lease Guarantor on the rental agreement. A Lease Guarantor is someone (either a friend, relative or legal entity) who co-signs the lease agreement with your tenant and agrees to be responsible for rental payments or any other financial obligations if your tenant defaults. This may be an option if you decide to lease your property to someone who does not have a perfect rental history check.
2 – Do They Have a Solid Rental History?
Past performance can give you a good indication of your potential tenant’s future behaviour. We strongly recommend you purchase a Tenancy Check before offering your property to a prospective tenant. Our tenant checks are conducted using a national database and give you information to complete a renting reference on your prospective tenants, helping you complete a rental history check.
In addition, we suggest requesting employment, personal and character references for the rental application to check their rental and other history that can help get a comprehensive renting reference.
You can also check rental history with one or two recent landlords. Questions to ask to check my rental history include:
- Did the applicants pay their rent on time?
- How long did they stay in the property?
- Why did they leave the property?
- Were there any issues when they left? Did they get their full rental bond back?
- Were there any lease violations?
Character references for rental property is an essential part of selecting the right tenant.
3 – Have They Ever Been Blacklisted?
There are several state-based and national databases that list tenants who have not paid rent, been evicted or damaged property. A lot like the credit checks conducted when applying for a loan or credit card, these agencies can provide tenancy history checks when applicants apply for rental properties. How to find out if you are blacklisted from renting is relatively easy, with several online resources. One national database is TICA (www.tica.com.au).
How long do you stay on TICA?
Tenants on TICA will stay on the database for 3 years.
4 – Do They Have Pets?
Many landlords don’t mind if tenants have pets, but they can add to the wear and tear of a property. You may not mind if they keep a guinea pig outside, but may draw the line at a number of indoor dogs. If you are worried about maintaining property condition, you can either decide to advertise your property with a no-pets clause or allow your tenant(s) to have pets but with a pet clause in the rental agreement. Such a clause includes a tenant’s obligation to have carpets cleaned and the house fumigated on termination of the lease if they have pets. Some even include an additional rental bond to be paid if pets will be living on the property.
For those in Victoria, please keep in mind the Residential Tenancies Act reforms. These changes include allowing tenants to keep pets, provided they have your written consent. You as the landlord only have the right to refuse consent to a pet if you have approval from tribunal board VCAT to do so. However, your tenant will be responsible for cleaning your property for pet-related damage if the final condition is beyond standard wear and tear. For further information on the Residential Tenancies Act reforms of 2020 click here.
5 – Why Are They Moving?
Take the time to chat with your applicants about their motives for moving and you’ll uncover valuable information, such as whether or not they’ll be long-term or short-term tenants. For example, if they are applying to rent your place while they finish their final six months of university, they may not stay beyond that period, which could leave you having to start the leasing process again sooner than you hoped. If they have occupied five different properties in two years, they might not be the type of person to commit to you in the long term.
6 – What Are Your Instincts and Observations?
You can almost always spot the people who are well organised and efficient from their appearance, visual cues or behaviour. For example, those who arrive at your Open for Inspections with their lease application filled out and ready to go demonstrate the kind of character traits that are likely to translate well as tenants.
While instincts and visual cues should not be your primary criterion, don’t underestimate a gut feeling. If you’re struggling between two impressive tenants, both of whom tick all the right boxes, go with your gut on who you think would be best for your property.
Should I choose a tenant with no rental history?
Many tenants wonder how to get a rental property with no history – but just because it may be someone’s first time, it doesn’t mean that they won’t be a great tenant. If you decide to rent privately to someone with no history, be extra diligent on the other checks you can perform such as personal reference checks and employment reference checks.
If they are starting out on their renting journey, be sure to check the affordability of the rent by looking at their income to rental ratio (discussed above). In the event you’re unsure about their ability to pay rent given their lack of rental history, you can always ask them for a guarantor.
Your checklist to choose the right tenant
- Complete a tenant history check to check rental history of your prospective tenant. You can check house rentals for backlisted tenants via a national database check that we can help with.
- Get a character reference from a landlord.
- Get a personal reference for the rental application.
- Check employment details and the affordability of the rent compared to their wages.
- Assess if you need a guarantor.
- Have a documented lease agreement signed by both parties. Consider if your rental agreement needs any additional clauses, such as obligations to maintain gardens or professional clean upon vacating.
Wrapping it up
It’s not always an easy task to select the right tenant. But if you put time and effort into discovering valuable information about your applicants, you’ll be able to make well-informed decisions that will reward you down the track.
Download your FREE buymyplace sample Tenancy Application Form that you’re welcome to use throughout your property journey.
Ultimately, it will be the renters choice about whether or not to apply for your property, but if you are follow the steps in this article, you’ll be well placed to find the right tenant for your property.
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