The Ultimate Tenant Checklist
It’s the one thing so many property investors overlook.
You can do all the due diligence in the world, you can cross all your t’s and dot all your i’s, but if you don’t get this one thing right, you’ll lose money on your investment property!
A bad tenant is like property investment cancer, it slowly eats away at your profits until you have nothing but a liability left, and all the pieces to pick up.
That’s why finding a good tenant can literally transform your property investments!
But how do you know the good form the bad?
Well that’s where my ultimate tenant checklist comes in.
And today I want to give it to you…
The Secret To Property Investing Profits
Securing the right tenants for your property is essential.
Naturally with no tenants at all, you have no income - And if you have a bond to pay, this can lead to money trouble!
But the same could be said for the wrong tenants.
If you don’t take the time to find the best tenant you can, you could have a nightmare scenario on your hands.
A tenant who…
- Doesn’t pay his rent on time or ends up in arrears
- Damages your property
- Has a negative impact on your property’s neighbours
Having an unruly tenant means more work and stress for you.
This is why it’s vital that you screen prospective tenants.
So how can you do it?
Ultimate Tenant Checklist Step #1: Serve A Tenant Application Form
This should be the first step in your search for the best tenant.
By formalising the application process, you’re more likely to scare off those that are likely to cause trouble.
So what should your tenant application form actually contain?
You need to get all of the personal information on the tenant or tenants wishing to rent your property.
- Full name
- ID number (along with a copy of their ID or passport if not a SA resident)
- Current residential address
- Contact details, including cell phone number and email address
- Date of birth
- Current landlord’s details
You need to know…
- The name and address of the applicant’s employer
- Position held
- How long they’ve been in their current role
- Monthly income, along with copy of an up to date payslip
You need to know their bank, type of account, account number and branch.
Ask for a minimum of two personal references.
You need the contact details and the relationship to the applicant.
As part of the application, state that by completing and signing the application, they are giving you permission to conduct a credit check.
This is really important, but I’ll touch on it more in a sec.
Ultimate Tenant Checklist Step #2: Screening A Tenant
Once an applicant has completed your application form, it’s now time to screen them.
The most important thing is to check that all the information an applicant gives you is true and correct.
A good starting point is the credit check, and it’s really easy to do too.
If their credit check comes back squeaky clean, it’s time to delve a bit deeper.
As you want to ensure that a prospective tenant can pay their rent, check their payslip and employer out.
It’s also vital that you make contact with the references provided. Ensure you’re happy with answers to any questions you have.
It’s also worthwhile contacting their current landlord for feedback too.
Ultimate Tenant Checklist Step #3: The Rental Agreement
Once you’ve selected a suitable tenant, you need to get a rental agreement in place.
It’s always worthwhile paying for an attorney to supply this or at least give your agreement the once over to ensure you’ve covered everything that needs to be covered.
Your rental agreement must include:
- Your details (as the landlord)
- The tenant’s details
- Details of the property
- The date the agreement begins and the date it ends
- The deposit amount due and when the tenant must pay this
- How much the monthly rent is and when this is payable
- The maximum number of people that can reside in the property
- Your banking details
The agreement must also cover what the tenant can and can’t do within the property, what you expect of the tenant, and aspects such as whether pets are permitted or not.
It’s vital that the agreement documents everything possible, including aspects relating to the body corporate if applicable.
You should also conduct an inventory before the tenant moves in - Both you and the tenant need to sign this. The last thing you want is a dispute.
You also need to ensure that any defects in the property are included in the agreement before the tenant takes up residence.
BONUS TIP: Take a few hi-res pictures of the property and any furnishings (including bathrooms, kitchens etc). These are easy to refer back to and if there are any disputes you can simply reference them (especially if things ever go down a legal path).
Ultimate Tenant Checklist Step #4: Why You Can’t Ignore A Deposit
Taking a deposit from your tenant is a must.
It can cover you for any damage or costs arising from your tenant, or if they stop paying rent.
So how much should you ask for?
At a minimum, you should ask your tenant to provide one-and-a-half months’ rent upfront.
You could also consider deposit guarantee insurance, such as PayProp DepositGuarantee.
This gives you comprehensive insurance for your property, covering you for up to two-and-a-half months’ worth of rent.
This form of insurance rewards good tenants, so you’ll likely find your tenant will be happy to oblige.
Should You Get A Letting Agent To Do It All For You?
Finding the best tenant for your property does entail a bit of work.
But you can work smart, rather than work hard – As I’ve shown you above.
If you don’t have the time to commit to it though, you could use the professional services of a letting agent instead.
Of course, they will charge for the service, but this outlay can give you peace of mind.
Most agents I know will require an amount based on the rent or even the first months rent, just something to keep in mind.
There are also different levels of service available, and you may even find agencies that guarantee your rental income!
Make sure you shop around for the best rates and try to get recommendations is this the route you’d prefer to go.
How To Get Rid of A Bad Tenant Legally
So, what if your stringent screening still results in a bad tenant taking up residency in your property?
Perhaps your tenant has skipped his rent once or twice, or you’ve found out that he’s breached aspects of the rental agreement, it may be time to consider eviction.
Eviction isn’t something you should take lightly.
You should only consider it after you’ve made efforts to sort any issues out. This is due to the costs involved.
To legally evict a tenant, you need to go through the courts to obtain a Tenant Eviction Order after you’ve failed to rectify breaches to the rental agreement contract with your tenant.
Then there will be a court hearing to establish what’s going on and whether in fact you can evict the tenant.
Evicting a tenant means legal fees. So as well as being out of pocket for damages or lost rental income, you’ll have these to cover too.
This is why it’s so important to screen prospective tenants to find the best tenant possible.
How To Avoid Dodgy Tenants In Four Simple Steps
Finding the right tenants is not difficult!
And they could mean the difference between property profits or a neighbourhood nightmare.
Remember, there are four simple things you can do to ensure you fill your investment properties with the right tenants.
- Make sure you get a Tenant Application Form signed before anything
- Screen your potential tenant
- Get the Rental Agreement signed
- Ensure a deposit is paid BEFORE the tenant moves in
And in those four easy steps you can dodge the rubbish and prime your property for profit.
Until then, here’s to profitable property investing.
The Money Lab
PS: Take the hard work out of finding the right tenants, and get your hands on our Tenant Application Form and our Rental Lease Agreement!
With them you can weed out the good tenants from the dodgy ones, and you can make sure your properties are ONLY filled with the types of tenants who are itching to put money in your back pocket!
Both agreements are 100% FREE, you just need to tell us where to send them.