Much of the success of real estate investing lies in the ability to attract great tenants for your property and ensuring that you’re getting as much rent as possible.
These aspects are crucial in the ongoing maintenance of your asset and your return on investment through your rental income.
Simply, the more a tenant pays and the better they look after your home, the less out of pocket you’ll be each week and the fewer repairs, maintenance and general stress you will need to attend to.
To attract great tenants you have to know what they are first. A great tenant is usually defined by property managers and investors as someone who is diligent with repayments, alerts them to maintenance when necessary but isn’t hard wearing on the facilities. They leave the home neat, tidy and clean when their lease ends and provide the correct notice periods.So how do you find these great tenants?
Prior to purchasing
Before even buying the property there are things you should do to ensure that you are purchasing a rental home that has the potential to attract good tenants. Speak to your property manager and real estate agent for an insight into the rental market and the type of tenants that are common. You should also aim to know what other properties are available for tenants locally so you are aware what competition is on the market.
Cultivating this level of local knowledge should alert you to the types of people looking to rent, the properties they may be attracted to, how common vacancies are and the likelihood of the property you are looking at achieving your desired rent.
It is not true that lower socio-economic areas cannot achieve a good tenant. However, you should listen closely to other local investors and residents to get an understanding of the type of person who may live in your investment.
Once you have purchased the home, it’s time to consider upgrades, renovations or even just cosmetic improvements that will make the home stand out. One of the most important things in obtaining a good tenant is to attract them in the first place and allow yourself a choice from a number of prospective renters.
Good tenants will be more likely to be attracted to a clean home that is well maintained. There may also be features that render a property almost unable to be rented in their absence. In some areas this may be air conditioning, in others it could by fly screens. Ensure you know what these things are and implement them into your investment. The small outlay now will likely be worth it in the long run. By adding these relatively inexpensive fixes you may also find that you are able to command some extra rent.
When marketing the home
Ask your property manager what the plan is for marketing the rental property. Aim to be on premium listings portal available, with well written copy, good photographs and open homes at hours that suit the demographic you are trying to attract. Ensure the polished appearance you present in the photographs is maintained at open homes – you may even want to consider staging the property with furniture to give a strong first impression to tenants.
Using your own judgment based on your earlier research and the knowledge of your agent, work out how much to charge for rent on the property. Remember that charging too low a price can see some tenants assume there is something wrong with the home, while charging more than the market can bear is also a major turn off for all categories of renter. Charge what the home is fairly worth.
Remember, it is often the case that getting a property rented as soon as possible for $5 or $10 less than desired often works out better than if you left the property vacant for four weeks.
Particularly in hot markets, it pays to be competitive. However, not all tactics are necessarily beneficial – ensure to consider the pros and cons of “incentives” such as a week of free rent.
Background checking tenants
When you start to receive applications for tenancy, ensure that they are looked through quickly and decisively. Look for warning signs, such as blank fields in the application form that haven’t been explained, and ensure to actually call and double check the identity of referees they have included on their application form. Another warning sign can be tenants that appear over-eager, such as promising three months rent in cash upfront and calling repeatedly. Always ask yourself why they are so desperate to rent your home, particularly if there are plenty of other opportunities.
Also, of course, ensure you double check the financial details you have been provided. Can they really afford to live in this property? Stability of employment and strong references are big plus signs for any tenant.
When undertaking a full background check ensure you do not write off potentially strong applicants for unfounded reasons. Ask yourself what it is that you are uncertain about before discarding a tenant’s application, but do trust your gut feeling.
What to do after securing a tenant
One of the most crucial things is to ensure you minimize vacancy by keeping a good tenant in the property when you have found them. Now you’ve done the hard yards with your property manager the trick is to keep your tenant on side.
Rental increases should only be implemented when the market justifies this – it is worth sending a letter explaining why the rent has been increased, potentially including comparables, to your tenant. Remember to increase fairly, with plenty of notice.
Don’t be afraid to ask your tenant what they do and don’t like about the home. Is there a feature you could provide that they would pay more for or be more comfortable with? You are under no obligation to provide these things, but it can open your eyes to the potential of the home.
Maintain open channels of communication with tenant and be courteous at all times and do not forget to undertake repairs and maintenance when necessary. If a property manager is in charge then you may wish to leave instructions for repairs to be undertaken up to a certain price point without your specific agreement. When you have the perfect tenant, don’t lose them for minor reasons.
Points to remember:
- Speak to property managers during the buying and renting process
- Understand the type of tenant likely to rent your home
- Consider upgrades and renovations
- Market your property carefully
- Be respectful with your tenant
- Communicate regularly with the tenant