One of the most important aspects of managing residential property, is making sure that the best possible people have been allowed to move into any property. How this process is handled virtually dictates what will happen during the tenancy period. E.g. if all references haven’t been properly checked or if an agency doesn’t have a complete checking process, the wrong people may be approved to live in the premises. Having said that, an application may have the best rental references, great employment history, excellent recommendations and things can still go wrong – relationships can and do fail; people can and do lose their jobs, and other things can happen that mean people struggle to pay rent, or in some instances, they may not care how they maintain the property any more.
To avoid this type of thing becoming a problem, it’s really essential that everything possible is done right from the start with the checking process, before any person is allowed to move into a property. To assist us when asking our landlords for approval of any prospective tenants, we have the same process with every application received, as below:
It’s important that the application is fully completed. We use the 1Form application service, which is an electronic application and cannot be sent to us unless every section has been fully completed. We really need to know as much as we can about every prospective tenant. This application also covers our obligations in relation to Privacy Act requirements.
Just as banks will ask for 100 points of identification to open any account, we feel this is even more essential when people are moving into a valuable investment property. In this day and age, with identity fraud becoming more prevalent and with the number of people arriving from overseas, it’s absolutely essential that everything possible is done to verify that the person on the photo I.D. is definitely the person applying for the property. It’s just as important that Visas are checked if an applicant has them and the Visa period is also checked.
Two previous rental references – so that we are able to speak to two past agencies/landlords. This is to make sure their rental history has been strong for a number of years. Most records won’t be retained after 5 years and it can even be very difficult to get this information after 4 or even 3 years. But we can normally make contact for the last two rental properties. This can be hard with people who have never rented previously, but we have other ways of gaining information. E.g. if prospective tenants have just sold a property, we contact the selling agent to see how the sold property was maintained – they’ve been in the property a number of times and should have a very good idea of how clean the people were and how they lived. It’s harder with young people moving out of home as they have no rental history. In these instances, we speak to everyone we can to ascertain their suitability or otherwise, as well having good discussions with the young applicants.
Employment, including income and work history, is really essential. This indicates to us that (a) they can actually afford the rent and (b) that they have stability – or otherwise. We always speak to their supervisor or someone at a higher level, so that the picture we have of the applicant is as broad as possible. Our ‘rule of thumb’ with income, is that if the rent is more than one third of the income, we would question whether they have the capacity to meet their rental obligations.
Three person/professional references help with the overall assessment of any application. Personal references can be friends or work colleagues and while these people will certainly say only good things about an applicant, sometimes they can give away information that does raise a ‘red flag’, which would mean we have more questions to ask. Professional references normally have more substance and give us more relevant information – generally speaking!
Emergency contact numbers are vital as these are part of the overall process of gathering as much information about the applicant as we can. For a lot of reasons during a tenancy, we may need to call someone regarding the tenant, and if they can’t provide these emergency contact details on the application, we would have to start asking more questions about its validity. These contacts are really important if tenants fall behind with rent payments and we aren’t able to contact them directly.
Tenancy Information Centre of Australia (T.I.C.A.) is an absolutely essential part of any application checking process. We are members of this service and because we believe T.I.C.A. is a vital part of any reference checking process, we don’t charge any of our landlords for T.I.C.A. searches. It’s too important and we feel it’s simply a part of professional management of the property. T.I.C.A. is by far the biggest database of defaulting tenants as they cover all Australia states as well as New Zealand. With the large numbers of Kiwis moving to Australia, it really is important that we check their renting history before they arrive in Melbourne.
Gut feel! As we personally show every property we let, we see how people act when inspecting the property; how their children may behave; we hear their conversations; we can ask questions at the property and before they make an application. We always factor this into our assessment with any application, as ‘red flags’ can pop up during any inspection or Open House. Instinct can indicate that something is not quite right with what is being said or people may give away certain information without even being aware of it.
Discussion with the property owner is the final part of the process and that discussion includes everything we’ve been able to find out about the prospective tenant/s. All the details, the good, the bad and the ugly!! We don’t want bad tenants, any more than a property owner does. So it’s important that everything is out in the open and discussed before a decision is made. We will definitely advise an owner if we feel the application is just not satisfactory or make a recommendation if we’re happy with the results of the checking process. It really is important that during all our discussions in relation to an application, we ask as many questions that we can. Certainly conversation can assist us enormously in making an overall assessment of any prospective tenant’s credibility and reliability.
Over the past 2 ½ years, we have obviously had tenants move to other properties which are managed by other agencies. At a rough guess, the number would be well over 100 tenants, perhaps even 200. Yet we find it strange that we have only been called by other agents for a rental reference check on perhaps a dozen occasions!
We think this is of great concern to any owners of investment property, that their property manager is not making the necessary enquiries or checking on their applicant’s rental history! We often discuss this unfortunate statistic, as it would certainly be a concern to me as an owner of investment property myself.
If you have any questions in regard to how your property is being managed, please feel free to contact me jan.malstrom@investorsdirect.com.au.