Tenant screening – important factors that may raise the red flag
Your investment property should be exactly that, an investment. As a property investor, you will appreciate that, as with all investments, there is a minimal risk which must be factored into the situation.
However, a bad tenant can have a negative effect on this, and although one cannot predict the future nor guarantee that a tenant will not suffer a change in circumstance which may impact on a rental, it is important to spot the warning signs.
Red flags to watch for during the screening process:
A gap in employment or a long list of short term jobs could be a bad sign. A good applicant should have a stable job with a stable income.
2. Proof of income
It is important that the applicant can prove continuity of income, as well as affordability. They should be willing to provide at least 3 months’ pay slips and/ or bank statements to verify their income. If they are reluctant to provide these, then this raises a red flag and you need to ask the question: “why”?
3. Rental Deposit
If an applicant asks to pay the deposit over a few months, this could indicate that they cannot afford it and could cause an affordability problem down the line. The full deposit and the first month’s rent must always be paid in full, prior to key handover and occupation.
4. Independent References
If there are no references listed or they use the name of a friend or family member, they could be trying to hide something. Contacting a friend or family member will not provide insight into what the applicant is really like as a tenant. Ideally, a reference is required from the previous rental agent or landlord.
Author: Julie Petermann- Rentals Compliance Officer