Tenant Checks Minimising One Of Your Biggest Risks

Posted on Monday, March 5 2012

Using Tenant Checks To Reduce Risk

As has been featured many times recently, the potential for a property investor to lose money can be quite common if simple rules are not followed. Not checking your rent payments or management statements are only one way that you as an owner may end up with less in your bank account than you should.

One of the most damaging Rental Property Management mistakes to affect your bank account is poor tenant selection. The costs that can arise from these decisions are almost infinite, but would certainly average in the many thousands of dollars at a time.

Control Loss With Tenant Checks Before Tenacies Start

The best time to control any potential loss from a tenant is at the stage before you put them in to the property. As we all know getting a poor tenant out of a property is a great deal harder than not putting them in at all. The main difficulty is gathering and then verifying any information that you are given if it is to be used to make an application decision. Remember this is the easiest time to get as much information as you legally can as this is the point when the potential tenant needs something from you and therefore is more willing to give up details they may choose not to later on. Be patient, a week of lost rent now is far less of a problem than many thousands of dollars potentially later and then having to go back through the process to find another tenant out of peak season and potentially with a less desirable property than previously.

Obviously all the information you collect in an application must comply with all the relevant pieces of legislation, for example the privacy act etc. Secondly you must make sure that the application process you use shows that the applicant has given you permission to do your due diligence on them for the purpose of assessing their suitability to become your tenant including performing that all important credit check.

Thirdly check and feel as certain as you can that the people giving you any references are verified as for example the owner of the property rented or the employer. It is not uncommon for an unscrupulous tenant to give the name of a previous landlord and their mobile number for convenience to get hold of them. Funnily enough when the phone call is made the person on the other end of the line may only be a friend and may have never even owned a house, let alone a Rental Property. The other rouse used has been to have a tenant with the phone in his left pocket as his, and his right pocket is his landlord, if you get what I mean.

Remember if you get the feeling that some of the information doesn’t stack up check it as independently as you can. It is quite possible to find out the real owner of a property, especially in Dunedin or other places where owners details are published, and then check if that person knows your applicant. If you don’t manage your own property and this article makes you remember one of the reasons why you don’t, then use this info to check what work your manager actually does to find your tenant, not just what they say they might do. Remember it is your investment and ultimately your decision that leads to the final outcomes. Whether that is directly deciding who goes into your property or which property manager to employ.

The business is not easy, and with the potential rewards, it quite possibly shouldn’t be. What it can be though is risk minimised, through good practices, checks and verification, losses by owners or managers running into the thousands can be avoided or reduced. So check your procedures, or your managers or future managers’ procedures to see if you think a basic unscrupulous application could get through. This is the time where losing a weeks rent by waiting for a better quality tenant could save you many thousands of dollars in missed rent, damage or time spent in tribunal or small claims court. Do your due diligence in advance, don’t learn after the fact, the costly way for the sake of a weeks rent.

Tania and Kyle Elmer
Directors
Mana Property Management Ltd

www.ManaProperty.co.nz

rental properties dunedin

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Expert's Bio

Tania & Kyle Elmer

Tania & Kyle Elmer are active investors with a large portfolio of properties in Dunedin and Central Otago and mentor investors in the techniques used to grow wealth through property investing. Kyle and Tania are Co-directors of the Leading Property Mangers of New Zealand (LPMNZ). Kyle is a past president of the Otago Property Investors Association (OPIA). They founded Mana Property Management Ltd to provide specialist management services to Discerning Landlords dealing in the quality end of the market. www.ManaProperty.co.nz | Find Kyle on Google+

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