What qualities should a landlord look for in a tenant?

Residential and commercial property investment is a lucrative opportunity for interested investors. The key to a successful investment is proper management. You need to be wise when selecting tenants, of course. Still, it's imperative that you find the right residential property manager to work with you to ensure this and the ongoing management of your investment.

Whether you're hands-on or hands-off as a property owner, a positive landlord-tenant relationship benefits both parties and choosing the right person will ensure your vacancy rates remain low.

At DiJones, we have a wealth of experience in real estate and property management, so we know the qualities of good tenants that landlords should look for. While it’s impossible to predict every outcome, putting controls in place to ensure high-quality tenants will make the process run smoothly.

So, let's explore what qualities the applicant has that would be appealing to a landlord to ensure you choose the right person to rent your property.

Financial stability

The first consideration when selecting qualified tenants is financial stability. Can this applicant afford to rent your property without putting themselves under pressure?

Credit history

An applicant may earn a good living, but the tenant's credit history will uncover their level of financial stability and responsibility, highlighting whether they've defaulted on debts or had other financial difficulties.

Income verification and employment status

Income verification is a must because it's the only way an applicant can prove they have regular income, and it demonstrates whether they can afford to rent your property. This must be followed up by confirming their employment status to ensure they have a stable income and employment.

While many landlords may reject applicants for new employment, it's worth looking at previous employment if they are otherwise suitable candidates. A history of solid employment suggests they would have the ability to pay rent.

Rental history

The applicant's rental history is also a good indication as to whether you're dealing with a potential match. If they have a positive rental history where they made their payments on time and lived without receiving complaints, that's a good indication that they will repeat this good behaviour in your property.

Responsibility and reliability

There is more to selecting the right tenant than their financial situation. In addition to a stable income and employment, it's important to ensure you select a responsible, reliable person. There are several ways to verify this.

Communication skills

You can seek references from a prospective tenant's employer and past landlords to ensure they had good relationships. Clear and timely communication between landlords and tenants is imperative, and it's important that both parties understand that.

Respect for property

You want to find a tenant who will respect your property as you would. So, any successful candidate must perform a variety of basic maintenance responsibilities, including general cleaning and tidying. Whether it's maintaining the lawn, skimming the swimming pool, or washing the windows; it all highlights respect for the property.

Adherence to rules

Renting rules are in place to protect both parties, and it's vital that the landlord and tenant are committed to following the rules and regulations to maintain a healthy relationship. It's a give-and-take relationship and it has to be equal.

Lifestyle and compatibility

The tenant should fit in with the lifestyle of the building or neighbourhood. You don't want to choose a constant entertainer if it could disrupt the harmony of the building.

Quiet and considerate

Living in close quarters with other people will always come with annoyance, but there is something to be said for quiet and considerate neighbours. Finding someone who thinks about what time they run the washing machine in the morning and what time their guests leave is an important piece of the community puzzle.

Lifestyle

It isn't just about whether they can pay their rent. The landlord should establish what type of expectations they have for their property – this will make it much easier to determine the type of lifestyle that would best fit.

If you want a professional type who eats out often and entertains at weekends, you should advertise to attract that type of tenant. If it's a family you're looking for to move in, you need to advertise to attract family tenants.

Pet ownership

This is down to the landlord, and often, landlords allow pets in unfurnished apartments. You can add provisions to the lease agreement to ensure any scratches or damage caused to walls and doors is handled by the tenant before they move out.

Or, in most states, you can refuse pets. (Keep in mind that in Queensland and Western Australia, landlords are no longer allowed to refuse pets without reasonable grounds).

Related: How to show a landlord you’re a good tenant?

What are some important things to consider?

Property management companies make use of tenant screening to assess potential tenants as they apply and this service can be invaluable to landlords looking to optimise their investment while protecting it from potential damage.

• References: References are vital to the process and potential tenants should be able to provide references from their employer as well as previous landlords. This will give you a clear picture of the type of person they are.
• Emergency contact information: Accidents and emergencies happen, and though contacting relatives and next of kin is generally something the authorities handle, you should have emergency contact information. It can speed up the process for the authorities.
• Background checks: In addition to a credit check, many landlords will take the step to run background checks to ensure there isn't anything dark lurking in someone's background.

You don't necessarily have a legal duty of care for the neighbours, but it's within your interest to ensure the neighbours aren't upset about a tenant in your property. That being said, if someone does have a criminal record, you can only refuse them if it's relevant to tenancy or would make them a bad tenant.

Property managers and landlords must work together to identify the qualities of a dream tenant. Sit down and agree on some of the essential qualities you expect the perfect tenant to have, including a solid credit score, a history of regular rent payments or mortgage payments, and evidence they are a reliable and responsible tenant.

Related: What a landlord needs to know if a tenant wants to break the lease early

Understanding Australian tenancy laws

Australian tenancy laws vary between states and territories, so you must adhere to those within your local area. The purpose of these laws is to protect the rights and responsibilities of all parties, and they cover everything from rent, dispute resolution, lease agreements, maintenance, and lease termination. Let’s look at some of the most important points to consider:

• Lease agreements: A lease agreement is a legally binding contract and is key to a successful tenancy. The agreement outlines the conditions of renting the property, including the duration of the lease, the frequency and amount of rent due, and the security deposit or bond requirements.

It should also outline the conditions for lease termination by either party and include a detailed process for handling maintenance and requesting repairs. This includes the tenant's obligation to address normal wear and tear issues and the landlord's obligation to handle major repairs.

The lease agreement should also provide clear guidelines around property use and detail what restrictions apply (no pets). Again, tenancy laws vary by state and it's essential you familiarise yourself with the specific laws in your region.

• Rent increases: A rent increase must be put in writing at least sixty days before it takes effect and it can only take place after a period as specified within the lease. It can't be arbitrarily increased at any point during a fixed-term lease.
• Landlord responsibilities: The landlord is responsible for maintaining a safe, habitable property. They are required to handle necessary repairs, including electricity, plumbing, etc.
• Tenant responsibilities: The tenant is responsible for maintaining a clean and tidy property, addressing minor wear and tear issues, and promptly notifying their landlord of any significant property damage.
• Lease termination: Either party can terminate a lease agreement provided they follow the notice period. Landlords require a valid reason to do so before the fixed-term lease ends, and that varies between states.
• Knowing your obligations: It's crucial that landlords understand the region's tenancy laws to ensure a smooth experience for all parties. You need to know your obligations and your rights to avoid disputes or legal issues.

Related: Everything you need to know about selling a tenanted property in NSW

Frequently asked questions

What words can you use to describe a good tenant?

If you're looking for words to describe a good tenant in your ad, there are several words you can plug in. Nailing the advert can attract the right people, which is an effective way of managing tenant turnover.

A good tenant pays rent punctually and is responsible, reliable, and prompt when it comes to reporting issues with the property. They respect the terms of the lease agreement, communicate effectively and maintain cleanliness.

They are considerate of their neighbours, mindful of disruptive behaviour, trustworthy and engaged in maintaining a solid long-term relationship with their landlord and neighbours. They are committed to honouring the lease agreement and will take care of the property.

What factors contribute to a high tenant turnover?

The biggest factor that contributes to a high tenant turnover is poor recruitment. If you can't keep a tenant, it's because you haven't selected the right tenants in the first place. It could be down to affordability; you might need to look for someone with a higher income to fill your rental property.

It might be down to amenities, you can look at what you offer and repair or upgrade where necessary. You can't force a leaving tenant to provide you with feedback, but you can ask if there was something you could have done differently to ensure you get it right for the next tenant.

How can I resolve a tenant dispute without involving legal action?

To avoid legal action, open the lines of communication. Start with a meeting where you can calmly discuss the issues and address any concerns your tenant may have. You should strive to find a compromise that benefits both parties.

If this isn't sufficient, you may want to try mediation with an independent third party guiding the conversation. If you find a solution, ensure you record it in writing so everyone understands their responsibilities moving forward.

What should I do if my tenant is not paying rent on time?

The quicker you address this, the better. There may be an issue causing a temporary delay. If there are bigger issues at play, offer the option of a payment plan if you can. However, you need to be firm about your expectations moving forward.

If late payments persist, you can issue a formal notice to remind them of the legal obligations associated with their lease agreement. You can use a dispute resolution service, but legal action should be the last resort.

Summing up

Many real estate investors will dive in head first without thinking of the practical steps that come with purchasing an investment property. It requires a lot of time and energy to find the right tenant for a property and ensure it's someone who will remain in place for years to come.

You might not have the time or energy, but enlisting the services of a property management company can lift that burden from your shoulders.

Learn more about DiJones: Visit our website to see the services we can provide you. If you are in the market to purchase an investment property, are looking for a property manager, or need a team who can do it all, get in touch with DiJones to discuss your property plans. You can also check out our real estate blog to learn more about buying and selling properties in NSW.