Making steady, long-term rental income as a property investor depends on whether you find good tenants.
Many landlords believe that good tenants should have a stable income and a good character. But the reality is, your property may not always attract such tenants. The type of people interested in renting your property depends on the socio-demographic of the community, as well as the average rental prices for that area.
Why your property does not attract the ‘best’ tenants?
Before becoming a property investor, my ideal tenants were white-collar professionals. But, I realised my investment strategy was and is based on buying run-down properties in poorer areas. These areas attracted more blue-collar workers and people on lower salaries. There is nothing wrong with this; my parents were poor but always paid their rent.
So, I changed my advertising tactic to market my properties to local tradesmen. In reflection, tradesmen and builders are the best tenants. They take more initiative to fix minor problems in the property. The lesson I learnt is that your property investment strategy should to be adapted to the demographic and area you are targeting.
Why it’s safer to use experts to find good tenants?
To avoid agency fees, many landlords find their own tenants. There is nothing wrong with this. But do you really have the skill to thoroughly assess every applicant? And, do you have the tools to perform financial and background checks? If not, the best solution, in my opinion, would be to use a ‘selective service’ offered by letting agents. (Please note, I am not a letting agent).
A ‘selective service’ means that the letting agent finds and interviews prospective tenants on your behalf. For a fee, the letting manager drafts the contract, does the credit and reference checks, organises viewings and lodges the bond. But the agency does not manage your property or collect the monthly rent. You still act as your own property manager.
For me, using a ‘selective service’ is a better choice than finding your own tenants, for three reasons:
- Sourcing the right tenant can take a lot of time, especially if you work full-time or own multiple properties. It also takes longer to find tenants during the holiday seasons.
- Good tenants can turn into bad tenants without notice. There is no 100% guarantee to prevent this from happening. However, you can minimise your chances of selecting a rogue tenant by having a professional give a second opinion.
- Selecting the wrong tenant can reduce your rental income. Legally, you cannot evict your tenant immediately if they default on the rent, or damage your property. You must go through a mediation or court process. Safeguard your property by using the knowledge of an expert to find good tenants from the onset.
So, how do you find good tenants?
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