How to screen your tenants

When you are managing a rental property, especially if it is your own property, the most important thing you can do is find great tenants. This means screening your tenant applications ruthlessly.

How do you get great tenants? It’s kind of like buying a boat (defined as 'a hole in the water into which you throw money'). You can take the time to find a good deal on a good boat with a strong engine that will bring you home every time, or you can accept the one with a couple of small leaks and think “at least it floats”. Which do you suppose is going to cost you more money and heartache in the long run?

It is tempting to accept the first tenants who fill out an application, especially if the property has been vacant for a while (“at least it floats”). However, unless you make the effort to carefully screen their application, who knows what kind of leaks, I mean problems, they will give you.

Find as many applicants as you can
Some owners and managers depend on luck to bring them great tenants, but I have found that luck has little to do with it. To get great tenants, you have to make the time and effort to find them. This means doing a good job of marketing the property so there are lots of applicants to choose from.

Simple logic tells us that if we have enough rental applications in hand, one of them is bound to be a good tenant. We can discuss some ways to get lots of potential tenants inspecting your property another time. For now, let's just imagine you have a decent pile of applications to select from.

The screening process began when you met the applicants during the inspection. How they respect your property during the inspection is a good indicator of how they will during the tenancy. Be careful on that note, however. If your instinct tells you they were putting on a performance at the inspection, you're probably right.

Don’t start checking an application without proof of income and ID
The application is essentially a series of questions whose answers you want to have about the people who will be moving into your property. The only way the answers are of value is if you take the time to verify them. Finding a great home is competitive enough that some tenants may not be completely truthful in their application.

This is one reason it is important to verify everything on the application when screening. Ensure they have given 100 points of ID and proof of income, preferably their three most recent payslips and/or a bank statement highlighting their income.

Important questions to ask referees
Your most important screening phone call will be to the property manager at the last place the tenants rented (and their previous place too). Ask how they were as tenants. Did they get the rent paid on time? (Feel free to ask for an email copy of their tenant ledger so that you can see the payments for yourself.) How well did they keep the home? Was the bond refunded in full?

Next, call the applicant's employer. You need to call to verify income, so ask to speak with the applicant's supervisor and get their impressions. I believe good employees make great tenants (one of my favourite questions to ask employers is whether they think the applicant will be working for them in six months' time. If they say “I hope so!”, I know I’m getting close).

Many people think the character references are merely a formality, but they can be a terrific tool to find out what kind of person your applicant associates themselves with. I believe a personal reference is as much about the person giving the reference as it is about the applicant. My favourite question to ask them is ‘If you had a rental property would you lease to them?’.

The answer is always going to be yes, but listen closely. If there is some hesitation in the reply, that’s a big worry. However, a cheerful genuine confirmation is a good sign.

The final screening steps
If the applicant has impressed me to this point, I like to make a check on the National Tenancy Database (or as I like to call it, the Naughty Tenants Database). The information from the NTD is not free, so I wait until I am almost ready to offer a lease. Up to this point the screening has only cost me time on the phone, so spending the money to confirm what I think I already know is well spent.

Before I accept an application and offer a lease, I want to go over everything and do a final gut check. If something does not feel right it probably isn’t. I’ve learned this the hard way!

Screening applicants before they become tenants is not always fun. It is a bit of work to ask a lot of strangers personal questions about another stranger, but I find the time I invest saves me 10 times as much frustration down the line.

About Michael Gilbert

Michael is the co-founder and director of Rent My Estate, one of Australia’s leading online property management services. With Rent My Estate, property owners can advertise, find tenants and manage their properties without having to use a conventional real estate agent.

Since he started as a real estate agent nine years ago, Michael has been examining the property management process in Australia and finding ways to improve it. His goal is to make property management a simple, streamlined process with Rent My Estate.

As a nationally licensed real estate agent, Michael relishes the task of helping his clients with all kinds of real estate issues. He blogs regularly at Rent My Estate to share property management tips and strategies that are important but sometimes overlooked by owners.