According to the Australian Bureau of Statistics, there are 4.62 million rented dwellings in Australia. Though most renters pay on time and will give you a hassle free tenancy, it’s important to avoid risk in the tenant selection process.
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If you’ve just invested in your first property, you might feel like you’ve hooked up a cash pump – all you have to do now is wait for the dollars to roll in.
If, however, you get a bad tenant, it can not only hurt your back pocket, but also your sanity. Look for these five tenant red flags in your next screening to avoid a big headache.
They have a thin employment history
If a would-be tenant has a string of short-term jobs – perhaps three months or so at a time – or has huge gaps in their employment history, this could be a bad sign.
A good tenant should have a stable job with a stable income. If they can’t hold down a job, they likely cannot afford to pay rent.
They don’t show you proof of income
If you’re trying to check a tenant’s income and come up with nothing, this could be a sign of a bad tenant. In the application process, a tenant should come up with at least three months’ worth of payslips or bank statements.
As Savvy CEO Bill Tsouvalas said, “continuity of income is crucial for a lender to approach a home loan, and it’s just as important for landlords to take the same approach.”
“A renter and landlord relationship is a business relationship, it requires honesty,” Bill said. “There is something to be said about the saying ‘Trust, but verify’ in this kind of transaction.”
They negotiate the bond, or ask to pay after they’ve moved in
A tenant trying to escape paying the bond – or trying to haggle for it – is not only a sign they cannot afford it, but against the law.
A rental bond is a security to ensure the tenant follows the rental agreement. At the end of the lease, if all is well, the tenant will get their bond back.
In fact, rules for the application and return of bonds are spelled out in the Residential Tenancies Act 1997. Not only that, but in all states, an agent or landlord must lodge the bond with a tenancies bond authority. It not only makes them look bad, but also puts you at odds with the law.
They don’t have independent references
Tenants who put down references on their application with the same last name could be trying to hide something.
Listing friends or relatives as residential references won’t give you an insight into what they’re really like as a tenant.
Tenants with rental history who can’t get a reference from a previous agent or a landlord may not be worth your time.
The numbers don’t add up
According to the ABS, the spread of rent-to-income ratios should be between 25% and 38%. If your would-be tenant would be paying more than 30% of their income in rent, the numbers probably don’t support their application, even if they have been forthright with everything else.