Good tenants will take care of your property, keep you up to date with any maintenance issues and provide a reliable source of income. Bad tenants can disrupt your cash flow, prematurely age your property and will end up costing you more in property management fees.
Don’t underestimate the value of tenant retention. Each time you lose a tenant, you’re losing valuable cash while your property sits vacant.
Property Observer brings you five tips for getting and keeping the right tenants.
- DON’T SET RENTS TOO HIGH
While slugging tenants with the highest possible rental rates might seem like the best way to squeeze cash from your investment, the practice may actually harm your tenant retention rate, costing you more money in the long run.
If tenants are too pressed for cash or see something more affordable pop up on the market, they may move on, leaving your property empty while you search for new renters. Just because one tenant can afford to pay extra for now, that doesn’t mean that others will do the same once that renter moves on.
Gary Triganza of Sydney agency Kelly & Sons told Property Observer that landlords should consider keeping rents slightly below the market rate to retain a great tenant. “Landlords can then go to the full market rent with the next tenant,” he said.
If you set rent at $590 per week rather than $600, it will cost you (and save your tenant) $520 a year – less than a single week on the market will cost you should they vacate.
Setting your rents too high will also scare off good tenants. Beware of prospective renters that are willing to pay well above and beyond market prices – they may be desperate because they have poor rental histories.
- DON’T SET RENTS TOO LOW
Setting rents too low may leave you vulnerable when you decide it’s time make an increase, with a big jump in the rent likely to scare away your tenants. Gradual adjustments to market value over a long period of time are more likely to go down well with your tenants than a leap at the six month mark. Be cautious about setting your rent too low to attract tenants. If your tenant is living in your property only because it is affordable, rather than desirable, they may not take good care of the property.
Remember, you probably won’t hold your investment property forever. When it comes time to sell, buyers will enquire about your rental yield – and will be turned off if it is well below market value.
- KEEP UP WITH MAINTENANCE
Although rental markets in certain capital cities are tight, don’t underestimate your tenants’ need for quality housing.
As a landlord, it is your responsibility to provide safe, clean and well maintained housing to your tenant. Don’t be fooled into thinking you hold on the cards because you are the property’s owner – they are paying you money in exchange for the provision of a service. If you want to maintain a good relationship with your tenants and your source of income, maintain your property. Don’t dodge calls from your property manager, don’t be stingy when it comes to required repairs and if you’re choosing to maintain the property yourself, make sure you show up on time.
Properties all see inevitable wear and tear, regardless of the tenant. But when renters see that you are on top of the necessary repairs, they will be more likely to take good care of your property.
- HAVE A GOOD RELATIONSHIP WITH YOUR PROPERTY MANAGER
Property managers are there for every step of the tenancy process, from sourcing good tenants to keeping them happy and finally guiding them out of the home when the time comes.
Your property manager should be on good terms with your tenants and work hard to keep them happy. They should be on top of any necessary maintenance issues and quick to let you know if any issues arise. Don’t have unrealistic expectations of your property manager, but do make sure that you are in regular contact.
- LET THE BAD ONES GO
Don’t think that you have to put up with bad tenants. If your tenant is failing to pay rent or causes damage to your property, you are able to take action.
Depending on the state, you may be able to immediately evict a tenant if they are causing malicious damage to your property or after two weeks if they are late on rental payments. You may also be able to evict a tenant before the end of their lease if they are using your property for illegal activities, putting their neighbours in danger or keeping other tenants in the property without your knowledge.
Being a good landlord isn’t just the right thing to do, but will end up making you more money in the long run. If you are a reliable landlord who takes care of your property, you can retain reliable tenants who do the same.