When you purchase an investment property either commercial or residential, you want to make sure you have the right tenants. When you don’t have this right, your investment property journey can turn from a dream into a nightmare.
There have been many horror stories out there of tenants refusing to pay rent, constantly being late with rent or tenants completely “trashing” a property. Some are to the point of the whole property being completely stripped down to the bones and restarting. You hear stories of ‘I was helping out a mate or family member.’
Some property investors are willing to help out a family member or mate, especially when they are in need. If this is you, make sure you still complete your due diligence no matter who you are helping. It is important to consider your own interests, especially when it is an investment property – this is a huge financial commitment for you.
The selection of tenants is easily the most significant decision a landlord makes during the course of leasing out their property.
Most importantly, if a tenant is not in a financial position to meet their rental obligations on time, or at all, this can have an immediate impact on the owner’s revenue, and subsequent possible late payments of outgoings and mortgage payments. Habitual late payers can apply for properties and omit certain information such as a previous rental history with an agent that is less than favourable. Rigorous reference and background checks are essential in this regard.
The second most critical factor in tenant selection is ensuring the tenant will care for the property. Tenants who do not maintain their properties to a good standard can in fact caused irreparable damage, far exceeding the bond, and also exceeding the maximum amount claimable under landlords insurance. This is another reason why it is important that an experienced agent handles the application review process making sure all background information and references are checked.
– Richard Kemp – National Property Manager, Frasers Property Australia
By engaging a real estate agent – you can take the stress out of finding a tenant. Good real estate agents will have processes in place to make sure that they find you the right tenant by screening them.
Just some of the requirements that your real estate agent will need and action are:
Documents – completed application, pet references, payslips, photo ID, pay slips;
Checking a tenants rental history – making sure there are no flags regarding damage;
Credit Check – making sure they are able to meet their rental payments;
Property inspections – they will complete rental property inspections to make sure the property isn’t damaged and that they are adhering to the rules outlined of the landlords ie pets.
In this modern world it is incredibly important to screen your tenants correctly and employ a Property Manager to do this for you. If there is ever a time where you need to make a claim on your landlord insurance, your insurer may request proof of your tenant screening process. Having a Property Manager ensures that your tenant has been well vetted prior to entering into a lease agreement.
When looking for a Property Manager, ask them how they screen their tenants. They should be ensuring all references have been contacted and they have documented all responses. With the increase in technology there are many online application providers that assist with this process electronically and can even alert them if their IP addresses match between responses.
- Tom Hathaway, Principal/Director – Hathaway Estate
Whether you are helping out a family member, mate or finding a new tenant, it is highly recommended that you complete a back-ground check. All these checks can help find the right tenant for your property and give you peace of mind that your financial investment is being looked after.
When planning to self-manage your property, there are dedicated online software programs that can complete these back-ground checks for you, for a monthly fee. If it’s too much to self-manage, then we highly recommend you engage a proactive real estate agent and ask questions on how they will look after your investment property.
Here at Capital Claims Tax Depreciation, we are proud to work with many proactive real estate agents. Not only do they have processes in place to help out their property investor clients with finding the right tenant, but they also help these property investors to claim their rental property depreciation deduction.
As an investment property owner, you are entitled to claim a tax deduction for the wear and tear on your property. The property depreciation deduction can total thousands for residentials property investors and sometimes hundreds of thousands for commercial property investors. Visit our website to learn more about property depreciation deduction
Your real estate agent may ask you if you organised a depreciation schedule? This is so you can claim your rental property depreciation deduction (also known as the tax depreciation deduction) which is one of the largest deductions claimable.
Many property investors are unaware of the depreciation deduction and miss claiming it. If you haven’t organised a depreciation schedule, your real estate agent may recommend organising one from a quality tax depreciation provider like us here at Capital Claims Tax Depreciation.
We work with proactive real estate agents and are happy to recommend any that we may work in your area. We are also happy to provide you with a quality tax depreciation schedule, call us on 1300 922 220. Or visit our website for more information.
Mark is an expert quantity surveyor, business owner, public speaker and property developer. With 20+ years experience in the construction and quantity surveying industry Mark’s specialist expertise have been sought in consultant capacity by professional bodies such as the National Institute of Accountants and the National Tax and Accountants Association, and he has presented at various property and tax seminars and expos nationwide. Mark holds a Bachelor of Construction Management from the University of Newcastle, is an affiliate member of the Australian Institute of Quantity Surveyors and a Registered Tax Agent.View all posts by Mark Wilkins