12/09/2013
Question: I recently bought a three-bedroom house and would like to rent it out as soon as possible. My property manager suggested I should do a full reno to get the best tenant. What do you think?
Answer: The first step I would recommend is to research and understand the market thoroughly. Although I believe in some cases you may get a better tenant with a better-presented property, it also comes down to a financial decision as to how much you are willing to spend on the reno and what return you will get for the money, also factoring in loss of rent and mortgage repayments during the renovation.
From understanding the current local market, what would the likely premium in rents be for a fully renovated property versus one in its original condition? Could there be a slightly cheaper alternative if your numbers don’t stack up for a full-blown reno at the moment, such as maybe updating the bathroom with a new vanity, toilet, taps and shower screen, and doing a minor facelift/refresh of the existing kitchen instead of ripping them both out and starting from scratch? Some other low-cost options that I find always yield very good ‘bang for your buck’ include a new coat of paint, new window furnishings, and polishing or carpeting the floors. These may also give you some good returns and ensure you get the best tenant.
SPOTTING DODGY TENANTS
Question: I know it’s not an exact science but, in your experience, how can you tell if a tenant is going to be a problem? I’m a bit nervous about renting my first investment property, so I need to make sure we’re getting the best tenant.
Answer: Yes, this is always a daunting experience, especially with all the stories you hear about ‘tenants from hell’. I believe a very big part of the selection of a suitable tenant doesn’t always come down just to their ability to pay but rather to the tenant/s themselves. This is why I believe the first step in choosing the best tenant is to meet them in person. They may look fantastic on paper, but you may get a bad vibe or gut feeling about them in person, like something just doesn’t add up about them.
Ask them questions. It doesn’t have to be entirely about their ‘rental history’. Ask some other questions (Did you grow up in this area? How long are you planning on living in the area? Where do your kids go to school? etc) that are about them personally, and see how they respond in general.
What are their personal hygiene and appearance like? If they don’t care about their own presentation, how much are they going to care about someone else’s property? Did your tenant fill out their application in full, or did they just answer the easy points and leave the hard ones out?
Interview all their references thoroughly. Double and triple check that all the information you are getting from them matches what the applicant has already told you. Or are there discrepancies; are they hiding something?
Get the tenant databases checked! You can also jump in your car and have a drive by their current address. Are their lawns mowed? Is there loads of rubbish on the outside? Are there half a dozen cars parked on the lawn? Chances are this is what your property will look like once they move in.
