The Goldilocks Zone – How to Spot the Perfect Tenant Application
Finding the right tenant can be difficult, and even risky. You can’t meet your tenants in person right away, and every application on paper can look the same.
But there are ways to tell the good applications from the bad.
In every local area there are a group of potential tenants who are looking for a home. At Pursuit we call this group the 'tenant pool'. When a family finds a new home, they leave the tenant pool, and when a tenant needs to move, they go into the pool. When you first look into the pool, it's hard to see which tenants are great and which tenants are not the right fit. Clearly, the logic behind having a great tenant in your investment, as opposed to a bad tenant is obvious. The important step is to be able to filter out the good from the bad.
Today we’ll show you the signs of what we look for in the perfect tenant application. We’ll outline what are some reasonable expectations you should have, and some unreasonable expectations you may need to let go.
Please note: today we’re talking about finding the right tenant. If you are a tenant and you’re looking to improve your chances of approval, you should check out our other blog on ‘Making Your Tenancy Application Stand Out’.
Take the Right Amount of Time
First of all, it’s important to spend the right amount of time looking at applications. The process of finding a tenant for your property should not take months. But it should not be rushed either.
It’s all about balance. Aim for the ‘Goldilocks Zone’ of not too much, not too little. Just right.
Some landlords and property managers will approve the first candidate that remotely looks good, just so they can fill a vacant property and look good for doing it quick. This is a giant risk for obvious reasons. For one, it’s easy to overlook red flags in the application if you only skim-read. Remember that a short term gain could end up being a long term loss.
Also, some landlords will wait too long before choosing a tenant. Usually this is because they keep waiting for the "perfect" candidate – someone who matches every single requirement they’re hoping for. Unfortunately, perfect candidates can be very rare. You can miss out on good tenancy applicants who get impatient from waiting too long, while landlords search endlessly for perfection.
It's a Goldilocks-like balance. Look through the applications thoroughly. But try not to look for tenants who are 'perfect'.
Now let’s look at how to spot good tenancy applications.
Good Applicants Don’t Hide Information
Every application should have its rental history, employment, and income clearly stated upfront. If you come across an application where this information is hidden, or omitted, it doesn't look good.
An application can obfuscate information through omission or blurring of the truth. Instead, the application should just be completed in clear, concise words or numbers.
Even if the tenant has unflattering information, such as being out of work, they should still make that clear. There nothing to gain from making the agents' job harder.
Tenants must supply proof that what they have stated on their application is true. They must also attach references so that items such as rental history and employment can be confirmed as true and accurate.
Know What to Look for in Employment History
You may think the perfect tenant has been in their job for at least 10 years, as a sign of stability. But the job market is different nowadays.
Younger generations are changing jobs much more frequently. Job experts are even recommending changing jobs every 3-4 years to help with career advancement, depending on your field.
So don’t look for a tenant who’s been in one job for a long time. Look for someone who is consistently employed. It doesn’t matter if they have changed job on a semi-regular basis. The important things is that they’re never without work for long.
A smart agent knows how to interpret employment history and cross-reference to income, industry and role. They will confirm with a manager and ensure the applicant is being forthright about their job.
Reference vetting can take time, especially if there are multiple applications. This is why it's best to focus on balance - if your property manager accepts a tenant too quickly they may have blitzed through the application so quickly that something is missed.
Don’t Look for Red Flags – Look for Green Flags
We’ve all heard horror stories of the tenants from hell. So you might be worried enough to search for serious red flags, such as rental arrears, damage to the property or eviction.
While a smart agent vets every single tenant through a blacklist database to be absolutely sure, the reality is that red flags can be hidden. If an application is incomplete, or has gaps, this can indicate problems. Often the property manager has to invest more time into the application process to discover if a red flag exists or not.
Instead, you’re better off looking for green flags. Focus on finding applicants with steady employment, a good rental history and a meaningful reason for the previous eviction such as property sale or relocation for work. Green flag tenants can demonstrate a solid income and history with references that will promote them well. These flags are hard to fake and easy to find.
How Soon Can They Move In
If you have a vacant property, you might be tempted to approve a tenant who can move in straight away. But you should first ask ‘why’ they can move in so quickly. Are they just eager? Or is there a problem with their current location?
In the same way, a tenant who needs more than a month to move in could be more trouble than they’re worth. They could take a long time to organise anything. Or they could have a lot of personal drama.
A reasonable timespan before moving is between 1-2 weeks. Anything more or less should raise some questions.
Consider Why They Want to Live in Your Property
Look at your property from the perspective of a tenant. What about your property might attract them?
If you have lots of bedrooms and you’re near a school, you may attract families. Or if your property is near the beach, you might attracted retired couples.
Take the time to understand the strengths of your property. Then you’ll better understand what kind of tenant is most suitable. A great agent knows what to look for and will make recommendations off their experience.
We hope this has given you a clear idea of what to look for in a tenant application. Give us a call if you need further advice on finding the right tenant.
Pursuit Real Estate has an extensive tenant pool of suitable tenants looking for their next home. We could soon have a great tenant living in your investment property without any drama or fuss. Give us a call if we can help you out.