As a landlord, you'll never have more control over the outcome of the tenancy, than when vetting tenants before signing them up.
Of course, there is no sure way of knowing if someone will become a great tenant, but there is still a lot you can do as a landlord during the selection process. There is a lot that can be learnt from a tenant's application, brief interactions during viewings, general chit-chat as well as more formal interviews, reference checks and thorough tenant screening.
Tenant checks reduce the risk of getting a bad tenant because you have more information about the applicant and can make a more informed decision.
But what are some potential red flags to look out for when choosing tenants that may indicate problems in future?
1. Poor credit record and low credit score
Most adults will have a genuine credit history even if they've never taken on any debt. As a landlord by running tenant checks, you can gain access to applicant's negative credit history, which covers payment defaults, serious credit infringements, bankruptcy, court judgements, collections, the pursuit of credit and creditor enquiries.
A tenant's credit score indicates their history of paying their debts on time and how credit-worthy an individual is. Those with lower scores tend to be less responsible with their finances. Generally speaking across all major credit bureaux, a score below 500 is considered poor.
When reviewing applicant's credit records pay attention to dates. Most information stays on the report for at least 4 years. Some events affecting tenant's credit history might have happened in the past due to some life events that can be explained, and they've been managing better since. You can always ask more questions if you're not sure.
2. Problems with the previous landlord
Checking applicant's references and talking to their previous landlord might provide an insightful picture of what they're like as tenants. Focus on questions about rent payment etiquette, property damage and noise complaints from neighbours, to help you understand how reliable the applicant will be as a tenant. But also ask about tenant's pets (to avoid any surprises if you're not allowing any), as well as if the bond was refunded in full.
Pay attention if the applicants speak negatively about their previous landlords, as this may also indicate problems that may carry over.
3. History of breaching the RTA
Tenancy Tribunal orders, as well as illion Tenancy database, are two great sources of information for landlords regarding applicant's history of tenancy breaches.
4. Outstanding fines
Ministry of Justice Fines and court judgements checks will show any outstanding fines that an individual may have. Having these fines may affect the applicant's ability to pay rent.
5. Rushing the application process
If a tenant is trying to speed up the application process and is in need to move in as soon as possible, look into why this is. Perhaps the landlord chose not to renew their agreement, or the applicant's relationship with flatmates at their current rental went poorly, or the applicant has been looking for a while and just can't seem to secure the place. It is important to ask questions and do some digging as to why they are eager to move in so fast.
- Verify the ID
As you don't know much about prospective tenants, it's important to examine the accuracy of the information provided, and this starts with their ID. The ID details will be used when running credit checks and other background checks on the applicant. If the ID details are provided, it's always a good idea to sight this ID to make sure it matches the person you've met before making any final offers and signing tenancy documents.
- Applicants with no credit history
Unfortunately accepting someone young, has no previous credit or rental history or new to the country, will always carry more risks. Consider asking for more references or suggesting using guarantors as an option (someone who can support their application and promise to pay rent should they fail to meet their obligation).
- Tenant check all adults on the application
You're best to run background checks on all tenants you're considering adding to the tenancy agreement. This will avoid situations when applicants want to put one name on the application/agreement and adding multiple occupants. The tenants can choose to put the application under the name of the person with the best tenancy and credit history and hide information they don't want you to see.
Does chasing down all the necessary information, calling references and finding the right credit company to perform tenant checks sounds too painful and time-consuming? Here at myRent.co.nz, we can perform thorough background checks from just $35. We'll spend the time collecting landlord and employment references, conducting ID checks, credit checks, Tenancy database and Tribunal Orders searches.