11 June 2015 The importance of having a good tenant

When looking for an investment property that you intend to lease, your choice of the tenant for the property is almost as important as the actual choice of property.

As a future landlord, you want a tenant who:

  • pays their rent in full, and on time
  • would look after your property, and
  • would stay in the property for the foreseeable future.

Fundamentally, what you want is a good tenant that will provide an ongoing income stream into the long term. After all, a strong cash flow is the key ingredient to making a sound investment. Furthermore, the wrong tenant could actually cause you to lose money. For example a tenant that leaves your property in a state of disrepair could leave you liable for expensive maintenance and damage bill that will quickly eat into your cash flows and could very well leave a big crack in your nest egg.

Going the distance
First thing is first … you want a tenant who will last. The longer someone stays in your property, the less time and money you’ll spend trying to replace them. With that in mind, you will need to treat good tenants well and deal promptly with problems that arise. You should also only implement a rent increase when the market justifies it and explain in writing why the rent has been increased, with plenty of notice.

Location, location
So what kind of investment property should you consider in order to attract the right tenant? Condition and location is a huge factor in the type of tenants your property will attract. You should consider the suburb, schools, shops, local amenities and business districts in the area to determine the type of tenant that is likely to be looking for a home in your area. If your property is located in an area that is renowned for its lifestyle options, schools or proximity to something of interest that you should attract more applicants and ultimately you will be able to cherry pick the ideal tenant.

Drive it like you own it
After finding an investment property, you need to attract tenants that will treat your property as if it is their own; but how do you go about finding them? Finding a good tenant is about marketing and about due diligence. Make sure that your property is well presented and desirable, then market the property accordingly. Once prospective tenants begin expressing an interest in your property, undertake background checks and screening. A normal tenancy application requires at least three references from an employer, a property manager and a personal referee. You’ll need to ask the past employer about the prospective tenant’s reliability at work, their employment history and financial status.

It sounds like hard work, and it is a lengthy process. But finding a good tenant is important to ensure your investment is safe. If you don’t have the time or the inclination to go down this road and still want to invest in a property, then investing with Defence Housing Australia (DHA) could be the best option for you.

Defence Housing Australia tenants
Investing in a property with DHA gives you “peace of mind”. Properties are sold to investors and leased back  to supplement their housing supply for the Australian Defence Force. And because DHA is backed by the Australian Government, and their occupants are members of the Australian Defence Force or Defence civilians, you can expect that your property is in good hands. DHA may well be that “good tenant” that every property homeowner hopes to have. Rent is guaranteed* for the term of the lease (up to 12 years) and is accrued daily and paid monthly in advance directly into your bank account. You’re even paid if your property isn’t occupied. The management fee is calculated as a percentage of the rent and is taken from your monthly payments.

DHA is responsible for organising and covering the cost of most routine, non-structural repairs. As a result, your responsibilities are significantly reduced when compared to conventional residential property investments. DHA even arranges a licensed independent valuer to annually review your property’s market rent and then adjusts your rent based on review date. As an investor, you will know your property is being cared for without the hassle of doing it yourself.

When the lease agreement comes to an end, DHA ensures that your property is returned in good order, is professionally cleaned, and the grounds and landscaping are in a neat and tidy condition. If your lease is six years or longer, the property is painted internally. If the lease term is nine years or more, the carpet is replaced and the property painted externally. You can then move in, rent privately, or sell the property as you wish.

In essence, DHA can ensure that you invest in a property that receives the rental income it deserves without the headache of securing long-term good tenants.

Learn more about investing in Defence Housing Australia or enquire online.

*Rent may be subject to abatement under certain circumstances such as loss of enjoyment or amenity, or breach of lease terms. Rent is paid where the property is habitable. Should a property become uninhabitable during the term of the lease, or lessor breaches the lease terms, the rent may cease or abate and the lease may be terminated by DHA. Guaranteed rent is subject to the terms of the lease. DHA does not take into account an investor’s objectives or financial needs. Investors should always seek appropriate independent advice before making any investment decisions with DHA.