Finding the right tenant can make or break your residential property investment business. Here’s a guide to get you started.

Once you’ve found a property to buy, the next step is to start the process of finding tenants. You’ll need to set the rent and make decisions on subjects such as rental agreements, pets, and flatmates.

1. Do your homework

Setting the rent. Do you know how much rent you can expect? You only get a short window of time from listing to grab good tenants’ attention. It’s vital you set rent to meet the market while maximising your return. Too high and you’ll get very little interest and attract desperate tenants who often turn out to be a problem. Too low and you’re selling yourself short and may attract the wrong tenants. Tenancy Services keeps records from bonds of recent rental prices in each suburb. Data is split into lower, median and upper bands for different types of properties. However, these statistics include social housing, so sometimes they don’t reflect actual market rents. It’s important to regularly check the rental market to see what rental properties are being advertised for.

2. Should I allow pets?

You’ll hear that many landlords don’t allow pets. The reason is our furry friends can damage walls, doors, floors, curtains, carpets or even dig up the back lawn. Yet tenants with pets offer landlords a huge opportunity. Tenants with pets have a lot of trouble finding tenancies. That means they’re often prepared to pay a little more rent for a property that allows pets.

3. The right tenant

You need to know what a good tenant looks like to find one. They may be very different people to you, but able to pay the rent and look after the property. Start with a well-written advert, paired with the best photos of your property, to appeal to the widest selection of tenants looking for a property. At Crockers, we use a number of platforms to source tenants. We vet all new clients to give landlords the best possible chance of a hassle-free tenancy. Crockers markets your property on multiple databases including our own popular website crockers.co.nz, OneRoof, realestate.co.nz, Trade Me, homes.co.nz, WeChat and SKYKIWI. Sometimes excellent tenants are relocating to New Zealand and these tenants may not know about TradeMe or other local New Zealand websites.

4. What about flatmates?

What about flatting situations and Work and Income clients? Landlords sometimes fear groups of flatmates. Yet the types of properties that appeal to groups often get the best rent. Not every property is suitable for a family and not every flatting situation is party central. Some groups of flatters may be better tenants than the wrong family. What’s more, a family might not want your property if it’s unfenced, on the main road, or backs onto a stream or railway line. Never say never, especially if you’re letting in an inner-city area. You might get some great young professionals. Likewise, the right Work and Income clients can make excellent tenants. It’s all about knowing what to look for in a tenant.

5. Fixed or periodic tenancy?

Under the Residential Tenancies Act (1986) you can offer either fixed or periodic tenancies. With a fixed-term tenancy, tenants sign up to stay for six months or another set period. During a fixed-term tenancy, you can’t simply give the tenant notice to leave. Fixed-term tenancies are popular with landlords but can prove to be a double-edged sword. With a periodic tenancy, there’s no set time a tenant must stay, and they can give 21 days’ notice at any time. The advantage of a fixed-term tenancy is that you won’t be looking for tenants again in a few months’ time. Landlords must give 90 days’ notice if they want the tenant to leave. This can be done at any time during a periodic tenancy.

One exception is if you, or one of the members of your family want to move in, you can give 42 days’ written notice to break a periodic tenancy. Be careful of this, because there are fish hooks. For example, companies and family trusts don’t have family members and can’t give this shorter notice. Fixed-term tenancies only need 21 days’ notice prior to the end of the tenancy to terminate. Tenants who breach the terms of their periodic or fixed-term tenancies can be removed from the property. To do this, they must be issued with a 14-day breach notice, with time to remedy the situation, and then a Tenancy Tribunal application is made for possession of the property if the issue isn’t resolved. A fixed tenancy rolls over into periodic at the end of the term unless you re-secure the tenancy within the correct time frame. A good property manager will make sure the negotiations are done in time, giving the landlord peace of mind.

6. Vet the tenant

Every tenant should be vetted. How they sell themselves and how they behave as tenants can be different. Vetting starts at the viewing. Look at what they are wearing, how tidy their car is, and whether they talk to you. Property managers learn very quickly which tenants will be suitable and know the tricks to look out for – such as old landlords giving glowing references to get rid of a bad tenant. Crockers runs credit and employment checks on every prospective tenant. You can never be too careful when it comes to letting an asset worth hundreds of thousands or even millions of dollars.

Published 28 November 2019

This article does not contain any financial advice and has not taken into account any particular person’s circumstances. Before relying on it, we recommend you speak with a financial adviser. This story reflects the views of the contributor only. Content comes from sources that we consider are accurate, but we do not guarantee that the content is accurate.