The Most Desirable Traits To Look For In A Tenant

Your investment property will not fund your retirement. Your tenants will.

Your investment property does not work 40 hours a week to pay you. Your tenants do.

Your investment property won’t clean up after itself. Your tenants will (hopefully!)

Don’t get these things confused - you only buy an investment property so you can house a tenant who will pay you to live there, which will in turn fund your retirement.

Your retirement strategy is tenancy-based.

Therefore, expert tenancy-selection is absolutely crucial to your retirement strategy end game.

Here are the three base-level traits to look for in a tenant. Anything else is a bonus:

Ability to pay the rent

It sounds obvious but sometimes it is not so. You need to make sure that the tenant:

• Can afford the rent, i.e. they are not paying too much of their salary to live in your property, and
• Will pay the rent on time. It also gives wiggle-room to propose rent increases (as the market dictates) down the track.

How to tick this box:

Request pay slips, bank statements and a reference from the applicants’ employer. The more documents they can give you the better.

A naturally clean and tidy person

You want someone living in your property who will - of their own accord - keep your property in a clean and tidy state at all times, not just on the day of inspection! Some things (such as failure to put away clothes) you can gloss over but other things (such as not cleaning the toilet/oven on a regular basis) can cause damage to your property.

How to tick this box:

• Ask for a reference from their previous property manager/landlord.
• Ask this person how the tenant looked after their property.
• If you can, find out from tradespersons about the cleanliness of the property whenever they need to go to the property for repairs and maintenance. A naturally untidy tenant will not go through the effort of cleaning before the plumber comes to stick his hand down the toilet, so you can see the tenant’s ‘true colours’.

Another (sneaky, might I add) way you can assess this is by checking out the condition of the applicants’ car (if at all possible) as they attend the inspection. If they have old McDonald’s wrappers and enough empty water bottles to contain the Pacific littered around the car, chances are they will treat their living quarters accordingly. Beware of this.

Of good character

You want the person living in your property to be sincere. You want them to do what they say, and act with integrity, honesty and fairness. You want them to be responsible.

How to tick this box:

This is a hard one to gauge at the very beginning of a relationship. The previous property manager/landlord reference may be able to shed some light.

But the best way I’ve found to ensure the tenant displays strong character traits moving forward is to display them first yourself. Treat the tenant with integrity and respect. Do what you say. Ensure ‘fairness’ is in your mind when negotiating. The tenant will respond in kind.

Wrapping up

Clearly, you want to tick all three boxes and for the tenant to pass with flying colours.

Will this happen all the time? Not likely.

Should you move forward with a tenant that does not tick all the boxes? This is up to you. Can you mitigate any potential risk this person poses?

Just remember - if you are not strict in your tenant selection, you’ll approve anyone (and risk approving a 'tenant from hell’), and if you’re too strict, you’ll only approve a ‘perfect’ candidate, in which case you’ll likely experience too much vacancy and miss out on a lot of money over the years.

Walk the line in the middle.