If you’re tossing and turning at night, anxious that your rental property is falling apart at the seams under your tenants, then you’re not alone. More than a quarter of owners we surveyed admitted that property damage was one of their biggest fears.
And it’s not hard to see why. According to EBM Rent Cover, in 2019, there were 1734 landlord insurance claims for accidental damage. All up, costing around $6 million!
The message is clear: leasing to bad rental tenants means putting your property at risk of unnecessary damage. Which also means being slapped with some blown-out home maintenance costs.
To stop this nightmare from becoming a reality, we’ve come up with this simple but effective guide to help you separate the wheat from the chuff when it comes to prospective tenants, along with some other handy tips designed to keep accidental damage to an absolute minimum. (Like signing on a property manager to take the hassle out of it altogether).
How do bad rental tenants increase home maintenance costs?
Types of damage that tenants cause
Not all damage is the same when it comes to real estate. Depending on just how questionable the tenant is, there are a few different types of damage they could unleash on your property.
- Negligent damage: This is the damage that comes from tenants who aren’t outright malicious but also aren’t the best when it comes to generally maintaining the residence and reporting damage when it arises. So, small issues tend to go unrepaired and grow worse.
- Violent damage: Think of tenants drunkenly punching holes in the wall or angrily smashing windows. These are tenants on the belligerent side who might even have trouble with drugs and alcohol. Either way, your property is the collateral damage in the equation.
- Criminal activity: A bigger problem than you might think – tenants using rental properties to manufacture drugs or as a base for other criminal activity can take a toll on the residence. Hazardous chemicals can leave a property uninhabitable for weeks on end.
Some of the common things that sub-par tenants typically do which can blow out your home maintenance budget include;
Common types of damage
Common home maintenance cost
Stains, burns or urine in the carpeting
$20-$250/m2 (installation extra $)
Unapproved paint job
Broken or missing locks
$30-$300 (+ $65-$110 Call out fee)
Cuts or burns on benchtops
As you can see, the cost of home repairs and maintenance can quickly add up if you’re stuck leasing to some bad tenants.
How to avoid leasing to bad rental tenants
Lucky for owners, there are a number of proactive things you can do to soften the financial blow if your tenants ever start to look like a bull in a China shop.
- Charge a rental bond: A super safe, legal way to guarantee reimbursement in the event of damage
- Get landlord insurance: As we’ve already mentioned, this is a godsend for many, many Australian owners who find themselves faced with unexpected home maintenance costs incurred by their tenants. (Just make sure your insurance specifically covers tenant damage)
- Specify liability in the tenancy agreement: Get everything in black and white. That way you and your tenant can steer clear of any confusion when it comes to who’s flipping the bill for the repair costs.
- Entry condition report: An expertly conducted condition report is basically your ‘exhibit A’ in the event of property damage. Having a comprehensive document that details just how the residence looked prior to leasing to tenants is your silver bullet in avoiding a stressful game of ‘he said, she said’.
- Frequent property inspections: Routine inspections are an easy way to stave off those unsightly and expensive maintenance costs. Taking the time, once or twice a year, to look around and spot any issues, while they’re still minor, could be saving you from having to fork out some serious dough down the line. Using a maintenance template like an Airbnb cleaning checklist can help you perform a thorough check of your property.
Tenant selection plan
If you want to prevent unnecessary damage altogether, why not stop it at its source? To do this you’re going to need a tried-and-true method for selecting prospective tenants that are the cream of the crop. That way you don’t have to sweat it worrying about unforeseen repair costs that could burst your home maintenance budget.
Tenant Background Check
- Verify the applicant’s ID and make sure it’s consistent across documents. You can (and should) hop on the National Tenancy Database to authenticate their identity, along with a blacklist screening, bankruptcy check and more.
- Ask for proof of income. This might take the form of payslips or bank statements, and ideally be provided by the applicant themselves. Otherwise, you can contact their work’s HR department, though we’d suggest less invasive measures when securing personal information.
- Ask for their credit score. You can even conduct a credit score check yourself, though you should notify the tenant in this case.
- Look at their rental history. You should aim to get in contact with at least one referee so you can gauge how the tenant faired under previous rental agreements. It’s also good practice to cross-check landlord references on the tenant databases to verify the referee was actually the landlord for that tenant.
Conducting background checks on multiple applicants means nothing if you don’t know what to look for when comparing them. That’s where the tenant checklist comes in. Consider it your go-to method for identifying prospective tenants who are a good fit for your property.
The criteria you’re looking for are:
- Tenant’s weekly salary: Is it 30% greater than the rent?
- Do the tenant’s past landlords have only positive things to say about their behaviour? You’d hope so.
- Is their credit score good? Around the 600 marks at least?
- Were your interactions with the tenant at viewings and through correspondences, all and all, a pleasant one?
But just remember! There is no perfect applicant. So, it’s probably unrealistic to expect to find a tenant who ticks all the boxes. The key is to find a tenant who checks as many boxes as possible.
And if they aren’t looking too green when it comes to something like their credit score, it can be a good idea to talk to them about it. Often, there are legit reasons for it.
How :Different helps reduce maintenance costs
At :Different, we practice what we preach. This is exactly why we, too, use the tenant background check and the tenant checklist as our bread and butter for finding you respectful renters who won’t put a hole in your property or your wallet.
So, what sets us apart from the DIY owners when it comes to selecting good-quality tenants? Well…
- Access to leasing websites: Because we’re licensed real estate agents, we can list your property on Realestate.com.au and Domain.com.au, the two best property sites out there. And because these sites prize profile verification and background checks, the quality of applicants you’ll receive will be higher across the board.
- Access to tenant databases: Unlike DIY owners, we have professional access to better background tools and tenancy databases that give us a sharper insight into prospective tenants.
But that’s just the leasing side of things. We’ve still got a few more tricks up our sleeves that can help you keep your cost of home repairs and maintenance to an absolute minimum.
- Entry condition report: Before your tenant sets foot in the property, our home experts go to work writing comments, taking photos and making notes on the condition of everything from appliances to doors and windows. Your full proof document for knowing who’s to blame for any damage that might rear its ugly head.
- Routine inspections: We make it a point to conduct 2 inspections each year. We can even do more if need be. And rest assured, we are thorough to a T – comparing the condition of the property to everything that was noted in the last condition report. Meaning we will find any new damage and get to fixing it before it grows anymore costly.
- Tenant app: Our patented tenant mobile app allows your renters to report a repair or maintenance issue as soon as it arises. That way, we can get to work (not you) sourcing reliable tradies to fix the problem ASAP.
- Owner App: Our innovative owner app houses all the information about your property, allowing you to be proactive with any maintenance requests you receive, helping you avoid inflated maintenance costs in the future
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