1. Find the Tenant with the Best Merit
Always rent to someone who has the best merit out of the pool of applicants for your property. Property investment is a business and you want to be doing business with the best possible person who can help you realise your investment potentials. Call it tenancy due diligence if you like. Put in the hard yard at the very beginning, interview your tenants, reference and credit check them to find out what they are like as tenants and debtors, find out if they had ever been involved in a Tenancy Tribunal case, get an understanding of the tenant’s way of life, all these information can help you pick the best possible tenant to work with.
2. Collect the Right Information at the Very Beginning
Information gathering is most effective at the very start of the tenancy when parties are still enjoying a good relationship. This is the time when your tenant is willing to give you more personal information. Treat this as a window of opportunity and ask for as much information as you can think of, photo IDs, alternative addresses for service, phone numbers for family members, next of kins, work numbers and other contact details. Should the tenancy deteriorate and debt collection process kicks in, the debt collectors can serve you better if you can supply them with more means to contact the tenant.
Additionally, always make sure that your tenancy agreement contains a debt collection clause making the tenant responsible for debt enforcement charges relating to the tenancy.
3. Ask Referees the Right Questions
Here are some standard questions you should always ask a referee:
- How long do you know the tenant and in what capacity?
- Can you confirm the tenant’s phone numbers and contact details?
- How regularly do you have contact with the tenant? When was the last time you had contact with the tenant?
- Have you ever had a creditor/debtor relationship with the tenant? If so has the tenant always been on time with payments?
- (If referee is an ex-landlord) What were the reasons for the dissolution of your tenancy? Would you ever rent your property to the tenant again?
If the referee cannot give you satisfactory answers to any of the above then they should not be treated as referees at all. Go back to your tenant and ask for more references.
4. Act Quickly
Remember that Lifeline TV ad from years ago when one small problem snowballed into something gigantic and out-of-control? Tenancy debt is a bit like that. On the first day of rent default, the amount owing may seem negligible. But left alone, debt has a tendency to fester into something un-manageable. Always be up-to-date with rent ledger, ask your tenant to address rent arrears immediately. Finding an extra $400 in one week is a lot easier than repaying a $3,200 tenancy debt when the rent becomes 8 weeks late.
5. Bring in the Professionals
Get the Tenancy Tribunal involved ASAP. If your tenant owes you rent arrears or compensation for property damages, apply to the Tribunal and get the debt recorded in a sealed Tenancy Tribunal Order. Once you have this order you can enforce it by engaging the services of a professional debt recovery agency. These agencies have processes and tools available to them to better track down the tenant.