Rental property quality has a significant impact on the kind of tenants that you will be able to attract. You wouldn’t expect someone with professional qualifications (such as a doctor or lawyer) to be working as a cleaner or office junior. They have worked hard and studied for years to get the letters after their name to be able to command a higher income.
Good tenants also know their value
A good tenant will also have worked towards this status in their own way by means of good references and employment record knowing this will be valued by potential landlords. If renting is their way of life the A1 tenant will know this background will enable them to rent the best of properties – and they will not expect to pay a letting fee.
The less desirable tenant however will not be so market aware or be bothered to go the extra mile to improve their lifestyle to get to the next rung on the ladder even when they know a bad renting record will go against them.
Which would be your preferred tenant, good or mediocre?
No contest really, you’d prefer the good tenant. However, if your Property Manager is charging a letting fee is that putting off the A1 tenant you could get?
Letting fees – true story
A landlord wanted to sell his rental property and his property manager wanted to help relocate the tenant to another property. The manager knew of a similar unit in another property which was vacant but not yet advertised. He rang the firm dealing with the property and explained that he had a first class tenant looking for another rental but they would not pay a letting fee. The answer he got was that her managers needed the letting fee income. Not only did they miss out on a top notch tenant but they could have saved the owner the cost of advertising.
So what sort of tenant are you getting if not a top class tenant?
Going with the example above if that property manager basically turned down a guaranteed top class tenant what did she get instead?
It’s more than likely she ended up with a lower tier of tenant who, in all likelihood, would treat the property as a temporary home with the accompanying problems of:
- Causing damage which they have no intention of rectifying
- In arrears with the rent – or even not bothering to pay at all
- Alienate the neighbours
- Cause problems for both the manager and owner in a variety of ways
Can you avoid second-tier tenant aggravation?
The first step is to ensure that your property manager is not one who charges letting fees.
Comprehensive credit and reference checks by your manager are essential to ensure you will be getting a good, reliable tenant and a good manager will treat these checks as a part of their job.
The application process can weed out undesirable tenants as a property investor will know, but if their manager is also being paid by the prospective tenant will the best possible tenant be selected when the really good tenant will refuse to pay a letting fee?
A top class tenant will know their worth (even if they’re not a lawyer or doctor) and will put the effort into keeping their rental unit in good condition as they would other aspects of their life.
Barry Bridgman has been managing his own investment property portfolio for 25 years. During this time, there has never been any occurrence of rent defaults or property damage and Barry’s goal is to achieve the same for your property. Bridgman Property Management is based in Auckland Central, where Barry has lived for more than 18 years.
