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Tenant Screening and Selection for Rental Properties

If you’re renting out your property, selecting good tenants is critical. A problem tenant can cost you thousands in lost rent and property damage. Here’s how to screen effectively.

Why screening matters:

A tenant who pays on time, maintains the property, and respects terms saves you grief. A tenant who doesn’t pay, damages the property, or violates terms costs money and stress.

Reference checks:

  1. Previous landlord: ask about payment history, maintenance, any issues. Call or email (don’t rely on written references, which are often positive).

  2. Employment verification: confirm employment, income, job stability. Typical rule: tenant income should be 30x the weekly rent (e.g., AUD 2,000/week rent requires AUD 60,000/year income).

  3. Personal references: ask for personal contacts who can speak to character and reliability.

Identity verification:

  1. Government-issued ID: confirm the person is who they claim
  2. Tax file number (TFN): request this to verify identity
  3. Tenancy history report: available from agencies like Equifax; shows rental history and any defaults

Financial checks:

  1. Bank statements: ask for 3 months of statements to verify income (usually required anyway for proof of funds)
  2. Credit check: similar to mortgage credit checks, reveals payment defaults or court judgments
  3. Income verification: recent payslips or accountant letters (for self-employed)

Red flags:

  • No rental history (or all negative references)
  • Frequent tenant changes (suggests instability)
  • Employment gaps (income uncertainty)
  • Credit defaults or judgments
  • Evasiveness about references

What to ask in interviews:

  • Why are you moving? (Understand motivation)
  • How long do you plan to stay? (Multi-year tenants are valuable)
  • Do you have pets? (Can affect property condition)
  • Do you have children? (Affects liability expectations)
  • Do you smoke? (Affects property condition)
  • Have you rented before? What happened? (Understand history)

Group tenancies:

If multiple people will live there (sharehouse), interview each person. Ensure each understands responsibilities. Consider whether to lease to all jointly or have one primary tenant.

Disadvantages:

  • Harder to remove one problem person if others are okay
  • Disputes between housemates affect property
  • Higher wear and tear with more occupants

Bond and insurance:

Rental bond: typically 4 weeks’ rent, held by a government body. It’s your protection against damages.

Landlord insurance: covers loss of rent if a tenant stops paying, and damages beyond normal wear. Costs roughly AUD 300–AUD 800/year; invaluable if problems arise.

Lease agreement:

Use a standard lease document (available from real estate associations). Key points:

  • Rent amount and payment date
  • Lease term (6–12 months typical)
  • Bond amount
  • Tenant responsibilities (maintenance, cleanliness)
  • Landlord responsibilities
  • Grounds for eviction

Getting it wrong:

Selecting a problem tenant:

You lease to someone without checking references thoroughly. After three months, they stop paying rent. Eviction takes 2–3 months and costs AUD 3,000–AUD 5,000 in legal fees. Three months’ lost rent at AUD 2,000/month = AUD 6,000. You’re out AUD 9,000+.

Total cost of poor screening: AUD 9,000+.

This is why screening costs AUD 200–AUD 300 (in professional screening services) seem trivial.

Trust your instincts:

Even with good references, if something feels off, ask more questions or decline. A tenant who makes you uncomfortable will likely cause problems.

Conversely, tenants with solid references, stable employment, and low credit risk are usually safe.

Documentation:

Keep records of:

  • All communications with prospective tenants
  • Reference checks performed
  • Credit report results
  • Interview notes
  • Final selection decision and lease signed

If a dispute arises later, documentation protects you.

Post-selection:

Once a tenant is in place:

  • Regular inspections (quarterly or half-yearly, with notice)
  • Prompt rent collection (use automatic transfers)
  • Maintenance responsiveness (fix issues quickly to maintain relationship)
  • Professional communication (avoid informal arrangements)

My take:

Tenant selection is the best investment in your property’s success. A good tenant pays rent, maintains the property, and requires minimal management. A bad tenant costs thousands.

Spend time screening. Use professional services if needed. Trust your instincts. A vacant property for an extra month while you find the right tenant is better than 12 months with a problem tenant.

The best property investment is only as good as the tenant living in it.