Pod Insights The Property Academy Podcast Follow This Process or Risk Getting the Wrong Tenant⎟Ep. 2395 About this episode Finding a tenant isn’t hard… finding a good tenant is. In this episode, Ed and Andrew walk through the exact 5-step process used by professional property managers to find, screen, and select reliable tenants ... without gatekeeping anything. You’ll learn:The 5-step system to attract and choose quality tenantsThe red flags and screening tools that most DIY landlords missWhat you can and can’t legally ask tenants in New ZealandThis episode breaks down a practical, step-by-step approach so you can avoid bad tenants, protect your property, and make smarter decisions, whether you self-manage or use a property manager. Don't forget to create your free Opes+ account and Wealth Plan here. For more from Opes Partners:Sign up for the weekly Private Property newsletterInstagramTikTok
Transcript 0:08 Speaker 00 Hello and welcome along to the Property Academy Podcast by Opes Partners. I'm your host, Tim McKnight. And I'm Andrew Nicoll. And this is the show that helps Kiwis go from zero to five investment properties. So you can be financially free and stick around for the next 20 minutes because you're going to learn the exact five step process to find good tenants, how to screen those tenants and the tools you can actually use, and the questions you legally can't ask a tenant in New Zealand. Now, finding tenants has been tough over the last year or so. So if you are looking for a tenant, there is a risk that you just take anyone rather than holding out or looking for a really, really good tenant.
0:48 Speaker 00 So what I want to do today is walk you through exactly how you figure out if a tenant is really good or potentially a bit risky. Now, remember, we own a company called Opus Property Management. So we have some tips, tricks and processes for actually how to find the good ones. And rather than gatekeeping and keeping all of that information to ourself, we're just going to tell you. Now, this one is going to be a little bit longer than the usual 15 minutes because we've got lots and lots of good stuff for you. Now, Andrew, what is the first step in this five step process that property investors can actually use to find good tenants? So the first step, it seems like an obvious one, is to figure out how you're going
1:31 Speaker 00 to get in front of the faces or the eyeballs of these potential tenants. So Trademe Property is still the biggest platform in New Zealand, has about 5 million active users. But according to MyRent, who are a property platform for investors, less than half of rental inquiries actually come from Trademe alone. So it's probably a better idea, particularly if you are doing this on your own and you don't have, you know, a tenant that missed out on another property that maybe you can ring up and see if they want this one. You want to be in front of as many people as possible. So you probably want to be on multiple platforms, so Trademe, but also maybe RealEstate.co.nz, OneRoof, Homes.co.nz. And another really common one nowadays is Facebook Marketplace.
2:13 Speaker 00 Isn't it fascinating that less than half of the tenants who are asking to view properties, when people are listing properties themselves, like self-managing landlords, less than half come from Trade Me. That would absolutely blow some people's mind because the typical process in the past has been, okay, I need to find a tenant, list it on Trade Me and see what happens. Yeah, I think that Trade Me's market share for this type of offering has been diminishing over the last few years and I think a big part of that is the cost of it. And obviously, we've just told you to pay that cost, but also pay other costs. But maybe, you know, if you can get in front of more eyeballs without having to pay as much, that's probably worth considering.
2:56 Speaker 00 And now, if you use a property manager, they are going to charge you to find a tenant. And often that's called a tenant sourcing fee and there are different ways that that's charged. Sometimes it's a week's rent plus GST, sometimes it's $500 or $1,000 or something like that. If you do it yourself, obviously you're not paying that tenant sourcing fee, but there are still costs involved. So, most investors that I've worked with that self-manage, they'll use an app like MyRent, which is the app that can kind of keep track of things for you. So, the full package, if you're using someone like MyRent, and so to be able to advertise on these different platforms, it's like $264. So, there is still costs, even if you're doing it yourself. And bear in mind, you've still got the work you've got to do.
3:38 Speaker 00 And as part of that, it's quite interesting that photos and videos really do matter quite a lot. I saw one property manager say that from their data, if you include a video within your rental listing, you get about 400% more inquiries. So, basically, five times the inquiries compared to if you just have images on your listing. So, at a time where it has been quite difficult to find tenants, including that walkthrough video could be very important. Now, once we've got some inquiries coming in, what happens next? What's step two? Step number two is you've actually got to run the open homes. Now, it's basic.
4:15 Speaker 00 Like an open home, if you're selling a property, you're going to get probably a group of people through because you're unlikely to want to turn up to a property 10 times to show 10 different groups. So you probably want to say, I'm going to run an open home on Saturday at 2pm. Come along if you want to. And you probably also want to make sure you don't have too many people there at any particular time. Yes, it's good to create a bit of a frenzy around your house, but you want to be able to talk to people and get a good feel for the the particular tenants as well. You're not going to probably be able to talk to everyone. So that's where you might want to have basically a feedback form or or some sort of form about whether or not someone's interested. And when they'd be ready to move in and if they're happy at the at the current rent.
4:57 Speaker 00 And if you do these viewings over a number of weeks, one of the things that I would suggest you do is run a couple of spots, maybe during the week at lunchtime. So people can come if that suits them then, because maybe the kids are at school. And then maybe you do a couple of weekend spots, but don't assume that everyone's going to want a weekend spot. Because again, lots of people have got kids. If you've got a house that you're advertising, it's probably kids' sports. And so you want to be able to cater to everyone. Yeah, it's really surprising. Our team are finding that lunchtime and kind of bid till late afternoon viewings work really well. So 3.30 to 4pm, that's where they're seeing people booking in right now. As opposed to necessarily after work, you might assume, oh, 5.30, 6pm, that's when everybody's going to want to come through it.
5:39 Speaker 00 But that's not always the case. And then sometimes if it's late at night and dark and the house seems cold, maybe people aren't so keen either. Now, I'll give you a couple of tips around what do you look for to try and find the good tenants or the bad tenants during these open homes. One of the big things I know that our team looks for is, do the potential tenants remove their shoes? Are they asking thoughtful questions and and do they turn up on time? And it's not necessarily that every house in the country has to be a shoes-off household. I know mine is, Andrew's isn't. But it's about the respect for the property, I suppose, is what we're looking for.
6:16 Speaker 00 And I think one red flag that our team also looks for is, does the potential tenant park the car in the driveway or use the unit's car? Park. Now, our view is they don't live there. Typically, guests would park on the street. Now, all of these things are small things, right? It's it's not that if somebody parks in the driveway, oh, they're definitely not getting the property. But what we're looking for is signs that they will respect boundaries and they will respect the property. And I get some people might be turned off by them and be like, really, you're really not going to accept a good tenant because they didn't remove their shoes. No, that's not the only factor, but these are some of the things that we look out for.
6:58 Speaker 00 Couple of other red flags is if the tenants arrive late with no explanation. So they don't say, oh, sorry, I was sorry, I'm 10 minutes late, blah, blah, blah, blah, blah. If they just don't mention it and and turn up as if it's their God given right to turn up when whenever they want. That can be a bit of a red flag. Maybe we're not going to have such a good relationship here because remember at the start. When a tenant is looking for a property, typically we're all on our best behaviour, right? Another thing that's a bit of a red flag, if the tenant is pressuring for an immediate move in. So they want to move in tomorrow or they want to move in in two days. Unless there's a really good explanation, sometimes that can be a bit of a red flag. For instance, if they're having to really get out or be evicted from their current rental property.
7:43 Speaker 00 Okay, that's going to raise some warning signs, need to dig into that. And I'll tell you one that I'm always really surprised by is sometimes tenants will send someone else on their behalf. So if I send my sister or my brother to go look at the property for me, that could sometimes catch a couple of red flags. Now, again, I want to give you an example where it's not always like this. So back when I was a tenant and I was moving up to Auckland with my now wife. We sent her sister to go look at a rental property on our behalf. To be honest, they're twins. Who would know the difference anyway? Well, I mean, yeah, identical twins too. We sent Kathy to go look at the property for us. We ended up renting that property. We didn't have any issues.
8:27 Speaker 00 Or at least we didn't think we had any issues while we lived there. Um. So it's not always necessarily red flag, but if there were a whole heap of these without a good explanation. Like somebody being in a different city. Well, you know, you might start asking questions. And just one thing, um, while we're talking about tips is if you aren't getting any inquiries within the first forty eight hours, you've priced it wrong. You've asked for too much rent. I actually was talking to a friend of mine who, who has a number of properties in Christchurch and they manage their own properties and they put something up the other day for fifteen hundred dollars a week, got zero inquiries after a week, dropped it, dropped it, end up getting twelve hundred dollars and they, they just missed the mark completely and we're just trying to get a bit too much.
9:08 Speaker 00 Okay. So now we're coming on to step three. We've done our open homes. We've maybe got some tenants applying for the property. What are we, what are we going on to next? So now this is such an important one that I think most private property managers, so people that are looking after their own properties will miss, and that is to call your tenants references. And what you want to find out from their previous landlord is how long the tenancy was and did they pay their rent on time and how clean did they keep the property and things like, you know, were there, were there complaints from the neighbours or significant damage when they left? Did they give the, the appropriate amount of notice or did they just up and leave? And were there any breach notices? And one of the most revealing questions, I think you can
9:53 Speaker 00 ask, the one that kind of encompasses all this, would you rent a property out to them again? Or why did the tenancy end? Because that'll give you a bit of a clue as to whether or not the tenant is, is someone that you want to have in your property. Now, don't get me wrong. I've been called up about tenants sometimes and I don't want to get rid of them. And if the new property manager says, would you rent to them again? I probably say yes, because I want them to go away.
10:20 Speaker 00 Like that's just, that's just the reality, right? You've foisted the tenants on this poor new landlord. So you do have to take it with a grain of salt. And I do think, you know, just getting a bit of a feel for their background. And again, you know, some of those, some of those kind of broad questions to give the previous landlord some scope to give you a bit more information. Things like, I'm thinking about renting this property to them. Is there anything else that I should be aware of? Asking that and then just pausing will give the opportunity for the landlord to say something. And again, they might not always say something, but that at least you've given them the opportunity to. Now, I watched this really interesting TikTok the other day. Oh, wow, wow, wow.
11:04 Speaker 00 And it was on a radio show and this radio show called up a random Australian and said, hey, I've applied for a job. I've put your number down as a fake reference. If you get a call from this company, can you pretend that I worked with you and that I was a really good employee? And anyway, this random Australian person guy, he actually did do the fake reference and was like, oh, yeah, yeah. He worked for me. And I know this is a bit of a problem in tenancy circles as well. So how do you spot fake references? Because I think this is where some DIY landlords can get caught out. Yeah, I think you've just got to be aware, right?
11:44 Speaker 00 People are savvy and, and so if, if I were a degenerate tenant and I wanted to rent a property, I'd say, oh, just can you call my previous landlord? Edward Christian McKnight, here's his phone number, here's his address, give him a call and, and, and just check with him. Now, a great way of trying to sense check whether or not maybe this person on the other line isn't a previous landlord and maybe just your prospective tenant's friend is to ask a question like this. Oh, thanks, thanks again, Ed, for your time, but oh, now I can't remember. Just tell me again, what was the address that Andrew was living at?
12:18 Speaker 00 Yeah. So you're trying to see if they actually know the address because the landlord would know it. But a fake landlord might not know the exact address, right? Yeah, that's a goodie. Or the other thing is rather than putting that at the end, you might put that at the start and say, hey, just before we begin, can you confirm the address of the property they are renting from you? Because that might trap them up a little bit as well if they don't know the exact address. And probably fluster them for the rest of the call if, if they have been called out. Now, the fourth step after we do our landlord checks is to use the right tools to screen tenants and do the background checks. Now, you could start with the free one that a lot of us would use, which is the Tenancy Tribunal Database. You know, some landlords don't know that you can go to the Tenancy Tribunal Database and search by name.
13:03 Speaker 00 So if you've got your tenant's name, pop that in there and you can see if over the last three years, there has been an order made against them. And you can also search for the property address that they gave you. So for instance, if Andrew Nichol has changed his name and rather than going by Andrew Nichol, he's now Michael Nichol. And so nothing's coming up when you put his name in. Maybe you can search the address of their rental property to see, well, have there been any orders that I should really look out for? Now, if you've got a bit of dosh to spend on it, and I'd highly recommend this because any property manager worth their salt is going to do this, is use something like Tenant Check. This costs about eighty nine dollars per cheque.
13:45 Speaker 00 And this is where they will get a credit report from the three major New Zealand credit agencies, right? So that's Centrix, Equifax and Ilian. Because that's going to see or test, does this tenant pay their bills? Or do they have a history of regularly and routinely falling behind on their bills? Like, that's, that's very, very important to do. And that's why when a property manager charges you a week plus GST, some of that money goes towards advertising on Trade Me and, and RealEstate.co.uk and so on. Some of it goes to doing some of these checks as well. Another little, little tip, which is free, is you can do a quick Google search of the applicant's name. Sometimes this does pull up some things that some checks won't.
14:29 Speaker 00 If you're looking at news articles and these things. Now, there is something to keep in mind though, is that you do need the tenant's written consent before running that credit check. Now, often you can get this on the tenancy application, right? And if your application form has a, has a privacy disclosure that says you're doing. A tenant check, then that's cool, you're covered. But make sure you only run the credit check on shortlisted applicants. The reason behind that is A, it costs you money. And the second reason is because you don't want to be prying into people's personal life, especially when you don't have their permission. Now, just before we get to step five, though, there are some things to keep in mind. What can you not legally ask a tenant in New Zealand? So there are things that you can ask other than just the normal things.
15:12 Speaker 00 So you can ask, you know, whether or not they've got pets. And just bear in mind, since the first of December last year, you can't have a blanket no pet policy unless of course your house won't allow it. Like there's a body corporate that doesn't allow pets. But if you've just got a normal house, you can't just say no pets. But you can ask them whether or not they've got a pet. You can ask them if they're a smoker, if it's prohibited on the, on the grounds. And you can include an enforcement clause for people that do smoke indoors. You can again, ask about their credit and rental history. That's all very standard and, and again, don't do a credit check without getting their written permission to do so. You can ask the number of people that will be living in the house. So you can make sure that it is going to be fit for purpose. But there's quite a few things that you can't ask for.
15:56 Speaker 00 And I've actually seen some private property managers or private landlords online complaining about these things. But this is the law. You can't ask about things like race, sex, family status. You can't say, are you married or not? Whether or not they've got any disabilities. You can't ask their age and you can't ask their religion. Those probably for most people seem pretty normal. I think most people, I mean, maybe the age thing might be a, might be a bit of a surprise for some people because that might just come up in conversation. But there's a really important one. You cannot ask their employment status. So you can't say, hi Ed, really nice to meet you. What do you do for a job, Ed? You can't ask that anymore because that could be seen as discrimination if Ed doesn't work, for example.
16:41 Speaker 00 Now you can say, how are you going to pay for the rent? And maybe not. He might offer up that he's employed somewhere and he's he's gets a good salary. But you can't just outright ask him what their employment status is. Now, there are little colloquialisms that might surface that same information, like, oh, yeah, Andrew, what do you do with yourself? Typically, most people are going to come back and tell you what their job is. But if somebody's unemployed, then they could say, well, I'm currently looking for a job or something along along those lines. Because asking what do you do with yourself is not is not the same as asking for a job. It's more asking what do you do during the week? And I suppose the reason you're not allowed to discriminate based on employment status is that if someone's between jobs
17:24 Speaker 00 or maybe they are a retiree or maybe they are on a benefit, but they can actually afford the rent. Then, you know, should we really be saying, oh, they're not working right now, so I'm going to say no to them? Well, if they can afford the property, they can afford the property. And that's why you can ask for evidence that this is affordable for them. And even if you disagree with some of these things and think it's stupid, doesn't matter. It's the law. That's what you're signing up to be as a as a property investor. So you've got to follow it. Now, let's come to step five. So we've done all of our checks. We're happy with the tenant. We've got them through the process of advertising everywhere and running our open homes. What is step number five? So really important that you do your documentation here. So that includes your tenancy agreement.
18:07 Speaker 00 And again, I see so many instances where self managing landlords just forget this part. And that includes the bond form as well. So remember that's a maximum of four weeks rent, which is the general kind of bond. And then up to two weeks pet bond over and above that, if there is a pet there. And the important thing here is not only that you've got to complete the paperwork, but you've actually got to lodge that bond with tenancy services via Bond Hub. It can't just be kept in your bank account. And if you do, just keep it in your bank account and get a complaint later from the tenant. You might get fined for that. And I think the other really important thing that sometimes private landlords forget is that property condition report. So what's the state of the property when the tenant moves in?
18:51 Speaker 00 So that you can compare it when they move out, because if you don't have that at the start, even if you've just got. Photos, you want something written down that the tenant agrees to, so that if there's something you want to take out of the bond afterwards, because there's been some damage from the tenant, you've got a record of what the before and the after looks like. And what might surprise a lot of people is that finding a tenant costs some real money, right? So if you've got a property that rents for $500 a week and the property manager is charging you one week plus GST, then the property manager is going to charge you $575. But even if you do it yourself, including all of the listings and the driving around and the tenant checks, it might cost you $400 to find a tenant. And so you just
19:32 Speaker 00 need to be prepared to invest in this process, whether you self-manage or whether you use a property manager, because it does cost real money. Now, of course, we're not saying don't use a property manager at all, just self-manage it yourself, because of course, I use property managers for all of my properties and we've got Opus Property Management. But if you do want to do it yourself, this is how you do it. And if you think this is all a bit of a faff, and you might think, well, I don't, I don't really want to be calling up landlords, asking how it all was, and I don't really know if I can spot a fake landlord or not. Well, you might like to use Opus Property Management. If you Google Opus Property Management, it'll be the first thing that comes up. And over the past 20 minutes, you've learned the exact five step process to find good tenants, how to screen
20:16 Speaker 00 those tenants are the tools you can actually use, and the questions you legally can't ask a tenant. Right, let's wrap it up there, but please don't forget to rate, review and subscribe to the podcast. Really does help us get the message out to more people.
20:35 Speaker 00 Thanks for listening to the Property Academy Podcast. I'm your host, David Knight. And I'm Adrian Nichol. We're going to be back again tomorrow with even more daily strategies, tactics and insights to help you get the most out of the estate and property market. Until next time.
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