How Are Good Tenants Discerned?
Finding genuine tenants to fit the climate of today’s property market
An interesting topic from the recent property investment summit (PRISM) on “How to find good tenants?” brought out some pearls of wisdom from the wise within the property industry. Multifarious inquiries were posed to each panellist to hear their elaborate thoughts and valuable lessons.
There were some questions directed by the moderator, Armani Media managing director Dato’ KK Chua (KK), towards fellow panellists Dexter Lim, Andrew Tan, Adrian Un and Chris Tan. Let’s see a little on the line of speakers for the session.
Dexter Lim (DL) is the founder of Property Fast Track Sdn Bhd. The company was set up to introduce a system for young and aspiring investors.
Andrew Tan (AT) is the founder of Luxury Boutique Accommodation, a company that manages Airbnb listings. He is also the co-founder of AppShack Asia.
Adrian Un (AU) is the chief executive officer of Skybridge International Sdn Bhd. He has over 20 years of experience in property investments.
Chris Tan (CT) is the founder of Chur Associate. He is a boutique legal service provider.
KK: Can you explain in your own terms, the definition of ‘a good tenant’?
DL: A good tenant is a person who pays on time, and does not need to be reminded constantly, without issues with other tenants or neighbours, and keeps the unit well maintained.
AT: As I run a short time vacation rental, I usually use the reverse methodology. I would conduct a pre-emptive check on the tenants first. We deal with lots of business travellers. So we try to tackle any problems which bring any nuisance to neighbours.
AD: As for me, if the tenants pay on time and pose no issues to other neighbours, I will count them as good tenants.
CT: Good tenants are those willing to sign the tenancy agreement. This includes tenants who are good partners, and love your property more than you do.
KK: This is easier said than done in certain cases. Can you define the process to assess a quality tenant?
CT: I felt that even before you invest in any property, you need to define the qualities of the tenant for that property first. We need to be constructive, especially on fact-finding during the property marketing period.
Obtain information from the agency or advertisements and talk to the community at the compound. There were instances where the best paying tenants were really the bad hats. They might not love your property at all, be it long or short terms tenants.
KK: I had an instance when an investor friend of mine said each time a potential tenant stops by to view the house, he would quickly check the interior of the person’s car. This is to see if the car was well maintained, looks dirty and messy or otherwise. From there, he would judge the type of tenant and be wary of tenants that settled for rent.
KK: Can you please state some ways of determining genuine tenants for your properties?
AU: A good tenant should be responsible. Nowadays, times are challenging. There were times where it was difficult to get tenants. If it is for residential units, they must match my demands for rental.
And for commercial properties, I would impose a strict payment scheme. Usually, for businesses like food and beverage outlets, I would request for a six month to a year of post-dated cheques to secure the payment agreement.
Everything will surely look rosy for new businesses but down the road, the company might face dreadful financial situations. This is something I’ve learned directly from my own experiences. If the location was perfect and the properties were in high demand, then it will be faster to secure rents.
KK: Can you elaborate on short term tenancy?
AT: Short term turnovers are larger for our market. We must attract the guests to come over to our establishment. We will provide the amenities which are needed for our guests. For example, if a business traveller was our guest, therefore a printer would be provided. If it is a family crowd, we would provide snacks or dvds to make them feel at home and comfortable.
Generally, we conduct a pre-qualification with a set of questions for the new guests. We need to gauge the objectives, such as how many people are occupying the units, and more. A set of house rules will be forwarded, such as cleanliness or safety rules, and usage of things in the units.
A validation check would also be done via social media by looking for a link to a Facebook profile, or other platforms. We had rejected some tenants in the past, even after confirmation was given. These sanctions were placed should tenants seemed to portray impertinent behaviour from first impressions, like party goers or people that show irresponsible attitudes by creating nuisances to other neighbours and more.
Pre-qualifying was necessary to determine the target market which were achieved through agents and application forms. When a tenant walks in, we will notice the first impression created by the target. If you are feeling uncomfortable, then the candidate can be rejected, some initially will look appropriate, but later will turn out be non-compliant tenants.
KK: Can you share on a few tips and how you manage your properties like rental collection, upkeep of furniture, and maintenance?
DL: I managed my own properties on a full-time basis. Normally, I would set a benchmark if rental payments were delayed, with gentle reminders sent for due payments. Then, a follow up call would be done. Basically, we have to be nice and let them have an idea of being monitored for the dues.
AU: My rent collection was clear-cut because we collected it when a person checked-in. I have a team of experienced handy-men. They have their in-house treatment, which is a standard practice. As for our furnishings, we use the homogenous method. This is a norm in the hotel industry.
Our basic upkeeps were modular, if any furniture or fixtures were spoilt, it will be easy to be replaced or repaired. We always have extra in case any untoward incidences occur in the units. The challenges faced usually were stolen or damaged goods which are a cost to me.
We usually collect advance deposits from the new guests and for the recurring ones, and the guest would be given a check-out access card with an upfront payment.
AT: I run a one-man show! As I managed my properties myself, I prefer to meet and chat with my tenants. As for the shop lots tenants, I buy from their shops to encourage them. We must appreciate and build a healthy relationship with the tenants. If there are any delays or default in payments, a due message will be forwarded to the tenants.
CT: I have a retired dad. He helps me to manage my rental collection and upkeeps too. I trained my dad to oversee the lots as he’s staying close by as well. I developed a business module for him and taught him the collection methods. Therefore, it’s important to pre-qualify before any investment. I use a personal touch by accepting them as our business partners.
KK: How do you deal with bad tenants? People who refuse to comply or rent defaulters?
AU: I had a bad experience once when I rented to a license reflexology centre, and the police raided the place as it was an illicit vice centre. I just stopped the rental as it was useless to pursue it.
AT: The tenants initially looked normal, spoke good English, paid up deposits in full and so on. However, they later turned out to be the opposite. There was an incident, where a guest rented our property for three months, and turned it into a cannabis farm. We kept close contact with the security guards, joint management body (JMB) and the police. We leveraged our liabilities with the insurance firms too, for handling damages of property. Apart from that, we faced a few credit card fraudsters, whereby our goods were stolen from the unit.
DL: My first deal was a tenant from hell. It happened in early 2009. The person brought his pregnant wife and moved in. I checked with the bank, and the deposit wasn’t paid. When asked of it, they said it was paid to the agent. The agent also denied it and was nowhere to be seen. We asked the tenant to move out immediately and locked the premise. The case dragged on for a few months, as it involved the police.
CT: Communication is a very vital link between tenant and landlord, though it can be challenging at times. Before a tenant moves out, a proper hand-over is needed. You can give a discount after the premise inspection, or even give a letter of recommendation for the stay.
AU: I had a unit with neighbours from hell. I had an experience when the neighbour invited me into her house, and I practically saw a tree stump in the middle of the living room. She also had recycled cartons all over.
CT: A distress order in regards to your rights can be used in certain cases. However, there are no guarantees that they will pay, as self-help is not encouraged. Even if you are found tress-passing in your own property or changing of locks, it is not advised.
KK: Can you share your advices to people on the propositions?
DL: Overall we had good tenants. Property will appreciate in the long run and so will the rental yield. Therefore, we can expect a positive outlook.
AT: As mine was a short-term vacation and hospitality business, and not real estate, it was more maintenance related with marketing strategies. We must be prepared to face problems or challenges. We run with technology.
AD: When you happen to buy a high-rise unit, make sure you fully furnish or renovate your unit. This is to create differences from the other landlords.
CT: Move forward with higher number of rentals in the future. Manage your work properly as these are your investments. Take it as a full time job, and all jobs come with risks.
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