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Mitigating the Risk of Bad Tenants in Your Investment Property

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Question: What can be done to help mitigate the risk of attracting a bad tenant to my investment property? 

Answer: By Carolyn Parrella, Executive Manager, Terri Scheer Insurance 

Attracting good tenants, and keeping them satisfied, is one of the best investments a landlord can make. The behaviour of tenants can make or break a landlord’s investment experience and cause significant financial stress. 

It’s important to minimise potential risks by attracting suitable tenants from the outset. 

• Know your target tenant

The process of attracting a suitable tenant begins before you’ve even purchased your rental property. 

When choosing an investment property, think about the type of tenant you want to attract, whether that is a family, sole tenant or couple, and choose a property that is likely to appeal to them. 

Poorly maintained properties in low socioeconomic areas may be less desirable for your target tenants and, in turn, attract a smaller pool of appropriate tenants. 

Established, well-appointed homes that are close to good schools, shops and public transport are usually highly sought after and will likely give you a larger pool of prospective tenants from which to select. 

• Presenting your property

A property that is poorly presented by the landlord is likely to be poorly cared for by the tenant. 

Landlords who present a clean, tidy and well cared for property set the standard which tenants are encouraged to maintain. 

• Screening tenants

It is important to thoroughly screen rental applications as this can help to filter out potential troublemakers and minimise the risk of future issues. 

This may involve speaking with previous landlords or property managers and ask whether they have had any issues with the tenants being reviewed, including late or missed rental payments and incidences of malicious or accidental damage. 

• Appoint a property manager

Property managers can help you identify potentially good tenants from the outset as they often have experience screening prospective tenants. They may also have access to a database that lists tenants with a history of defaulting on rental payments, damaging property, eviction and absconding. 

A property manager can also take responsibility for conducting regular property inspections and can alert you to potential issues with the tenant or their lifestyle before they escalate. 

• Obtain landlord insurance

While even the best tenant can accidentally damage a property or run into financial hardship, there is also a minority who may purposely cause grief for their landlords. 

Every landlord should consider having a tailored landlord insurance policy that covers them for both malicious and accidental damage, their legal liability as landlords and the loss of rental income. 

This type of cover can provide landlords with peace of mind should unforeseen insured events occur. A standard building and contents insurance policy generally won’t cover landlords for the risks associated with owning an investment property. 

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Carolyn Parrella

Carolyn Parrella joined Australia's leading landlord insurance specialists, Terri Scheer Insurance, in 2004 and was appointed Executive Manager in 2009.
Carolyn oversees all operations within business, which aims to protect landlords against the risks associated with owning a rental property. These include malicious damage by tenants, accidental damage, legal liability for occurrences on the property that cause death or bodily injury, and loss of rental income as a result of damage to a property or a tenant absconding.
As a South-Australian based national insurance firm, Terri Scheer Insurance is the only company in Australia to specialise solely in landlord insurance.
Carolyn also owns two investment properties.

For further information, visit www.terrischeer.com.au or call 1800 804 016. 

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