Three Elements That Make a Tenancy Agreement

When letting your investment property it’s important to secure a lease that will not only maximise the return but also underpin the security of your investment. There are essentially three elements of making a good lease.

1. Quality Tenant

Always number one on any list, is quality. Everything will fall into place once the quality of something (in this case a tenant) is established.

To ensure a good tenant is found and subsequently selected, it’s critical for your property manager to thoroughly check references before passing on the final selection duties to yourself.

Written references are fast becoming a requirement for this process and you should consider those applicants above all else, it proves these applicants are above all else, organised and considerate of not only a property managers time, but yours as well. If, in the case of the prospective tenants being young or void of a rental history, a co-signature (like a parent) adds to the security of the lease.

2. Lease Period

In this age of short attention spans (are you still reading?) finding someone willing to lease a property for 12-months or more is a god-send.

A tenant that suggests a lease period of 12-months or more should be considered over anyone else.

Longer term tenants make for a solid lease, as much of the wear and tear on a property comes during the process of moving in and out. You’ll also avoid the changeover costs of new tenancies like the letting fee, advertising costs, lease preparation fees and the loss of rent that can occur between the end date of the old tenant and the start date of the new one. If your concerned about achieving market-rate rent at all times, get your property manager to work 6-monthly rental increases into the tenancy agreement.

3. Achievable Rent

In theory all parties (except for the tenant) want maximum dollar for the asset. This is eminently achievable in markets with very low vacancy rates where there is active competition for the property between prospective tenants.

Rent flexibility is common in markets where demand for rental properties is lower but the key to maximising the yield lies in ensuring regular rent reviews with minimum escalation clauses.

Offering the property in a cosmetically attractive fashion is also important in ensuring top dollar for rent.

Considering each of the three above elements before the letting process begins should ensure a positive outcome.

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