Figures recently released in the Credit Bureau Monitors' latest report show clearly that buy-to-rent property investors have to be extremely careful in selecting tenants as the risk of ending up with a defaulting rent payer is now very high.
The Credit Bureau Monitor reports that at the end of December 2010 of the 18,51 million "credit-active" consumers, only 53,5% were rated as being in "good standing". The number of consumers with impaired records increased to 8,61 million, a year on year upswing of 426 000. The CBM estimates that 17,8% of creditors at the end of last year were three months or more in arrears, 14,6% had adverse listings and a staggering 14,1% had judgements or administration orders against them. In this scenario the shrewd property investor should employ an experienced agent with access to one or more credit monitoring facilities and with a proven track record of contacting tenants' banks, employers, major creditors and previous landlords. Special care should be taken in discussing a prospective tenant's reliability with their current landlord because it has happened that that the landlord is so keen to be rid of his tenant that he will fudge his credit report. The good news is, firstly, that rental returns are improving month by month because home loans are still so hard to come by and, secondly, the monitoring of prospective tenants has now been honed to the point where very few bad payers get through the net - so it pays to have such a person on your side. *Tony Clarke is the Managing Director of Rawson Properties