.svg)
Selecting the right tenant for your rental property is the most important task when it comes to the management of a property.
The cost of a bad tenant is usually $3,000 - $10,000 and it’s a long messy headache.
But on the contrary the best renters can almost manage themselves. You could make all the mistakes in the book; no bond, no condition report and no lease and still not have any issues.
Two very different outcomes.
Here’s a common scenario; your rental property is becoming vacant in 2 weeks and you have 5 applications just submitted on the property.
Little do you know, your two best applicants have also applied for another property.
So speed is of the essence.
Screening an application isn’t just a basic process. It’s very conditional.
For one, every property is different. The best tenant for one property is not always the best tenant for another property.
For example, lets’ take a ‘super fussy’ type tenant. They will pay the rent and look after the property without fail but if something isn’t perfect, and I mean anything, they’ll jump up and down until it’s resolved no matter how small or costly to you.
Fussy type renters are brilliant for the right property but can be nightmare for the average rental property.
Every prospective renter’s situation is also different. How you screen an application from a retired couple is different to a first time renter.
It’s not as simple as verifying their income and getting a reference or two.
It’s about love too. Love for the property that is.
You want to know they really want the property… for what it is.
The more a renter sees your property as their home, the longer they’ll stay, the more forgiving they’ll be and they’ll definitely treat your property better, like a home.
This is particularly true if the property has a garden, you want renters who love a garden otherwise it’ll be dead in 6 months.
Just as a little tip: For those situations where your property has a decent garden but the potential renter is not big on gardens, you could increase the rent and include garden maintenance in the lease. This is another consideration because many times you have to pick the best application from an average bunch, and work with what you have.
Even if you can prove the prospective tenants will pay the rent and look after the property…
It’s far from over.
As the investor you need to pick the tenant that makes the most financial sense for you.
If the applicant only wants a place for 6 months but you want long term tenants, over a long period of time shorter term leases will blow out your vacancy and letting costs. This could be $1,500 per year.
How quick an applicant can move in is also important. If an applicant can move in as soon as the property is available vs 2 weeks later, based on a $500 weekly rent, thats $1,000 right there.
And what if an applicant offers a higher rent?
If someone offers $20 per week extra thats a $1,000 per year of additional rental income so of course this needs to be considered in the screening process.
This extra rent could also be considered as an additional insurance policy to off set some of the risks that an application might present, like first time renters. Think of the extra $1,000 rent per year as a second bond that you keep if nothing goes wrong.
An investment property is like a business, it has to make financial sense.
So I’ll ask the question again, with so much to consider can AI screen a rental application? (better than a person)
Think back to the scenario above, can AI tell you out of the 5 applications submitted on your property which one you should rent to?
There is no doubt AI can analyse huge amounts of data in seconds, allowing you to secure the best renters first, so from a speed perspective it beats humans hands down.
Humans also have good and bad days. If they’re having an off day they might miss a red flag. Some bad renters are scarily good presenting themselves as good renters so you have to be on your game to spot the red flag.
Now the problem is, AI to screen a rental application (properly) does not exist yet. Certainly that I know of.
AI needs to be trained specifically for the purpose (of screening rental applications) and on high volumes of data. It needs to learn over time, just like a human property manager who gets better over time.
The AI needs to see how the renters actually performed during the tenancy (did they pay rent on time and did they look after the property?) This enables the AI to learn and get better over time at predicting future prospective renters.
(but with huge amounts of data it can learn super fast)
Even with all the training, it still needs to know in-depth information about the property and your intensions, like how long you’re intending to rent the property out for, any other preferences like desired renters or pets and even what you plan to do with the property.
For example, if you’re looking to knock down the property or do major renovations you may not be worried about how a renter looks after your property, you’ll be more concerned about the rent being paid on time, them putting up with potentially maintenance issues and moving out when you need. All this should effect the screening process of an application.
Obviously you can’t just upload a rental application into ChatGPT today and ask it ‘Should I rent to them?’
Today, at Cubbi we use our own AI models to assist humans (real professionals) to screen rental applications.
We use it as a tool to make our screening better.
To make it faster, more reliable and provide us with more information we would other not get otherwise.
Ultimately make it better.
To keep our 100% strike rate alive (of zero Cubbi Certified renters being taken to Tribunal over the past ~4 years)
We use AI technology to verify an applicants ID - by matching a live photo with the picture on their ID. Then referencing the ID number with government records.
A person cannot do that nearly anywhere as well or as fast.
We use AI to analyse an applicants rent payment history. Instead of a person going through every payment, AI can analyse 100 payments in 5 seconds.
We also use technology to complete a renter personality assessment of each applicant. It gives an indication about how likely they will care for the property and accomodate your needs, based on their personality.
We use AI to verify documents like, income statements, bank statements etc. Think about how easy it is to doctor up a payslip.
These are all indications. I must stress this.
Never does one piece of information tell the whole story.
We also use technology to calculate their ability to pay rent on time but that’s pretty standard stuff these days.
Every bit of data helps tell a story.
There is a lot to consider but when screening a rental application assisted by AI, it’s like ten pin bowling with the bumper guards, nothing gets missed.
Using technology and AI as a tool not only provides more accurate recommendations (about a potential tenant), but we slash the time it takes to screen an application by 50%. Allowing owners to secure the best renters before the other agent.
AI is moving at extreme speeds at the moment.
This is an area we are particularly interested in at Cubbi.
Using technology to get better outcomes and experiences for both owners and renters.
Right now, AI is a brilliant tool to assist humans but imagine if one day it could choose a better renter than a human could?
You could secure a good renter instantly.
Beating other agents to secure the best renters and reducing vacancy periods.
Getting renters in your property just 4 days earlier could almost pay off a new dishwasher.
But this all hinges on the AI being better at recommending the right tenant vs an experienced property manager.
Being faster is not enough, it has to make better recommendations.
At some point over the next few years we believe the tables will turn, humans will assist the AI, where the human just reviews the AI recommendation before it is sent to the owner.
Time will tell.
If you want to learn more about our screening service we provide for self managing landlords, you can learn about our service here.
.svg)