Just about every landlord will say that their success hinges on the tenants in their respective properties. It is no secret that the better tenants a landlord gets, the easier their job is. While widely acknowledged as fact, not enough time is spent on finding the best tenants. You may get lucky and find a good tenant, but why risk your business on luck? While you can never guarantee what type of tenant you will get, there are enough things you can do to greatly increase your chances of landing a good one. Getting the right people in your property is too important not to focus more time on it.
The most basic step a landlord can take is often overlooked. It is not enough to simply ask for an application, you need to use the information provided. As a businessman, you probably wouldn’t hire someone without doing your homework. The same concept should be applied to your rental properties. You can always move on from a bad employee, but a bad tenant is much more difficult to deal with. Your application should ask for all of the pertinent information you want to find out. Current job status, income, previous addresses and references should be requirements. From there, you should call any previous landlords and found about their current job status. It is not uncommon for applicants to list erroneous jobs or previous landlords. It doesn’t take more than a couple of minutes to do your homework on a new tenant. If you do not read through the application, you are only hurting yourself.
One way to verify the information provided on the application is to pull your own credit report. For less than the cost of your lunch, you can see any and all past liabilities and get an idea of their credit history. A bad credit score doesn’t necessarily mean they are bad tenants, but it does give you an idea of their payment history. Additionally, the credit report will also list current and previous jobs and addresses. This is a good way to cross reference the information provided on the application. If the address listed on the application is wrong, it may be a sign of things to come. You are not looking to catch anyone in a lie, but you are looking to protect your investment. The credit report will also give you an idea of what type of debts they are carrying. Excessive debt may lead the tenant to choose between paying their rent or a number of other obligations. Don’t let a $20 credit report fee prohibit you from doing your homework on your tenants.
The security deposit is much like the down payment that is made on the purchase. It is a reflection of just how serious the person is and how much they are willing to put into the property. You should feel comfortable asking for the maximum your state will allow. This doesn’t mean that you don’t trust your tenant, but the higher security you have, the less chance that they will leave without notice. Almost all tenants are aware that they need to come up with a security deposit before they move in. One of the first indicators that a tenant may not be for you is if they balk at this request. By not having the security funds available or not being willing to supply them, they may not be on strong financial footing. Regardless of what is on the application, you should strive to get the highest possible security amount.
Everything can look good on paper, but unless you talk to someone who knows your tenant you really have no idea. The first call you should make is to the previous landlord. In most cases, they have no reason to lie about the tenant. That being said, you never know if they have an axe to grind. Listen to everything they say, and make your decision accordingly. If the applicant lists more than one previous tenant, give them a call as well. The more people you talk to, the better picture of your tenant you can create.
When you got started in real estate, one of the last things you thought you would do is spend time screening tenants. Even if you are diligent in this process, there is probably something you have overlooked. If you have room in the budget, you should consider hiring a property manager. In addition to a variety of other roles, a property manager will screen your tenants and help find the best tenants. A portion of their income is directly tied to the amount of rents received. It is in their best interest to get the best tenants and they will spend time doing it. A property manager will eat away at your bottom line, but – to find good tenants – it is worth it.
Nothing is more important for a landlord than finding good tenants. Do whatever is necessary to make it happen.
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