5 Steps To Finding Better Tenants
As a rental property owner finding good tenants is a necessary evil. The screening process itself can be long and grueling but it will impact your business for the next several months. Good tenants are the key to any good rental property. It is important that you spend the time to know exactly who you are renting to. Too many times landlords skimp on screening just to get a vacancy filled. This is the worst thing you can do. A bad tenant is always worse than dealing with a vacancy. While you can never ensure that your tenants will pay on time and take care of your property there are some things you can do to give yourself the best possible chance. Here are five critical actions you should take to find better tenants.
- Application. After your prospective tenant views the property the very next thing you need to do is give them an application. Even if they love the property and want to commit on the spot you can’t bypass this step. You should treat your rental sort of like a job interview. The application is the tenants resume. You wouldn’t hire someone to work for you without looking at a resume and you shouldn’t rent to someone without reviewing their application. Your tenant may be the nicest person in the world but you can’t make a snap decision based on ten minutes with them. Only after you review the application and do your due diligence should you take action. Yes, you can lose a tenant or two by taking your time but your goal is to find good tenants and not just put someone in the property. Regardless of a tenants interest always have them fill out an application.
- Background Check. Your application shouldn’t be the size of a small book but it can’t just have a few questions either. With your application you need to figure out who you are renting to. You have every right to ask questions about income, employment and rental history. The first thing your application should provide is information for you to run a credit check. The credit score itself is not that important. One or two old accounts can pull a credit score down. What you are looking for is the payment history. Timely payments are the most important thing a tenant can do. Without monthly cash flow coming in nothing else matters. Aside from payment history a credit report will also provide previous address history as well as employment. If your tenant is trying to pull one over on you the credit report will supply this information. Some landlords charge their tenant the credit report fee. Many consider this as a cost of doing business and an expense that comes with the territory. Don’t be short sided enough to avoid a $20 credit report fee to find good tenants.
- References. It is important that your application has a section to list any references as well as past rental history. A credit score doesn’t always tell the whole story. The best way to find out who you are renting to is by reaching out to previous landlords. You should ask for at least three references or previous landlords. The reason you do this is because you never know which landlords may hold a grudge for one reason or another. They may have treated the tenant poorly which caused them to move out early. By listening to three different voices you can get a good idea of your prospective tenant. As difficult as it may be to believe but there are some tenants that will provide erroneous information on the application. They will list a family friend or relative as a landlord. Ask the reference what the address of the rental property was and what their full name is. With a quick internet search you should be able to verify if the person you are talking to is real.
- Employers. You need to verify that your tenant is currently employed and able to pay their rent. If the applicant bounces around from job to job it can be a red flag for potential problems. In much the same way with your reference check you should reach out to the current employer. A quick two minute call to human resources can verify length of employment as well as the current position in the company. You can also go so far as to ask for a previous pay stub. This will give you the exact year to date income and provide you with the amount of hours they are currently working per week.
- Security Deposit. Assuming that your tenant is strong the next step is to move forward with the lease and security deposit. Anyone that has rented in the past knows that they need to come up with these funds. This figure should be clear on any print advertising your make as well as early conversations you have. If your tenant avoids having to come up with the security or tries to negotiate a lower amount it could be a sign of potential trouble. The security deposit is the last line of defense you have in the event of property damage. You can’t take a reduced amount or a promise to provide it in a few weeks. Good tenants know that the security is a prerequisite for moving in. If they don’t have the security you should look for tenants elsewhere.
Good tenants make your life as a landlord much easier. Spend the time to make sure you have the best tenants possible.