Selecting the right tenants is crucial to your success as a landlord. Bad tenants frequently complain, cause property damage, or fail to pay rent on time, leading to costly repairs and frustrating legal battles for eviction.
Before you fill your next vacancy, carefully screen applicants to make sure you select someone who is responsible and reliable. Understanding how to find great tenants will help to minimize headaches and ensure your properties are successful.
Defining Your Ideal Tenant
Taking the time to identify the attributes you are looking for in a tenant will help you choose the right person or family. Be sure to write down the criteria you come up with so you will remember it the next time you consider applicants.
Although it will be different for every landlord, a few common things to look for include:
- A reliable payment history
- Respectful and courteous
- A stable income
- No prior evictions
- Passes a background check
Watching for red flags can also help you identify applicants who may not be a good fit. Just as it’s a good idea to write down criteria for your ideal tenant, writing down red flags can also be helpful.
Potential red flags to look for include:
- Excessive debt relative to income
- Frequent moves
- An incomplete application
- A reluctance to provide information
- Odd behavior
- Previous legal issues with landlords
Before you begin the tenant selection process, be sure to review state and local fair housing laws to make sure you are compliant. These laws prohibit discrimination based on race, religion, national origin, sex, disability, and other factors. The same screening process must be used for all applicants, and reasonable accommodations must be provided to those with disabilities—like allowing service animals.
Crafting an Attractive Rental Listing
Attracting your ideal tenant begins with how you write your rental listing. The right marketing strategy will help you reach quality tenants while minimizing applicants who may not be a good fit.
Your rental listing should set tenant expectations. It should begin with basic property information including the address, property type (e.g., apartment, house, condo, etc.), monthly rent, and security deposit requirements. It should then provide a detailed description of the property including the number of rooms, square footage, and amenities. High-quality photos, lease terms, availability date, pet policy, and whether any utilities are included should also be stated.
When writing your property listing, avoid using language that could be interpreted as discriminatory, such as “ideal for single professionals” or “no children.” Be sure to use inclusive language that does not favor any particular group or exclude anyone.
Advertising Your Rental Property Effectively
After crafting an appealing listing, you will then want to get the word out to attract as many quality applicants as possible. The more applicants you have, the more selective you can be. You can increase your reach by using several marketing strategies.
Although we now live in the information age, traditional ways to market your rental property are still effective. If your rental is located near a high-traffic road, consider placing a “for rent” sign on your property with clear contact information.
Many people search for a place to rent by checking online platforms. Be sure you include your listing on the most popular platforms, like Craigslist, local Facebook groups, and popular rental websites like Apartments.com and Rent.com.
Before you show your property, be sure it’s clean and presentable. If you are in a hurry and show a dirty property, applicants could be turned off by it. If possible, staging your property can help make it more attractive.
Finally, be sure you respond to inquiries quickly, especially if the market is competitive. If you delay in getting back to people, they may lose interest and go with another property.
3 Steps to Finding Great Tenants
Finding great tenants isn’t complicated. If you follow a simple three-step process, you can quickly narrow your search to those who meet your criteria.
1. Make sure they earn enough to afford to live in your property
You don’t want tenants who are overextended financially. The more bills they have, the greater the risk they will miss rent payments. You want to make sure any tenants you consider earn enough to comfortably cover all of their monthly expenses.
Many landlords prefer tenants who earn at least three times the monthly rent. If your rent is $1,000 per month, for example, you could look for tenants who earn at least $3,000 per month. Whether you go by their gross income or net income (after taxes are deducted) is up to you. It’s not a rule written in stone, and you have the discretion to consider other factors.
A tenant’s income doesn’t necessarily have to come from a job. Many great tenants receive subsidies, which is fine. The important thing is that the income they receive—from whatever source—is sufficient to cover their monthly expenses.
You can confirm applicants’ incomes by checking their pay stubs or printed copies of their direct deposits. You don’t want to take their word on it. Another option is to accept letters from employers verifying income. Don’t forget to call and confirm the authenticity of the letters and to make sure the information is correct.
2. Gauge how well they are paying their other financial obligations
If applicants pay their monthly bills on time, it may be a good indicator of how well they will pay their monthly rent. Pull copies of applicants’ credit reports. This will tell you whether they make their car payments, utilities, cable TV, cell phone, and other monthly payments on time.
When you review a credit report, be sure to go through it line by line to look for late or missed payments. Although evictions don’t show up on credit reports, defaulted rent payments may show up if a landlord sent the debt to collections.
The minimum credit score you will accept is up to you and will depend on your local market and tolerance for risk. If there is strong competition for rentals in your area, you might consider accepting tenants with a fair credit score. If you have multiple applicants, you may prefer a stronger score to improve your chances of finding someone who will always pay on time.
Negative information stays on credit reports for seven years. Credit reports also aren’t perfect. Sometimes things are added to them that aren’t correct. That’s why many people successfully dispute reporting errors and have incorrect information removed.
Some people also change their financial habits over time. If you see something minor on a report from six years ago but there is nothing negative after that, it may be worth overlooking it and focusing on the most recent payment history.
3. Determine who potential tenants are interacting with
The third step in finding great tenants is to evaluate their character. You want to find out whether they will respect your property like it’s their home and be courteous to their neighbors.
The best way to do this is to check the tenant’s personal references. You should get at least two. References should be from employers, past landlords, professors or teachers, clergy, or others who are trusted in the community. References from family members or close friends should not be accepted.
When calling references, be sure to ask questions that will help you understand an applicant’s character, dependability, and financial responsibility. Also, be sure to ask how they know the applicant. Someone may claim that the reference you are calling is a former landlord, for example, when that person is actually a friend.
Before ending the call, ask if there is anything else they think you should know about the applicant’s suitability as a tenant. Such an open-ended question may reveal some important information that you may not have thought to ask about.
The Importance of Thorough Tenant Screening
Many factors go into successful management of a rental property, but perhaps the most important is making sure you have good tenants. The tenants you select can either make or break you as a landlord. That’s why tenant selection is something that shouldn’t be rushed, even if you need to quickly fill a vacant property.
As a landlord, you are a business owner. That’s why it’s vitally important to fill your rentals with people who pay their rent on time and are respectful to your property and other people. This helps to ensure your cash flow is optimized and that your valuable time isn’t wasted taking care of issues that could have been prevented with careful tenant screening.
It’s important to keep in mind that tenant screening doesn’t guarantee that you will never have any problems. All businesses have to deal with a certain degree of uncertainty, after all. But it will help to reduce potential problems, which helps you save time and money.
Final Thoughts
Tenant screening is critical to the long-term success of your rental business. This is why you should regularly review your tenant screening process to make sure you don’t miss anything. Also, be sure to periodically review local fair housing laws to keep up with changes.
It’s also important to communicate with applicants so they will have a clear understanding of expectations. Be sure to answer any questions they may have. Not only are you selecting a new tenant, but applicants are also evaluating you as a potential landlord. Being open and honest will help you build a positive relationship.
Save time and money with this refreshing guide to managing your own properties.
In The Self-Managing Landlord, Amelia McGee and Grace Gudenkauf share the secrets of efficient property management, tenant screening and onboarding, and scaling your business—all to help you break free from the 9-to-5 grind and create lasting wealth through real estate.
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
