Just the Peaks
This newsletter at a glance
Identifying qualified tenants is important to your potential rental profit
Learn how experienced landlords handle the applicant screening process
Multifamily investors agree: finding and keeping good quality tenants is half the work.
On the one hand, you don’t want a unit sitting empty for months on end as you search for the perfect unicorn of a candidate. But on the other hand, accepting a tenant without proper screening could result in a far worse situation.
If your occupants cause damage or stop paying rent, you may end up paying more in the end. According to a TransUnion survey, evicting tenants typically takes 3 to 4 weeks (or more depending on your local eviction laws). The process also costs an average of $3,500.
To avoid the wasted time and financial stress, landlords should put more emphasis on the initial tenant search.
Back to basics
Whether you’re a seasoned expert or relatively new to the rental game, it’s good to review the fundamentals of smart tenant management.
“Selecting a tenant is a business decision,” writes Andrea Collatz, a contributor at TransUnion. “You should prioritize a good tenant based on objective facts versus subjective opinions.”
Some of the most desirable tenant qualities include:
– Track record of on-time payments
– Steady and substantial income
– A healthy credit score/report
– Ability to pay the security deposit
– Good references from past landlords
– Polite and respectful demeanor
– No prior history of eviction or crime
For more tenant screening 101, visit MySmartMove
Clearly, the only way to collect these objective facts is to be aggressive in your tenant screening. This may require added time and expense (including lost rental income), but the more you know about your applicants, the better the outcome.
From risky business to rental bliss
Prior to beginning your tenant search, be sure to do plenty of research. You can discuss the topic with your realtor and mortgage broker, or even consider consulting with a local attorney.
Collatz advises, “Because many jurisdictions regulate advertisement and the tenant selection process, it is important to familiarize yourself with federal, state, and local housing and tenancy laws that may apply to you.”
And don’t forget—your fellow landlords know best! Part of your research might include talking with other investors about their past experiences, what they look for, and what they avoid. A recent poll of property owners gives great insight into common red flags.
Top Landlord Concerns About Tenants
Payment problems: 84%
Prior history of eviction: 56%
Prior criminal history: 45%
Fraudulent application info: 34%
High maintenance: 32%
Moves frequently: 11%
As you embark on this deeply fulfilling investment opportunity, keep Everest’s top 5 tips in mind. If the search has you feeling stressed, repeat our mantra: ‘Screen for a dream!’
6 Tips for Finding the Perfect Tenants
Beautify your property
In addition to screening your applicants, research shows that properties in good repair attract more desirable tenants—the type that will also respect the place like you do. This includes maintaining appliances, replacing broken fixtures, and investing in cosmetic upgrades.
Understand the neighborhood
Sometimes vacancies happen because the landlord’s expectations—and rents—are too high. Be sure to research the average income level of people living in the area, decide upon a fair market rent for the property, and wait for qualified candidates to pour in.
Back in the day, it was all about the fancy brochures. But now, advertising on popular rental websites gets the word out to more people and at a lower cost to you. Experts say the more pictures and amenity details, the better—including 3D guided video tours.
Successful landlords never compromise when it comes to setting clear expectations and enforcing them. During your tenant search, you can cut down on unqualified applicants by stating your rules upfront including pet and smoking policies, duration of lease, and maximum occupancy.
Credit reports are a great start, but what about a candidate’s criminal history, eviction report, and past landlord references? The more due diligence you perform, the easier it is to make the right choice. When speaking with past landlords, be sure to ask about noise complaints and whether or not renters left the property dirty or in disrepair.
Once you find them, you’ll want your dream tenants to re-sign for many years to come! Encourage them to stay by maintaining a friendly, respectful rapport. Respond to their concerns in a timely manner, continue to make necessary upgrades to the property, and thank them regularly.
Everest says: let these tips live in your head rent-free!