We love investment properties. We love the fact that it can bring a steady monthly income. We love how it’s an asset that (usually) grows in value while you own it.
But investment properties will bring plenty of challenges. From broken appliances to structural damage to unsuitable tenants, owning an investment property will require patience, hard work, and resilience.
There are many things you can do to help you succeed when investing in rental properties. Finding the right property is essential, but it’s also crucial that you find high-quality tenants. A bad tenant can make you want to sell every property in your portfolio, but good tenants make owning investment property a true pleasure.
So how can you find good tenants?
Important Note: Follow the Law at ALL TIMES!
This can’t be overstated: it’s essential that you follow the law at all times, especially in regards to potential discriminatory violation. For obvious reasons, there are many laws that govern how landlords select tenants, and these important housing laws can significantly impact your process. Understand what you can and cannot do in your area and stay within the law at all times.
For example, some areas do not allow you to use certain information from criminal records to make a decision. If this applies to you, it may be best to avoid criminal information entirely.
Landlord Tips: Finding Good Tenants for Longterm Success
Purchase Properties that Will Attract Good Tenants
If you want good tenants, purchase good properties. A well-maintained and cared-for property will attract high-quality tenants, and will set a standard of care and respect that neglected, run-down properties won’t receive. You don’t have to purchase high-end properties, but you should focus on quality homes that will bring people who will respect your properties.
Use an Application Process with a Small Fee
An application shows that you are selective about who gets to live in your house, and it can help weed-out bad tenants or people who are not serious about renting. Creating a complete application is fairly easy, but make sure to include requests for proper identification, whether or not they have pets, and how many people would move into the property.
If legal, you should also consider an application fee. The fee should be small, and the goal is not to generate money but to filter away applicants who are not serious about finding a good place to live.
Do Your Homework: Perform Background Checks and Credit Checks
There are a variety of checks you may want to perform, but a background check could be the most important. Just be sure that the use of this information is legal in your state or city, and only use the information that is legally permissible.
A credit check can also be helpful for gaining insight, but don’t automatically eliminate tenants who don’t have a certain score. If there is a low score, talk to the tenant about causes for the score and what they have done to improve payment histories.
Request Rental History Information
If your potential tenant has rented properties in the past, ask for information and references. Talk with their past landlords to get a clear picture of this person’s level of responsibility, including their likelihood for making payments on time and how well they treated the house.
If you can get in touch with past landlords, ask a variety of questions. Were they evicted? Did they break any rules? Why did they move out? These questions will provide further insight. You should also ask about damage they may have caused, and whether were they respectful of the neighbors.
Inquire about the landlord’s relationship with the tenant. Were they easy to get along with? Did they complain about minor property issues? Overall, would the owner rent to this person again? These questions will help you understand if this is someone who should have access to your valuable property.
Find Tenants with Stability and Consistency in Their Lives
Employment history and past rental history can provide a clear indication for someone’s reliability and stability. If they stay in a job for an extended period, they are, logically, more likely to stay in that job for the foreseeable future.
Choosing tenants who are stable, with strong work histories and long rental relationships, will increase your chances of a positive experience.
Personally Interview Potential Tenants
Getting to know someone on a personal level is a great way to find outstanding tenants. You may think you are too busy; you may think it’s a waste of time to have a cup of coffee with a tenant when you can simply pull up their application and credit history. But remember, you are giving this person access to your property, which likely costs hundreds of thousands of dollars. You are essentially putting your financial future into the hands of this person. So no, you are not too busy!
When you meet one-on-one with a potential tenant, ask them about their jobs, where they previously lived, and why they need a new house. Ask if they have pets, how long they plan to rent, and what line of work they are in. Once again, this personal meeting helps you establish a rapport with a tenant that can’t be duplicated any other way. (Be sure all the questions you ask are legal and appropriate.)
KEEP YOUR GOOD TENANTS HAPPY!
Want good tenants now and in the future? Then treat people right, respond to issues, and communicate as quickly as possible. By keeping your current tenants happy, you not only ensure that the good ones will stick around, you’ll create a strong reputation for your properties. By word of mouth (which still exists!), you may start to see more high-quality tenants applying for your houses and apartments.
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