Having a rental property can be an excellent way to bring in additional income. However, it only works well if you have high-quality tenants.
Choosing the wrong tenants will give you nothing but headaches. Late rent payments, damage to your property, and even the need to evict someone could all be issues you face. Not only do these problems take up your time, but they also cost you money.
On the other hand, the right tenants can be everything you hoped for. From long-term living arrangements, on-time rent payments, and few concerns about the property beyond routine maintenance, these renters are the people who make the investment worthwhile.
Here are five steps you can take to choose the best tenants for your rental property.
Verify Credit & Income
The first key to finding a tenant who will pay on time is to make sure the renters you approve are responsible with their money. The best way to do this is to check their credit rating and verify income.
You can ask for copies of pay stubs and call an employer directly to verify ongoing employment. Ideally, choose a tenant whose income is at least three times the monthly rent. This will help ensure they won’t be choosing between rent and other daily needs.
Next, run a credit check. Look at both the score and the debt to income ratio. This will help you avoid choosing a renter who is so far in debt that they will struggle to make payments for monthly rent.
Do a Background Check
You’ll have nothing but trouble if you end up with tenants who are conducting criminal activity – especially if it happens on your property! To avoid these issues, do a criminal background check on potential tenants.
Don’t let them falsify their information – get their name and date of birth from a valid photo ID. Be sure you’re aware of the laws in your state regarding what types of crimes you can consider in making a rental decision.
Beyond criminal history, check their background regarding rental history. Make sure tenants haven’t broken leases, been evicted, or skipped rent in the past. Talk to previous landlords to get the real story.
Ask the Right Questions
Screening questions can make or break your tenant process. If you ask the right questions, you’ll be able to discover red flags in advance and avoid problems. You’ll also be able to find out if the tenant is an ideal match for your property and needs.
Aside from the questions already mentioned regarding income, criminal history, and credit, ask the following:
- Will you live alone, or have others with you?
- Do you have pets?
- Do you plan to sublet?
- Do you smoke?
Be sure that your rules and standards are clear to all applicants from the beginning. You can set a maximum number of people who can live in the unit, along with subletting policies or bans, smoking rules, and restrictions for pets.
Beyond the verbal questions and answers, watch for non-verbal red flags. For instance, are they late for the rental showing? Do they seem unclear about their plans about a move-in date, roommates, or other important details?
If so, you probably need to move on to the next applicant.
Have the Right Reasons for Making Your Decision
Once you’ve received the application and completed your screening, you’re ready to decide on your tenant. Be sure you follow Fair Housing Laws in making your choice.
Good reasons to approve a tenant are that they seem friendly, easy to communicate with, and are interested in your property. If they have the right income, good credit, and a good history, they could be great ongoing tenants.
You will want to decline a tenant if they don’t meet your income, credit, or background standards. You can also say no if they are hard to work with, rude and uncooperative, or if they provide fake information.
If you’d like help finding the best tenants and making these decisions, that’s understandable. An excellent property management firm can be a huge help.
Keep Good Tenants Renewing Year After Year
Finding good tenants is difficult, so once you find them, do everything you can to ensure they renew each year. Treat them well and communicate with them in a timely, consistent manner. Be friendly and kind. Moving is a hassle, and many tenants will stay if they like the landlord.
Be sure to respond to requests about maintenance, noise, or other concerns as quickly as you can. Prioritize your great tenants so that they see how important they are to you. This will give them a lot of reasons to stay.
Great landlords and apartments are as hard to find as great tenants, so if you treat them like the valuable people they are, you have a great chance of keeping them long-term.
Finding good tenants is a challenge, so follow these five steps and put yourself in a great position to get and keep the very best. That makes your rental very profitable, so don’t skip this due diligence.