If you want to be a successful property manager, you need to find good tenants. But what exactly is a “good” tenant and why is the quality of a tenant so important? Even more importantly, how can you go about finding them?
What Makes a Good Tenant
Let’s start with a basic definition of what makes a good tenant. A good tenant will generally accomplish three things:
1. They’ll pay rent on time. First, your “good” tenants will pay rent consistently and on time. You won’t have to chase them down every month for a rent payment, and you can depend on them to pay you every month.
2. They’ll stay at your property for an extended period of time. Though perfectly responsible tenants may have to move prematurely, it’s better for you as a landlord if your tenants continue occupying your property for an extended period of time.
3. They’ll keep things in decent condition. Finally, your best tenants will do what they can to keep your property in good shape. They won’t destroy things, damage things, or annoy your other tenants. They’ll also notify you if there’s something that needs to be repaired.
You can see why a “good” tenant who fits this description is so valuable. Not only will they improve cash flow at your property, but they’ll also make your life easier.
How to Find Better Tenants
So how can you find these better tenants?
· Create a strict screening process. Your first line of defense is a good tenant screening process. Before accepting any tenants at your property, you should run a thorough background check – and reject any candidates who don’t meet your minimum criteria. For example, you’ll need to check a person’s credit score, current job, current income, and previous renting history; if it doesn’t look like they can afford this place, or if their payment history is sketchy at best, it’s time to move onto another applicant.
· Use a consistent rental application. Using the right rental application can make everything easier for you as a landlord. This consistent form can ensure you’re collecting all the information you need to run a background check on this person and can help you answer some early questions you might have about this person. It’s also a great way to document each applicant so you have a reliable paper trail.
· Be wary of discrimination laws. When reviewing and possibly rejecting applicants, it’s important to be wary of discrimination laws. There are valid reasons for rejecting a rental application and invalid reasons; and if you’re found to reject a tenant for an invalid, illegal reason, you could end up facing serious legal consequences. Work with a lawyer if you’re not sure what these discrimination laws are or how they operate in your city.
· Interview your tenants. Before finalizing the approval of a new tenant, spend a bit of time interviewing them. This doesn’t have to be an especially formal or intensive process; just call them and talk to them a bit. Ask them why they’re looking to rent here, what their plans are, and what type of person they are. You can learn a lot about your prospective tenant this way. If they seem like a responsible and well-intentioned tenant, and their background check looks clean, you can be confident you’re making the right choice.
· Choose the right neighborhood. It’s also a good strategy to choose properties in the right neighborhood. As a property investor, you’ll need to consider a lot of factors when making a purchase, including the potential rental income, the purchase price, and the future potential. But your neighborhood choice is about more than just potential property appreciation. A safe, kid-friendly neighborhood with plenty of access to amenities is going to attract more responsible, conscientious tenants (in general). It can help you find better candidates, especially compared to sketchier neighborhoods.
· Upgrade the property. Spend some time investing in the property – especially the curb appeal. Tenants will be more likely to take care of a property if they love where they live. If you’ve made some serious upgrades to beautify and improve the location, your occupants will be more likely to respect it (and pay rent on time).
· Improve retention for good tenants. Finally, make sure you invest in tenant retention for the good tenants you find along the way. It’s hard to find good tenants, but it’s relatively easy to keep them if you respond to their requests promptly and reward their loyalty.
With better tenants occupying your rental properties, your real estate strategy is going to pay off faster and more consistently. Make sure you invest some time, money, and energy into your tenant screening process so you end up with the best possible candidates.