How To Find Good Renters – 6 tips for success

How To Find Good Renters – 6 tips for success: In any buy-and-hold rental property venture, someone will be dealing with tenants. Unless you are hiring it out to property management, you will most likely be doing this yourself. Property management could find you any kind of renter. If you want to treat this like a business and actually make money you need to learn how to find good renters.

How To Find Good Renters

“Where are all the normal people?”

For many people, dealing with tenants can be intimidating. From not knowing where to start, what to ask or even how to market a property – the process can be overwhelming.

If you want to get started in Real Estate Investing, consider reading the article: How to get started with Real Estate Investing.

In the steps below, I will tell you exactly what I do and as I am writing this article – am doing currently. Here are my following recommendations on How to Find Good Renters:

How to find good renters

This is definitely one of my favorite reads on this subject.

1. How To Find Good Renters: Have a Minimum Standard

This is a good one to start with. Have a minimum standard for your renter’s qualifications. I have the following saved on my phone so I can reference it easily:

  • Income – Minimum of 3x rent amount (gross income
  • Employment – 2 to 3 year history at the same job or at least the same industry
  • Self Employed – Last year’s tax return with 2 previous month’s bank statements
  • Reference from previous landlord if applicable
  • Pass background check
  • Pass credit check

Having a minimum standard gives you a quick pass/fail for a potential tenant and lets you know if either of you should continue to spend your time on this business relationship.

I recently got a wonderful lesson in keeping to my own standard. I received an application from someone that looked great: fantastic credit, great background check, fantastic income. Awesome! I was completely excited. However, before we get too far here you must trust but verify.

When I asked for proof of income, I got a wonderful song and dance about how they’re self-employed, making lots of money, etc, etc. When I began to look at the bank statements, it simply wasn’t so. They barely made HALF the income they claimed that they did.

When confronted on this, more excuses came about how they had more contracts lined up and things were improving with the business. But the data didn’t support this. If it can’t be proved with hard data – it doesn’t exist.

2. How To Find Good Renters: How do they interact with you?

This one is huge and it says a lot about how this relationship will be in the future. Is this potential tenant nice, courteous and flexible? Or do you find that they are stubborn, demanding and unrealistic? That will be the personality you continue to deal with if you pursue this business relationship.

While some people might say “They meet the minimum standard. I don’t have to talk to them every day. It’ll be fine”. If that works for you, that’s okay.

How to find good renters: I prefer relationships where both parties can be amicable, professional and courteous. An ideal renter will be motivated, organized and ready to start the relationship off on the right foot.

3. How To Find Good Renters: Do they value your time?

How To Find Good Renters

Your time is valuable. Don’t let someone waste it.

This one is huge regarding my personal pass/fail standard. If you are trying to schedule a time to view a property, is the potential tenant willing to be flexible with you? If you’re available between 5 pm and 8 pm and the potential tenant insists they are only available between 1 pm and 3 pm – this isn’t going to work.

While personally, I do not like to “bend over backwards” for any potential, untested tenant because it sets a bad example. If you compromise on your standards in the beginning of the interaction, what does that say about how this relationship will go? Many landlords fail because they treat land lording as a hobby, not a business. In a business there are standards and protocols, pure and simple.

An immediate fail in my book is making an appointment to see a property and then not showing. No call/show is an immediate disqualification. Delete their number and move on.

How to find good renters: Good renters are respective of your time and theirs. They will not leave you waiting for a showing, nor should you leave them waiting when they are prompt and on time. Respect goes both ways.

How to find good renters

4. How To Find Good Renters: Have a system

This is another important detail, you need to have a good set of tools. Personally, I use the Cozy.co website. They offer a free platform that allows a potential tenant to do the following:

  • Complete a Background Check and Credit Check ($25 a piece, $40 if both completed at once)
  • Submit an Online Application
  • If the Credit and Background check are both completed, it is only $40 for the potential tenant

This is a nice thing because if you do choose to accept them, they are already ingrained in your system. Cozy offers direct deposit payments, which means everything is handled through the program. They can even have the tenant schedule rent payment one month ahead of time.

Nice feature: The other thing that I like is that additional, unpredictable expenses can be added as well. In one rental that I have, the water bill needs to be paid by me (as per state law). So the tenant reimburses me as per the lease. Every month when I get the water bill, I take a picture of it, send it to the tenant and generate a payment request. All through my phone, which I could do anywhere (and have done several times while on vacation).

Cozy definitely makes land lording MUCH easier. From not dealing with physical checks, to the flexibility and control of payments, it is wonderful. I always recommend to those that are interested in operating their own rentals.

How to find good renters: A quality renter will appreciate having a landlord that is organized, professional and well equipped to handle their business. This goes so far as offering electronic ways to pay the rent. Checks are a thing of the past. Time to step up your game.

5. How To Find Good Renters: Have a Strong Lease

This is another pitfall area that I have seen quite a view people fall into. They must think “Well, I’ve already sunk all this money into a property for rehab and repair – I will save a few dollars and get a free lease online!”. Sure – great idea. There is a massive difference between being cheap and being frugal. And the decision to get a sub par lease that legally controls your interaction with a potential tenant for free is just plain cheap.

Do not be foolish about this! A good lease can save you thousands in court costs. Get a lease specifically written for the state you will be renting in. Even better, have it completed by an attorney who would hypothetically be representing you if you needed to file an eviction. The lease is your playbook when interacting with a tenant. If both of you follow the rules in the lease, there is nothing to fear. If either of you stray from the rules, the consequences are written out specifically.

How to find good renters: A quality lease protects you as the landlord and them as the renter. Both people benefit!

Most importantly: You can use the blank lease again and again once you own it!

A good place to find a lease is at BiggerPockets.com. They have a landlord form for all 50 states that you can download. They aren’t free but each of the leases was checked out and approved by an attorney in that state so you know its the real deal. You can find the forms here: Biggerpockets Landlord Forms.

6. How To Find Good Renters: Bonus tip: Beware the Sob Story (or just simply the crazy one)

This is another interesting part of doing your own tenant vetting. You interact with people from all different walks of life and in different situations. Everyone has a different need or preference. The interesting part comes in when a potential tenant tries to manipulate you by pulling at your heartstrings: My fiance died. I lost my job but I can still pay the rent. Can I pay the first 6 months in advance? Do you accept pets? I have 6 dogs.

How To Find Good Renters

Another great read on the subject.


Stick to your minimum standards and stick to the lease. Tenants tend to be wily and will try to test you. I just had a woman see my property today tell me that she separating from her husband and then tries to negotiate the rent down well past market rate (more than $150!). The best part? This woman forgot that she asked me about the rental rate and tried to negotiate it down three more times. Memory impairment? Who knows. People are interesting for sure…

How to find good renters: Quality renters do not need drama or pity to get your business. Avoid toxic renters at all costs!

Conclusion

In the end, having a rental property is what you make of it. If you do your research and stick your standards, chances are you will have a good business. If you cut corners, your end result can reflect this. Be it with a sub-par rehab, which means the tenants will always be complaining something isn’t repaired. Or picking sub-par tenants and getting late or even NO rent. Or buying a property for too much so that you barely turn a profit each month. Having a rental home is a business and should be treated like one!

Want to learn how to pick up a property that doesn’t end up costing you money each month: Consider reading the article on: Selecting and Analyzing Real Estate Deals.

Do you have a rental home and have some fun and interesting stories about tenants? If so, leave a comment below!

Did you like this article, check out some of our others:

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Investing in Real Estate Part 2: Analyzing Rental Property

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14 thoughts on “How To Find Good Renters – 6 tips for success

  1. This is great. This info should have been available years ago. I have a few friends that went on the ‘trust’ method and ended up being so hurt in the end. The landlords had to take the tenants to court because the tenants didn’t want to cooperate.

    Thank you for this info.

  2. These are great tips. My father tends to fall for the sob story when it comes to renters. It is best not to find out too much about them personally. Just learn the essentials that you outlined.

    1. I really like to keep it to the basics and essentials, like you said. The potential tenant’s private life is up to them. If they keep up with the property and pay the rent – there is no issue 🙂

  3. One thing I’d add is to BE PATIENT and don’t feel you need to rent ASAP. When you’re in a rush due to a looming mortgage payment, you’re likely to make the wrong decision. Case in point – 2 examples of close friends of ours.

    Friend #1 was doing everything you suggested above, but his wife felt he was being too picky and thought the single mom would be a good tenant and pressured him to rent to her. Turned out to be a NIGHTMARE. She was on the phone with him DAILY about making “changes” to the property. She eventually changed all the locks (illegal) so he couldn’t get in AND tapped into the electricity and created a small grow-up in one of the rooms. It took him MONTHS to evict her and her “family” that showed up (all 10 relatives) and $10,000 to fix the wiring mess.

    Friend #2 rented to someone we all knew (single mom and her son is friends with mine). She seemed normal but didn’t do a background check at all or anything. She became ‘friends’ and would let her use her car, etc. Turned out she was into drugs and was using her car to move drugs. She eventually lost custody of her son and she spiraled out of control, becoming a junkie. She had to go to court and get a bailiff and the police to evict her. This cost her THOUSANDS to clean up, as there were used needles and blood all over the place. Disgusting.

    Never feel you NEED to rent in a hurry – take your time, spend some small money as outlined above to make sure you’re getting a decent tenant. Doing it ‘fast and lose’ will end up with nightmare.

    1. Oh man, I love this comment. You are SO right. I have been tempted a few times to bend the rules slightly, but seeing this comment really makes me happy I didn’t. You need to wait for quality and that is okay!

  4. Hi Dave, your article gives some great tips. There are so many bad renters out there, and by not being careful about who you rent to you could end up with a real nightmare. I agree that they should value your time, there is nothing worse than setting up a scheduled time and then the person doesn’t show. I also believe that you should never rent to family or friends.

    1. Thank you for your comment! I completely agree with you about the friends/family thing. I think that is just a recipe for disaster.

  5. I have a question. A renter has a good reference from landlords. Very good references. However he did not pass the credit check. What should I do?

    1. I would look at other things, such as: have they made their recent payments on time, how much debt do they owe (and what are the payments on this like), and what is causing the bad credit score.

  6. Wow great topic and your site looks top notch, it shows that you have put a lot of time and energy into the site.

    great read for the blogs it seems like you are going the right way.

    It is great to see that pop up window as well on sharing articles, and spreading the word of your page on social media . Great work

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