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.
“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:
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?
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.
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.
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!
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!
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