Screening and choosing a tenant.
Professional Property Manager Peter Garian discusses How to choose the best tenant for your rental property.
Understanding the best way to choose a tenant for your rental property can make all the difference between success and failure in the rental property business.
Many property owners make the mistake of accepting a tenant as a referral from a neighbor or acquaintance without doing the necessary background checks. I knew a property owner who had just evicted a tenant for nonpayment, fixed all the damage and was getting ready to re-rent the house when the neighbor from next door stopped by. The neighbor said he had a friend who wanted to rent the house. Because the property owner knew the neighbor as a “good guy” he took the referral based on the word of the neighbor and failed to do any background or income verification checks on the friend. He figured that he would save money and avoid having to do any advertising or showings of the house. So, he accepted the tenant just on the neighbor’s recommendation. Needless to say, within a few months, he was right back in the same spot. He had a non-paying tenant who was not taking care of the house and had to evict, AGAIN.
Choosing a tenant is probably the most important task in rental property management. Always follow fair housing laws first and foremost.
When it comes to finding and selecting a tenant for your investment property there are a number of steps you’ll want to follow…
Step number one – Get the word out.
When it comes to advertising, there are strict rules (laws) for the advertising of rental property. Make sure you or your property manager adhere to these laws. In today’s age of the internet there are a number of ways to promote your rental house. The key to finding a good tenant is to have as many possible applicants to choose from. The larger the pool of potential renters the better. If you have more people available to choose from you have a better chance of finding the highest quality tenants for your rental property. Using these available websites is going to be the key to generating interest in your rental.
As property managers, we study the trends in demographics to know what renters want to see when looking for potential homes online. When developing your listing advertisement it has been shown that certain elements within the listing will help you generate more interest in your house. Two of the most important aspects of your listing will be the description and the photos. Statistics have shown that a well written description detailing the home along with multiple photos will increase the interest you get from potential renters. Any property manager will tell you, the more potential renters who can see your home the better.
Step number two – Charge an application fee.
As a property management company, when it’s time to start taking applications we recommend charging an application fee. This will help you determine motivated renters from the tire kickers. The money you generate from application fees should be used for your background and credit checks as these services usually have a fee. When you use a property management company to manage your rentals these services are usually included in an initial leasing fee that might be charged by the management firm. There are a number of tenant screening services available to help you check the background and credit of potential applicants.
Step number three – Processing the application.
You or your property manager must make sure that you have written permission from your applicant to check their credit. Disclose to them that you will be checking their credit during the rental application process. You will also want potential tenants to provide proof of income and references. When it comes to the affordability factor you should require that your tenants have a gross monthly rent of at least 3x the monthly rent. This will help ensure that your tenants will be able to afford the property without too much burden.
First and foremost are the rules (laws) you have to follow to ensure you comply with landlord/tenant law. Do not ever violate landlord/tenant laws or fair housing laws. The best way to do this is to understand the laws or have a property management company who does. Lastly, make sure there is a set of guidelines that you follow and never stray from. Before developing your guidelines, make sure you understand landlord/tenant laws so that you don’t unknowingly violate any of them.
Having a property manager who has a system set up for screening tenants will be the key. Every potential tenant must go through the same process every time with no exceptions.