Let’s face it, owning an investment property is a great way to build wealth, but it can also go downhill very quickly if you have the wrong tenant. Picking the right tenant for your rental is one of the most important decisions you will make as a landlord.
Make sure you require a rental application and the questions are appropriate to gather the information needed to make an informed decision.
There are 2 main points to consider when qualifying a tenant.
1. Does the tenant have the ability to pay?
Obviously, when you rent out a property the goal is to collect money. One of the most frustrating things is to hear the excuse of, “I can’t pay my rent”. “What do you mean you can’t pay your rent? You mean you get to live here for free and you irresponsibly spent all your money?” Proper screening up front can help to minimize this possibility from happening and saving a lot of frustration. A high-quality tenant will be able to pay the rent.
A good way to determine whether a renter can afford your place is to verify income. Although each person is different when it comes to how one manages their finances it can be pretty obvious whether one can afford something or not. A rule of thumb is to verify that only about 30% of their income will go to rent. Every month various other expenses seem to “pop” up, but if only 30% of income is set aside for rent, there is a high probable chance that the other 70% of one’s income can take care of those unexpected expenses. College students, or others, who can’t afford the property on their own might be acceptable to you with a co-signer. If you consider a co-signer, make sure you have the co-signer apply too.
View the applicant’s credit report to verify debts and responsibility in paying other creditors. This is a great way to see the past, present, and possibly predict the future on how well a tenant pays there bills. Interview past landlords to make sure that past rent amounts were paid in full and on-time. The manner in which way a tenant paid their previous landlord will likely continue on how they pay you.
2. Are the Tenants responsible and Will they take care of the property?
- Receiving the rent is 1 thing, it’s another to find out that the property has been destroyed by the tenant and now costs thousands to fix up and get it ready for the next tenant. Any and all profits can quickly be erased if this happens. Proper screening can also assist in minimizing potential costly damage from occurring.
- There are few ways to assist in judging if the tenant will take care of the property.Just as in verifying if rent was on time, interview past landlords to determine if the property was kept in good shape, if any lease violations occurred, if there were any unauthorized occupants or pets. If so this is a good indication that this may occur at your property.
Look at background reports such as past evictions and criminal reports. Look for applicants who respond to you in a timely manner and who tell you pertinent information about themselves before you ask.
Landlords who struggle are usually renting to bad tenants. And landlords who choose high-quality tenants are typically successful. Choose your tenants wisely, so you’ll experience success.
To learn more about how to be a Landlord Pro and receive more tips and tricks click here