How To Find the Right Tenant
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.
The first step is to require each prospective tenant to fill out a rental application. Make sure that the questions are appropriate to gather the information needed to make an informed decision. Then there are a few main points to consider when qualifying a tenant.
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 to hear from a tenant is “I can’t pay my rent this month”. Proper screening up front can help minimize this situation from happening and save a lot of frustration. A high-quality tenant will be able to pay the rent.
How to Determine a High-Quality Tenant
A good way to determine whether a renter can afford your place is to verify their income. Although each person is different when it comes to managing their finances, it can be pretty obvious whether a person can afford to rent your property or not.
A helpful rule of thumb is to validate that only about 30% of their income will go to rent. Tenants will have other expenses each month, but if they have set 30% of their income aside for rent the remaining 70% should cover the rest of their expenses.
View the applicant’s credit report to verify debts and responsibility in paying other creditors. This is a great way to see the past, the present, and possibly predict the future on how well a tenant will pay their 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.
What if They Can’t Afford the Rent Price?
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 as well.
Are the Tenants Responsible and Will They Take Care of the Property?
Finding a tenant who will take care of your property is just as important as finding one who will pay the rent. No owner wants to find out that their tenant has destroyed their property and it will now potentially costs thousands of dollars to fix up and get ready for the next tenant. Any and all profits from the property can quickly be erased if this happens.
Proper screening can 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.
- Interview past landlords to determine if the property was kept in good shape, if lease violations occurred or if there were any unauthorized occupants or guests.
- Look at background reports such as past evictions and criminal reports.
- Look for tenants who respond to you in a timely manner and tell you pertinent information about themselves before you ask.
Landlords who struggle are usually renting to bad tenants. Landlords who choose high-quality tenants are typically successful. Choose your tenants wisely, so you can experience success.
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