The rental market in the U.S. has been on the rise over the past year with an increase of 3.1 percent in rental prices. This means it’s a great time for you to turn your property into an income property or keep it going if you already have.
To ensure it runs smoothly and you don’t incur unnecessary costs, it’s important to find the perfect tenant. With everything from leaky faucets and broken appliances to a pony hidden in the yard, no property issue is unfamiliar to rental property owners with a misbehaving tenant.
Apparently, there is such a massive surplus of these tenants that there is an entire AskReddit thread dedicated to sharing the worst tenant stories.
Dealing with difficult tenants can get costly quickly, especially if it involves evictions. Between lost rent, repair of property damage, and possible legal fees and court costs, the cost of an eviction can range from $3,500 to $10,000.
If you’re a first-time property owner, it may only be a matter of time before you see your fair share of renter nightmares. Thankfully, there is a way to find wonderful tenants instead and dodge costly and embarrassing court battles: stringent screening of every applicant that goes through your doors.
To help you weed out difficult tenants and find the gems that will love your place as much as you do, we’ve put together some strategies you or your property manager can set in motion.
Start With Marketing That Attracts the Perfect Tenants
Successful property owners clearly define the type of people they would like to have as tenants. This starts with the ads placed during initial marketing.
Use language in your ad that reflects the type of person you’d like and gear it so that it will appeal to reliable people. You can emphasize safety and clearly define the parameters of what you are looking for and offering.
Successful marketing to attract ideal tenants also involves a rental price that is realistic for the market and your income needs. Research the market or lean into the expertise of your property manager to get the price just right.
Get Your Place in Great Shape Before You Show It
A great tenant is going to want a great place. If you want to attract someone that will keep your place nice, give them a place that’s nice to start. Then they’ll know what it can be and keep it there.
When you do a walk-through with your new tenant, the state of the place will be noted and it will be agreed that the tenant will give it back to you in this state.
A nice place will make them happy and you’ll be happy that they’re happy!
Apply a Solid Screening Process
To make sure nothing slips through the cracks and to save you time, you need a rock-solid process for screening.
You may have applicants that apply online that you can screen on the phone. You also will have applicants that you or your property manager meet when you show the property. It really pays to meet the tenant in person, so you can evaluate character.
Be vigilant and, again, lean into your property manager if you have one, because she or he will know what to look for in a good tenant.
People who have experience in conning property owners are likely to have their own set of strategies. They tend to prey on landlords with loose rental agreements and unclear move-in procedures. They will use these loopholes to circumvent the law.
This is why it’s so important to set the rental agreement and move-in expectations right in the initial ad. Don’t waiver from what you decide on before you list the rental.
Look Out for Red Flags in the Application Process
Each applicant should complete the application form in its entirety. By doing so, you can pull credit reports and background checks. You will also get contact information on the applicant’s current and previous employers and landlords as well as earnings and financial information.
If an applicant refuses to be subject to a background check or give you any information on request on the application, consider it a red flag and know that you have the discretion to turn the applicant down.
A property manager with experience can help you do this in a friendly way and within your legal rights so you avoid future issues.
Make Sure the Tenant Can Afford to Rent Your Place Comfortably
When vetting tenants, look for the people with an income that goes three times higher than the rent. This will ensure that they can comfortably pay on time. This will make your life easier and theirs too!
A renter that lives in a place they love and can afford it is more likely to treat the place with respect.
A happy tenant that wants to live in a nice place is more likely to let you know when there are issues so you can fix them promptly and avoid small issues turning into bigger ones.
For example, if there’s a drip in the faucet, you’re paying for the extra water bill as most landlords pay for the water. If there’s a drip in the roof, you want to nip it in the bud before it causes bad water damage.
Happy tenants won’t “live” with the problem because they want you to keep the place in good order and, in turn, they will take care of it on their end.
Be Diligent With Background Checks
Ideally, you want a tenant with no history of evictions. You also want someone with a clean background and who can provide you with good references.
Call every landlord and employer reference given and ask detailed questions. Find out whether the tenant has ever been late on their rent or taken to rent court. Find out how easy the tenant was to talk to and the communication style that worked best.
Ask employers about character. You want someone that is responsible and reliable at work as that’s likely to translate to how they work and communicate with you.
Also, you want someone that is likely to continue to be employed so they can easily pay their rent.
Also, you can harness technology to determine whether the tenant has had run-ins with the law.
Put Potential Tenants to the Test
Ask that your tenants get rental insurance. This shows that they are committed. Ask for proof.
Also, ask for a deposit and makes sure the money is in your account before you sign the rental or lease agreement.
Only Go With Your Ideal Tenant That Jumps Through All the Hoops
Your ideal tenant will make the effort to make this process easy for you. The ideal person will be happy to do this. You’ll be able to sense how much they like your place.
Don’t settle for someone that you can’t vet or that doesn’t feel like a good fit. Use your instinct and the experience of a property manager and all the screening you’ve done to make your decision.
Keep looking until you find the right tenant or tenants.
Use a Solid Rental or Lease Agreement
Make sure your contract covers all your legal needs, clearly states what you will provide, and what your renter will do and pay, plus many other important details to protect you and your renter.
Clarity is key to a happy and professional landlord-renter relationship whereby everyone knows what they need to do to hold up their end of the bargain. If there are future questions or disputes, you can refer to this rental agreement.
A property manager can tell you what needs to be in the agreement. There are things you probably haven’t thought about but they’ll know.
For example, you should do a walk-through before the tenant moves in and note any issues as an addendum to the agreement. You should clarify how the renter should pay you and by which day of the month. You should clarify if there is a late fee if the renter pays after a certain date.
This is just the tip of the iceberg. The good news is that the items that should be covered in the agreement are pretty standard so a professional property manager can let you know.
Find the Best Tenants for You
Now that you know how to screen tenants and attract the ones that are a great fit for your place, you’re ready to find the tenants for you.
Working with a reputable property management company can be so helpful in this process as they bring all their experience to the table. They can quickly get you one step closer to finding good tenants and enjoying a steady income flow while evading all the hassle.
To start, give us a call today, especially if you’re in the Denver area or fill out our form and we’ll reach out to you as soon as possible.
We can help you set prices, do your marketing, use the best contract, and even manage your property going forward. We run credit reports, verify employment, vet rental history, and secure all criminal background and income checks of all potential tenants. Our goal is to make rental ownership easier and more effective for you.
Bergan and Company have been a leading professional, comprehensive property management services and the investment industry since 1961.