Many landlords are so worried about getting a bad tenant that they don't focus enough attention on finding great tenants. A strategic approach to tenant selection can lead to finding renters who significantly enhance the landlord-tenant relationship. High-quality tenants can improve property performance plus increase cash flow and overall value appreciation.
This article explores the basics of vetting new tenants (so you can avoid the "bad apples"). We'll also share some new ideas on finding really good tenants using methods you may not have considered before.
When it comes to property management, finding the right tenant is like striking gold. Many landlords focus solely on avoiding problematic renters, but savvy property owners understand that excellent tenants are the backbone of a successful rental business. These ideal renters do more than just pay on time - they can significantly boost your property's performance, increase its value, and create a positive living environment for everyone involved.
Finding the right tenant offers multiple advantages, including:
Reliable, punctual rent payments are the lifeblood of any successful rental property. When you have tenants who consistently pay on time, it does more than just keep your cash flow steady - it creates a ripple effect of benefits. You'll have the peace of mind, knowing that your mortgage, property taxes, and other expenses will be covered without fail. This financial stability lets you focus on property improvements and long-term investment strategies rather than chasing down late payments. Moreover, tenants who prioritize timely rent often demonstrate responsibility in other areas of their tenancy
Hot Tip: Make it super easy for tenants to pay the rent by using an automatic payment system. Allow your tenants to pay on a day that's convenient to them, perhaps a few business days after their paydays. If your tenant pays bi-weekly (every two weeks) or semi-monthly (on the first and 15th of the month), use the automated system to withdraw both payments from the tenant's bank account on those days.
A truly exceptional tenant is one who treats your rental property with the same care and respect they would their own home. This level of stewardship goes far beyond simply avoiding damage; it involves active maintenance. When tenants take pride in their living space, it manifests in numerous ways - from keeping the property clean and reporting minor issues before they become major problems, to suggesting or even implementing enhancements. This proactive care not only helps maintain the property's condition but can significantly increase its value over time.
Hot Tip: Create opportunities for tenant involvement. For example, one landlord offered to purchase window flower boxes for tenants willing to take care of the flowers in their windows. After one tenant took up the offer, the rest also wanted them. For the price of low-cost flower boxes, some dirt, and seeds, the windows of the building transformed. It became a self-reinforcing idea when the tenants participated in taking care of the flowers. Talk about curb appeal!
The value of respectful tenants extends far beyond the walls of their individual units. Tenants who are considerate of their neighbors contribute to a harmonious living environment that can dramatically improve the overall reputation of your property. This positive atmosphere doesn't just make for happier residents; it can benefit your bottom line. Properties known for their peaceful, community-oriented environments tend to have higher occupancy rates and lower turnover. In today's digital age, where online reviews can make or break a rental property's reputation, respectful tenants indirectly become your best marketers. They're less likely to generate noise complaints or conflicts that could lead to negative online reviews and more likely to contribute to positive word-of-mouth recommendations.
Hot Tip: If you make a mistake and get a bad tenant, sometimes it is cheaper and faster to pay them to leave rather than go through an eviction. Dangle the promise of cash in front of them to get them to move out asap and give you the keys (then immediately change the locks). Yes, it is horrible to have to pay a bad tenant to leave; however, you may lose more money and many other good tenants while an eviction is in progress. Even worse, you could end up with a wrecked unit plus an extensive loss when the bad tenant finally moves out.
To increase your odds of getting a good tenant, have a robust application process that complies with all municipal, state, and federal regulations. Be aware of the laws that prohibit rental discrimination. Landlords are not allowed to discriminate against any person based on race, religion, disability, or any other protected category. For example,, you can source good tenants from special interest groups, such as professional associations, corporations, and religious organizations. But you cannot discriminate against others who are not in those groups.
Landlords can select tenants for valid business reasons, such as a minimum income requirement, good credit history, no previous evictions, and positive, verifiable references from previous landlords. Be sure these standards are applied equally to all prospective tenants.
Other steps to take in finding the right tenant include the following:
When advertising a vacancy, it is a wise strategy to list the necessary criteria that are legally allowed (such as minimum income, pet/no-pet policy, smoking/no-smoking policy) on the rental listings. This will help you pre-screen tenants and save time. Verify these qualifications with all prospective tenants before going further with the application process.
Hot Tip: It may surprise some landlords that applicants with certain types of pets actually make excellent long-term tenants. While some pets may be destructive, people can be worse. In general, pet owners appreciate a rental that allows pets and will usually be happy to put down a pet deposit to cover any potential damage.
Find/develop an in-depth rental application that covers the following criteria: 1) rental/residence history; 2) contact information for previous landlords; 3) non-family references; 4) employment history; and 5) proof of income through pay stubs or W-2 form. Have the applicant agree to a credit check in writing and check the regulations in your area regarding who pays the fee for the credit check.
Hot Tip: Do not assume the tenant's application Information is accurate. Be sure to check references (employment and previous landlords). Run a credit check to determine the tenant's credit history, timely rental payments, and any bankruptcy or previous eviction history. Be aware that a tenant's previous landlord may give a false-positive reference to get rid of a bad tenant. This is somewhat rare, but it does happen.
Interview the tenant in person. Ask questions like why they’re interested in your property, why they’re moving, if they’ve ever been evicted, and how many people will be living in the property. Give them a chance to ask if they have additional questions about the house rules as you go through them one by one.
Hot Tip: Check your gut – if something doesn’t “feel” right about a prospective tenant, respect that feeling and conduct further due diligence. However, also be aware that each of us has some bias that we may not be aware of, and we must be careful not to discriminate against any protected category of people. Nevertheless, if things don't match up and there is a valid business reason to reject an applicant, do not be afraid to deny them. Even though you may lose some rent while the place remains vacant, this is better than dealing with a bad tenant.
Securing great tenants is only half the battle in successful property management; retaining them is equally crucial. Long-term, satisfied tenants are the cornerstone of a thriving rental property, offering stability and consistent income, often serving as ambassadors for your property to potential new renters. The strategies for keeping good tenants in place go beyond simply maintaining the property; they involve creating a living experience that tenants are reluctant to leave.
In the realm of property management, the importance of prompt and reliable maintenance cannot be overstated. It's not just about fixing problems; it's about demonstrating to your tenants that their comfort and safety are your top priorities, regardless of the hour. A robust 24/7 maintenance service goes beyond addressing emergencies; it encompasses a proactive approach to all tenant concerns, both major and minor. This level of responsiveness builds trust, enhances tenant satisfaction, and can be a key differentiator in a competitive rental market. By prioritizing immediate action on maintenance issues, you're not just preserving your property's value; you're investing in tenant relationships and cultivating a reputation for excellence that can pay dividends in long-term occupancy and positive referrals.
Hot Tip: Nothing is more frustrating to a tenant than having the heat go off in the middle of a cold winter night, making a call to maintenance, and dealing with voice mail. Be sure to staff the emergency line with people who can dispatch a response for any problem at any time.
Effective communication goes far beyond simply addressing issues as they arise; it's about creating an open, responsive, and collaborative environment. Regular, proactive communication helps build trust, prevents misunderstandings, and fosters a sense of community within your property. By staying in constant touch with tenants, you demonstrate that their opinions and experiences matter. Soliciting feedback about their rental experience not only helps you identify areas for improvement but also makes tenants feel valued and heard. Involving tenants in decisions about property improvements, such as paint colors or new amenities, can significantly boost their sense of ownership and belonging. This approach transforms renters from mere occupants into engaged community members, often resulting in longer tenancies and a more positive living environment for all.
Hot Tip: Ensure tenants are well-informed in advance when any maintenance, repairs, or renovation work is going to be done and the length of disruption it may cause.
A well-maintained property not only attracts quality tenants but also encourages them to treat the space with respect and care. This goes beyond mere cosmetic upkeep; it's about creating an environment that tenants are proud to call home. Regular maintenance, from lawn care and landscaping to exterior paint jobs and proactive HVAC servicing, demonstrates your commitment to providing a high-quality living space. These efforts not only preserve and enhance your property's value but also contribute to tenants' overall quality of life. By consistently investing in your property's appearance and functionality, you're not just maintaining a rental unit; you're cultivating a desirable home that tenants will be reluctant to leave.
Hot Tip: If a tenant has the interest and skills, hire them to help take care of the place. For example, you may incentivize property cleanliness by providing a small credit against the rent for sweeping and cleaning up common areas.
A thoughtful approach to lease dynamics can significantly impact tenant satisfaction and retention. Providing early notice for lease renewals shows respect for your tenants' time and decision-making process. It also opens the door for constructive dialogue about any potential changes or improvements. Leveraging data analytics for real estate comparables when setting lease rates ensures that your pricing remains competitive and fair. However, the true art of lease dynamics lies in balancing financial considerations with tenant retention strategies. Offering incentives for longer leases, such as slightly reduced rates, can encourage tenants to commit to extended stays. This approach not only provides you with more stable occupancy but also demonstrates to tenants that you value their long-term residency.
Hot Tip: Rather than surprising a tenant with a rent increase, let them know what to expect in advance. Tell a prospetive tenant about any planned increases and by how much before they move in. For example, raising rents to match the inflation rate is a common practice, so let the prospective tenant know this will happen. If you want tenants to stay longer, surprise them with a rent decrease. The amount might be small, say one or two percent. However, it shows the tenants that you appreciate them.
Respecting tenant privacy is not just a legal obligation; it's a fundamental aspect of building trust and maintaining positive landlord-tenant relationships. In most jurisdictions, the law strictly regulates a landlord's right to enter a rented property, typically requiring either explicit tenant permission or a minimum of 24 hours' prior written notice. This legal framework underscores the importance of treating a rented space as the tenant's home, not just a property you own. While exceptions exist for genuine emergencies such as gas leaks or flooding, these situations are rare and should be treated as such. By consistently honoring these privacy boundaries, you respect your tenants' personal space and reinforce their sense of security and autonomy within their rented home.
Hot Tip: ALWAYS tell a tenant when you or your maintenance crews will be by and for what purpose. Also, be respectful while in the tenant's home; avoid touching possessions and only move furniture with permission. Be sure that maintenance crews understand the rules and are respectful.
A good tenant adds value to your property by providing consistent cash flow. Because of this, it's important to get the right tenant in place and keep them there as long as you can.
If you're interested in real estate investments and buying a property for the right tenant (or tenants), turn to PropertyReach for in-depth information about sales comps, market information, and off-market properties.
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