You have a love/hate relationship with tenants. Admit it. On the one hand, you love them because they provide you with a consistent stream of income and you get to know some really great people over time. The problem, of course, is when tenants go “bad,” stop paying their rent, and trash the place.
Every landlord has a nightmare tenant story. And, while they can be valuable lessons to learn as a landlord, ultimately you want a string of good tenants. Here’s how to get them and keep them there for a long, long, time.
Keep your houses or apartments full
Easier said than done, right? But, the truth is that the best way to make money in real estate is to make sure you never have any vacancies. According to real estate firms like FreemanForman.co.uk, this is how successful landlords stay successful. Seems like common sense, but it’s something a lot of people just starting out gloss over.
The nitty-gritty details of how you achieve this vary depending on the property, but the basics are to keep the place picked up, do all the required maintenance, charge a fair price for the place, and do a really good job interviewing.
So, how do you interview a potential tenant? Well, the first thing you should do is vet them using a criminal background check. If anything comes up, you know not to rent to them. Outside of a criminal background check, you can perform a credit check to make sure that they do not have any bad debts hanging over their head. Now, people make mistakes and, honesty, you’re unlikely to find a perfect person out there — perfect meaning someone with no bad credit history.
At the same time, it’s an important piece of the puzzle and should be considered in a larger context of other data points.
Another thing you should check is their history with banks. You can do this via a ChexSystems report. ChexSystems is sort of like a credit check but for bank accounts. If a tenant owes a bank money, it’s almost always because he or she went negative in their bank account and it was closed because of non-sufficient funds.
Normally, banks give customers ample time to bring the account balance back into the positive before shutting the account down. If your prospective tenant has a problem on ChexSystems, and a poor credit history, guess what? They don’t pay their bills.
Move on to the next applicant.
One final thing to check are the person’s references. See if anyone besides their mom will vouch for them. If so, ask the reference to tell you a story about the person’s character. Specifically, a time when the prospective tenant was facing a financial difficulty or a challenging problem — how did they deal with it. What you’re looking for is whether this person runs away from problems and somehow never seems to get caught, or whether they face their problems.
That’s good to know just in case there ever is a problem collecting rent.
Ask existing tenants for testimonials
It might seem a little “late night T.V.-ish,” but getting testimonials from your existing tenants can help you “sell” potential tenants on your own value. It’s a great way to draw in good tenants because, let’s face it, good tenants tend to be responsible people, and responsible people with decent jobs. And, they didn’t get that way without a healthy dose of skepticism. Skepticism you want to overcome.
Getting referrals from tenants
If your tenants are happy with the way you run things, why not ask them for a referral? This works particularly well if your tenants happen to be model ones. They probably know other responsible people who would be great tenants, too. Of course, you should never simply take their word for it. Always do your background checks. But, it’s a good source of potential renters and almost always better than a complete stranger.
Keep your property in good shape
A lot of landlords have this mental block about keeping their properties in good working order. They believe that, because it’s “just a rental,” that they don’t need to work on it in the same way they would their own home. It’s sort of a self-defeating attitude to have, and it’s one of the most common reasons they can’t get and keep good tenants.
If you treat your property like a real investment, then you’ll keep the place in perfect condition and only rent it out to the best and most capable tenants. You’ll pay your property taxes on time, pay all related property bills on time, and make the place enjoyable for whomever lives there.
Watch those rent prices
You’re not trying to save the world. You’re just providing someone with a place to live. At the same time, if you get carried away with the rent prices, you’re going to drive away otherwise decent tenants. Not everyone can afford $2,000/month for rent, unless you happen to live in the Washington D.C. area, or NYC.
Try to keep your rents just slightly below market rates. If you do, and if you do a good job screening tenants, you will find yourself with an abundance of well-qualified applicants. As long as the price isn’t too low, people will flock to your apartment because it’s a great deal.
Darryl Stokes entered the property game a few years back, and now has 5 properties which he is renting out. He hopes he is a good landlord, and enjoys sharing his knowledge with other budding landlords online.