It’s all but impossible to design a precise formula for successful investment in rental properties. But no matter how you slice it, good tenants have to be one of the core elements.
Good tenants make your life easy by paying rent on time, respecting your property, and abiding by your rules. They cause little or no conflict and can be trusted to live up to the terms of the lease agreement.
Bad tenants can make your life a living nightmare. They pay rent late (or not at all), come up with a constant stream of excuses, trash your property, and create so many headaches that you’ll wish you had never entered the business.
So the perennial question is: How do you get more of the former, and avoid all the latter?
Tips for Magnetically Attracting Quality Tenants
It’s impossible to know who someone truly is until you begin to interact with them. So it’s always possible to get duped into thinking someone is a much better person than who they turn out to be after the documents have been signed, you can increase your chances of getting high-quality tenants by coming up with a smart, tactical plan.
This is far from comprehensive, but here are several key ways you can attract good tenants who will benefit your rental property portfolio and make your life a breeze.
1. Work With a Professional
For some entrepreneurs, one of the appealing facets of real estate investing – and single-family residential properties in particular – is that you can run the entire business on your own. From buying the property and finding a tenant to collecting rent and maintaining the property, technically you’re capable of doing it all yourself.
But why would you? Other than saving a few bucks upfront, there’s no reason to waste your own time searching for tenants.
Because unless you have experience with screening people, sooner or later you stand a good chance of making some mistakes. All it takes is a single error in judgment – which means a bad placement – and all the money you hoped to save gets flushed down the drain.
It’s highly recommended that you work with a property management company. Many will take responsibility for handling your tenants. For example, Green Residential in Houston has a “tenant placement guarantee,” in which they stand behind any tenant they bring to the table (even if the person stops paying rent).
2. Write Descriptive Listings
Attracting the right tenants starts with publishing an effective rental property listing. You can weed out a lot of the tire-kickers and unqualified applicants by including all the appropriate details in your listing.
A descriptive listing is more than clever wordplay. It should include answers to every question a tenant is likely to raise. That would include information about pricing, number of bedrooms and bathrooms, location, amenities, pet policies, parking, school zones, and much else.
3. Pre-Qualify Over the Phone
Never meet with a prospective at the property for a showing unless you’ve pre-qualified them over the phone first. The pre-qualification process doesn’t have to be incredibly thorough, but it should address a few key items such as their income, when they want to move in, whether they have pets, and so on.
4. Schedule Individual Showings
Though there’s a case to be made for holding an open house and showing the property to several prospective tenants at the same time, you’re better off scheduling individual showings. They will demand more of your time, but individual showings give you an opportunity to get to know each applicant better, cover the important questions, and get a feel for what the prospective tenant is looking for.
If you have three or four different people in the house at once, it’s much more challenging to do an adequate job of this with any of them.
5. Put On Your Investigator Hat
Once you have an applicant who appears to be a good fit, you can dig in and uncover as much information as you can. You’re legally allowed to inquire about income, check credit history, and pull a criminal background report.
You can also speak to an applicant’s employer and check with his or her current and past landlords. It’s highly recommended that you do every one of these things to obtain a strong sense of what kind of tenant they’ll make.
6. Refine Your Process
As you know if you’ve been a landlord, everything becomes a learning process. Each time you buy a new property, enter into negotiations, put up a property listing, search for tenants, sign lease agreements, or deal with conflict, you’re adding new chapters to your unofficial “landlord manual.”
Some lessons come from positive outcomes and “wins,” others leave their mark through costly mistakes. Either way, there’s value in the process. And with each new lesson, you’re one step closer to growing into the entrepreneur you want to be.