Searching for the ideal tenant is not always easy. However, understanding how to find a good tenant is the cornerstone of successful property management and real estate investing success.
Tenants can make or break your investment. With the right tenant, your rental property experience can be smooth and profitable. On the flip side, a problematic tenant can mean endless complications and expensive damages.This leads many to ask, what is property management and what do property managers do to make the process seamless? The answer often lies in their tenant selection process.
With the rising demand for rental properties, the need for guidance in this area has never been more important. Today, we’ll explore 8 keys to show you how to find a good tenant for your investment property. They are:
- Make Home Visits
- Create Comprehensive Rental Applications
- Check References
- Run Credit and Criminal Background Checks
- Utilize State Law Compliant Lease Agreements
- Create Financial Prerequisites
- Set Clear Expectations
- Secure a Property Manager
1. Make Home Visits
Visiting a potential tenant’s current residence is not about snooping—it is about due diligence. Walking into their living space offers an unfiltered snapshot of their daily habits and treatment of property. This real-life glimpse can help predict how they might maintain your rental property. Moreover, it sends a clear message: you are a thorough landlord who cares about their property.
2. Create Comprehensive Rental Applications
A detailed rental application is more than just a piece of paper— it is a tool to help you fully explore the background of a potential tenant. With sections dedicated to their employment history, previous residences, and financial obligations, you get a holistic view. This not only showcases their responsibility but also reveals patterns, giving you a clearer picture of their long-term behavior.
3. Check References
Imagine you’re buying a product online. Wouldn’t you want to see its reviews first? Similarly, references act as ‘reviews’ for tenants. By speaking to former landlords and employers, you get an external perspective on their reliability, behavior, and overall reputation. It’s like a sneak peek into their past that helps you forecast the kind of tenant they’ll be.
5. Utilize State Law Compliant Lease Agreements
Every region has its quirks, especially when it comes to the law. Leases are important legal contracts. By ensuring your lease aligns with state-specific regulations, you fortify your rights and set clear boundaries for the tenant, avoiding gray areas that could lead to future legal tussles. However, it is important to note that state-specific regulations can change frequently, so it is important to have your lease reviewed by an attorney on a regular basis.
6. Create Financial Prerequisites
As the saying goes, money talks. By requiring the security deposit, as well as the first (and sometimes last) month’s rent upfront, you get an immediate gauge of your tenant’s financial health. It’s a signal of their ability to plan ahead and meet financial obligations. This ensures you aren’t left chasing payments each month. Plus, you have an extra financial cushion for late payments or damages.
7. Set Clear Expectations
If you want to find a good tenant, you will need more than just a handshake and a lease. It is important to set clear expectations from the get-go. A Statement of Condition documents the state of the property prior to the tenant moving in, and it is agreed upon by both parties. It acts as a reference point throughout the lease term and meticulously notes the property’s current state. This ensures there’s no room for ambiguity. This clear understanding can be the key to avoiding potentially bitter disputes down the line.
These seven keys will protect your property and your peace of mind so that you can have a good relationship with your tenant. The tenant you choose will play a major role in the success of your rental property.
These guidelines streamline the selection process and ensure that the journey ahead is smooth, profitable, and devoid of unwanted surprises. Along with these strategies, I want to share a bonus tip with you – consider hiring a property manager.
8. Secure a Property Manager
You may be wondering, “what do property managers do?” Property managers wear many hats.
From tenant selection, handling repairs, to timely rent collection, this is a big role worth adding to your team. While we recommend managing the first couple of properties yourself to get experience, a property manager is a vital addition as you scale your real estate portfolio.
Read the following blog, Property Management 101, for a detailed breakdown that will help you learn more about what property managers do. If you want to understand the scope and challenges of this role, read Pros and Cons of Self Property Management.
How to Navigate Tenant Relationships
In the ever-evolving world of real estate, the quest for the ideal tenant remains a consistent challenge. This is an important relationship in your real estate journey.
Instead of having a strained tenant relationship filled with misunderstandings and challenges, why not make this aspect of your real estate journey a peaceful one?
The steps I shared above are more than just guidelines; they’re a roadmap designed to navigate the delicate landscape of tenant selection. When you use these keys, they have the potential to transform your tenant screening process from a daunting task into a smooth, strategic effort.
While these steps are a structured approach, you also need to use your own personal judgment. After all, real estate, at its core, is a people-centric business. Understanding people, their needs, and behaviors is just as important as understanding the property market trends.
Remember, tenant selection is an ongoing learning process. Each experience will help you learn and grow. So, while the road to finding the perfect tenant might have its share of bumps and curves, WealthBuilders will be here to guide you on this journey.
Take Your Real Estate Journey Further
When you arm yourself with the right strategies and knowledge, you can increase the value of your investment. You can enhance your real estate experience even more with a simple tool like a checklist. I curated the Investment Property Checklist to help guide you on your journey. It includes a detailed list of everything you need to do from start to finish when investing in real estate. Fill out the form below to access your free checklist.