If you want to get the best return on your investment, there are a couple of elements that must come together to make it work.
First, you need a rental property that is in a good location that has a high demand. This will keep your vacancy rate low and your rent up high. Second, you need to purchase your rental property in a neighborhood that is known for appreciating values. When it comes time to sell, you want to make more than you paid. Third, you want to find a property that will generate good cash flow and give you a great cash-on-cash return.
There is one element, however, that can easily be overlooked but is a critical element of success – finding a good tenant. You want to locate a tenant that will pay your rent each and every month on time and in full. You also want to find a tenant that will take care of your investment. Here are five steps to find the best renters.
Step #1: Get a Background Check
Never rent to someone without first completing a background check. Never judge a book by its cover. The best looking tenants could be the worst bill payers – and their credit report will let you know. The credit report will show if they pay their loans on time and if there are any court judgements against them. Here are the main websites that provide background checks: www.equifax.com, www.experian.com , www.transunion.com.
Step #2: Check Their References
Just like you never judge a book by the cover, don’t read the first and last page and think you know the plot. Just because a tenant says they pay on time does not mean that they do. Take the time to call their last landlord and ask if they would ever rent to them again and why?
Step #3: Get First Month’s Rent and the Security Deposit Upfront
All tenants know that they are going to have to pay their rent and a security deposit before they move in. If you find a tenant that cannot pay that upfront, then we recommend you find another renter. It is the beginning of a poor tenancy.
Step #4: Photograph the Inside
Most landlords will do a move-in inspection and then have the tenant sign the inspection. This indicates that they accept the unit in as-is condition. But as time passes, our memories tend to fade. Why not take photos of any new items and any pre-conditions before the tenant moves in. In this way, both you and the tenant will have visual proof of the condition of the unit when they moved in.
Step 5: Hire a Good Property Manager
If you want to find the best tenants; have the safest of lease agreements and ensure you get paid on time, why not hire a highly recommended property manager. They will handle all the headaches and you can rest easy knowing you get a check each and every month.
If you follow these five steps, you will go a long way to ensuring that you get some great tenants and that your unit will stay in great condition.