Investors spend hours pouring over listings. They put forth great effort analyzing the profit and loss statements to make sure an investment property will create the desired return. Home inspectors are hired to look for unseen problems. Do investors, however, spend the same amount of time checking out their rental applications? How can you find good renters?
Nothing can ruin an investor’s return like a poor tenant. If the rent is not paid or even not paid on time, the cash flow collapses. If a tenant trashes the inside of the property, much if not all, of the profit will be spent in repairs.
How can you make sure that you are getting good tenants in your rental property? Here are five important steps to take to find good renters.
Get a Background Check
A background check is not just to check a tenant’s credit rating. You can also get an idea of your applicant’s debt load. You will see if there are any outstanding judgments or if they have gone through a foreclosure. It will increase, or demolish, your confidence in their ability to pay the rent each month. Here are the three main websites that provide background checks: www.equifax.com, www.experian.com and www.transunion.com. This will go a long way to ensure you are getting good renters.
Call Previous Landlords
Landlords frequently overlook the importance of calling previous landlords. This is a critical step to finding good tenants. Some data is not going to show up on a credit report – such as how well they maintained the unit; did they cause trouble with the neighbors; do they own a killer dog, etc. Calling past landlords will help you see them in the eyes of the landlord. Ask them if they got the chance, would they rent to these people again. If they answer, “Not in a million years.” then, unless you want to have a similar experience, I would find a different tenant.
Get a Security Deposit
As an added financial protection against property damage, collect the highest allowed amount for you security deposit. Check with your local or state requirements as they vary from place to place. When it comes time for your tenant to move, you can use their security deposit to offset any damages to the property.
Take Photos before You Rent
If this unit has had past renters, it is not going to be in perfect shape. As time passes, our memories tend to fade. When the present tenant moves out, it may be an honest mistake to charge them for damage that was there when they moved in. Taking photos of the condition of the interior and exterior of the property will eliminate this potential disaster. Additionally, it serves as concrete evidence to prove tenant damage to the unit, even in court.
Find a Good Property Management Company
Property managers know how important it is to locate a good tenant. They know what to look for and they can usually smell a deadbeat renter a mile away. Property management companies are paid based on a percentage of the rent they collect. This is a great motivation to make sure no tenant gets forgotten. To find a good company, ask around. Referrals are one of the best ways to find a quality company. Before hiring a PM, see if your state requires that they are licensed.
Managing rental properties does not have to cause endless headaches and stress – if you can get a good tenant. Do you homework, protect your assets and get help. These simple tips could save you thousands down the road and help you to find good renters every time.