Much of the financial success that comes from rental investment property depends on a landlord’s ability to secure great renters and tenants. You want to find a tenant that will not only pay the rent on time but one that will keep your property in good condition.
Do not leave accepting a renter to the luck of the draw. There have been many a landlord that quickly accepted the security deposit and first month’s rent only to spend thousands in repairs and legal fees. There are some steps that you can take that will help to ensure that you find a good tenant.
Tip #1 Get a Background Check
A credit check is not just for bank loans. It is an important part of the leasing process. A credit check will tell you if they pay their bills on time. If they have been late on their credit card payments, guess what? They will probably be late in paying their rent as well.
On the other hand, the credit report may indicate that they have a foreclosure on their record. While this will definitely disqualify them from getting a mortgage anytime soon, it should not immediately disqualify their rental application. There are a lot of external factors that can create a foreclosure. Pay more attention to their payment history and any collection accounts.
Here are the top online sites that provide credit reports:
In addition to a credit report, it is recommended that you do a background check as well. A credit report is going to tell you their financial status whereas a background check will reveal any criminal history and court judgements. This will help you get a better picture of your prospective tenant and help to protect the safety of the renters and tenants that you already have in your building.
Here are the top three rated sites that do background checks online:
Make sure that your application clearly states that the applicant is granting authorization for a credit and background check.
Tip #2 Check Their References
Have you ever lied on your taxes? Millions do annually. There is little to stop a prospective tenant or renter from misrepresenting their rental history as well. Do not take the application at face value. Always take the time to verify employment and rental history. When you call a past landlord, make sure you ask them these questions:
- Did they pay the rent on time?
- Did they damage the property?
- Would you rent to them again?
Tip #3 Get the Highest Allowable Security Deposit
The security deposit is one of the primary ways to ensure that your unit is left in the same condition as when it was rented. If the tenant has damaged the unit, the security deposit can be used to pay for the repairs after they move out. It can also be used as payment for any outstanding rent.
The laws that state how much you can collect from renter at move in vary from state to state. According to North Carolina’s Tenant Security Deposit Act, “The security deposit shall not exceed an amount equal to two weeks’ rent if a tenancy is week to week, one and one-half months’ rent if a tenancy is month to month, and two months’ rent for terms greater than month to month.” Collect the most that you are allowed and then deposit it into a bank trust account for safe keeping.
Tip #4 Get to Know Your Tenants
While going through the application process, take some time to get to know the applicants. Be friendly and open. Find out their hobbies. Ask about the names and ages of their kids and inquire about their pets. When a renter or tenant senses that you care about them individually, they are more likely to feel a sense of responsibility to that relationship. If they see that you care about the unit and take pride in keeping it maintained, perhaps they will follow suit.
Tip #5 Hire a Reputable Property Manager
Finding a great renter can be one of the most stressful parts of being a landlord. Why not pass that responsibility on to a professional company. A good property management company is worth every cent. They are experienced in renting, screening and efficiently collecting the rent. Their years of experience only add to the screening process and help to ensure that you will have quality renters and tenants renting your investment property.