No matter how great of an investment property you may own, it doesn’t mean squat if your tenant screening process is weak. A bad tenant can, and likely will, negatively impact your cash flow on your rental. When selecting and building a relationship with my tenants these are precisely the 8 rules I follow.
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Reel ‘em in
When showing your rental suite, don’t set different appointment times for your prospective tenants. Take five days to let the calls come in after you place your ad and tell everyone to show up on the same day, at the same time. I can’t tell you how vital this is.
As is the case with any product, when people see demand for something, they want it more (and they act immediately). It is human nature. On more than one occasion I literally had a bidding war to lease a suite because 20 (or more) people showed up at the same time to view the place.
Make the prospective tenants feel like it is a privilege to rent your suite - nothing does that better than by demonstrating how ‘in demand’ it is.
Weeding out the Slobs
The last person you want renting your investment property is a Slob. Not only are Slobs messy, they create costly problems for your suite (i.e. bugs, mold, rot, stains on flooring etc.) and negatively impact your cash flow and ROI.
As a landlord you want to avoid messy tenants like the plague. With that said, spotting a Slob just by meeting them at a showing can be difficult… luckily there’s a little trick I’ve learnt over the years.
While your prospective tenants are looking at your rental suite, quickly walk by their cars and have a peek inside. A messy car is a dead giveaway that that person is a Slob, and not fit to rent your suite.
If you’re wondering how to take a peek in a prospective tenant’s car without being made, that’s another benefit of having all your prospects show up at the same time for a showing. There will be so much going on inside your rental suite during the showing, with people looking around and filling out applications, that you’ll easily have the 30 seconds needed to go outside and glance in the cars of your prospects (provided your suite isn’t in a high-rise building).
Take a mental note of which cars were filthy. If you use my tenant application form (email info@capitalistcreations.com to get your free tenant application template), there is a spot for prospective tenants to fill out the make and model of their car. This will tip you off as to whether or not they are a Slob because you’ll have noted the filthy vehicles. If you don’t think you have the covert ability to look inside the car without being made, it never hurts to have a second person at the showing with you – that can be their job (get a friend, spouse etc.). It also helps to have a helper at the showing to guide people to the suite (if in a high-rise or complex).
For those who think I’m extreme for recommending this somewhat sneaky tactic, think again. This is your investment property and don’t forget how hard you worked to save for it. One slob-tenant can end up costing you thousands of dollars and unnecessary stress.
If a prospective tenant doesn’t own a car, then you are going to have to use your judgement based on how well put together they are and by contacting previous landlord references (which must be included in the tenant application). Ask the prospective tenant’s previous landlord about the state of the suite when they moved out. Was the suite clean? Was there any substantial damage to the suite?
Don’t short-change your suite
Set the monthly rental rate in your ad on the high-side of what the suite should rent for. This will weed out all the prospective tenants who are just looking for a cheap place to crash and have no intention of staying long-term. People looking to rent a nice place in the neighborhood, who will call it ‘home’ and treat it well, understand that the higher-priced rental suites are often the better ones, so it won’t deter them. Pricing is branding.
Advertise in more than one classified
This doesn’t mean go out and buy ad space for classifieds in all the local papers and websites. From my experience, no two classifieds/sites bring more traffic to my rental suites than Kajiji and Craigslist. Without question these two sites, which are free to advertise a basic classified on, are the best for finding great tenants. You can also promote your ad on these sites for next to nothing, but it is only necessary to do so if you are looking to rent your suite out quickly.
References
Have applications at the showing and make sure they have a spot for references as well as current employment. Don’t be lazy and don’t pretend you are an amazing judge of character after meeting someone one time. Follow-up and call prospective tenant references. You want to know if the person has reliable employment. In some cases, prospective tenants may not want you calling their employer. In such a scenario, ask for a letter of employment, which is a letterhead document from the employer stating how long that person has been with the company and what position they hold.
Start your tenant/landlord relationship off stern and clear,
then ease up once trust has been established. Upon signing the lease agreement, let your tenant know that every 60 days you will be doing a quick walk-through of the suite. You can do the walk-through while she is at work and it doesn’t take more than a couple minutes. You’re doing it to check the condition of the suite and staying on top of potential maintenance issues. This sets the tone and shows your tenant that you are an engaged landlord and they will respect the place and treat it better because of it. It is better to be stern at first and ease off as you get to know your tenant(s). Remember, it is easier to start off stern and ease up later than to do the opposite.
You must avoid high turnover if you want to be a successful landlord
Without question, on a residential property, at the bare minimum, you should be signing a one year lease with your tenant. Don’t sign month to month leases unless you have an executive rental. Ideally you want to find tenants who will stay in your rental for several consecutive years.
In order to find a tenant(s) who will call your rental suite ‘home’ for 2, 3 or even 5 years, look to select someone who has attachments to the neighborhood in which your suite resides – i.e. employment, university (ideally a grad student), their children attending a neighborhood school. High turnover kills your ROI and it’s a headache to deal with.
One tenant is always better than two
It is a simple concept. One person will be less damaging than two. Of course, don’t rule out all couples or families, but if you are having a hard time deciding between a single tenant or a young couple, my preference has always been to go with the single person. Naturally, any tenants will create some wear and tear issues on your rental no matter how great they are. However, when there are two people living in your suite, that’s double the wear and tear (mainly applies to appliances – twice the amount of laundry, showers, dishes etc.).
Those are the most crucial tips for you to remember when selecting and building a relationship with your tenant. No matter how great an investment property may be, it can turn into a nightmare if you don’t screen your tenant(s) using my tips above and build a working relationship.
Rather than viewing your tenant(s) as someone who pays you rent on the 1st of each month, consider them the caretaker of your investment. With that mindset and my tips above you’ll have no troubles finding the perfect tenant for your rental property.
Stay hungry,
Aaron
