Real estate investors have quite a to-do list when it comes to minimizing risk for their investment property portfolio. You must consider things like adequate insurance coverage, estimated home maintenance costs, potential tax implications, and how to find and keep the right tenants for your rental properties.
While finding a tenant may be easy for some investors, particularly if you're in a popular location, finding the right tenant is not always so simple. Unfortunately, if you don't find the right tenants, it could cost you substantially. Even if you have potential renters waiting in line to take a peek at your freshly painted rental, being picky pays off. From unpaid rent, expensive maintenance repairs, and the legal fees associated with an eviction, settling on the wrong tenant could cost a landlord big.
So, how do you find the right tenant for your rentals? Although there is no guarantee that you will find the perfect tenant for every property, taking the time to choose the right tenants can help protect your investment. Here are some tips that will get you closer to finding the right fit and increase the likelihood that you'll find the type of renters who will be ideal tenants for your properties.
1. Follow the Federal Fair Housing Rules
Make sure that you comply with the rules of the Federal Fair Housing Act. You're not allowed to discriminate based on a person's race, color, nationality, religion, sex, disability, or family status. Some laws vary from state-to-state, so you'll need to know what is required in your state and adhere to the laws otherwise you could be open to a lawsuit in the future.
2. Make Sure the Renter Has Good Credit
Your applicants should be able to show proof that they are financially responsible and pay their bills on time. It means they're likely to submit their payment of rent on time and will take care of the place they’re renting. You'll need to do two things: Get proof of income and do a credit check to make sure they make enough to pay the rent and that they have a track record of paying their bills on time. Make sure to check for evictions and bankruptcies.
3. Check the Rental History of the Tenant
Contact two previous landlords to confirm that the applicants paid their rent on time, adhered to rules, gave an adequate notice before moving out, kept the apartment clean, left the apartment damage free, conducted themselves respectfully to the landlord and the neighbors, and seldom made complaints.
You should talk to at least two of the applicant’s previous landlords because if they were a problem tenant, the current landlord may not be truthful as they may just want to get them off their hands. If the applicant is a first-time renter, a student or a recent graduate, they may not have a rental history. In this case, you can require a co-signer for the lease.
4. Check Their Background for Criminal Offenses
Because criminal information is public record, you'll be able to check for serious and minor offenses, but you will need the applicant's name and date of birth. Keep in mind that those with a criminal record may try to falsify this information to get into a rental property, so make sure to ask to see a valid ID to make sure they are who they say they are. Depending on the type of criminal offense, as well as the length of time since the offense, it may be a red flag to avoid renting to the applicant.
5. Require Only Two People per Bedroom
Under the Federal Fair Housing Act, allowing two people per bedroom is the maximum number that should be permitted for tenants, although it's not always required. If you have too many people living in a dwelling, you increase the likelihood of more noise and damage to the property. However, there are exceptions if your property is much larger than the average apartment or single family home.
There are no guarantees that you'll find the ideal tenant every time, but if you make sure that your applicants meet all of your requirements and you or your property management company conduct thorough due diligence on each applicant, you should increase the likelihood of making the right tenant selections for your rental properties.
The information provided in this blog post is for general information purposes only. Use this information at your own risk. You may wish to consider seeking legal and other professional advice prior to making any decisions regarding the selection of your tenants.