8 Tips for Finding Good Tenants for Your Rental Property
As a rental property owner, finding and retaining good, reliable tenants is one of the most important aspects of successful real estate investing. The right tenants can provide consistent rental income, take care of your property, and cause minimal headaches. However, the wrong tenants can wreak havoc through late or missing rent payments, property damage, and evictions. According to a survey by the Residential Tenancies Board, over 67% of agents have experienced issues with problematic tenants in the past two years, resulting in thousands of dollars in lost income and legal fees. Clearly, tenant screening and selection is a crucial process that cannot be overlooked.
By taking the time to thoroughly vet applicants and implement a rigorous selection process, landlords can avoid many of the problems associated with bad tenants. While no screening system is foolproof, implementing the following tips will help you find and select the most qualified, responsible renters for your property.
1. Be Thorough with Rental Application Screening
A thorough, well-crafted rental application serves as your first line of defense in finding good tenants. This important document collects crucial information to evaluate applicants against your criteria, including identity, income, employment, rental history, credit profile, background, and references. Make sure to ask every adult planning to occupy the unit to complete an individual rental application.
With the rising demand for rental properties, homeowners now receive a large number of applications that they need to sift through to find the best rental application. For this purpose, many are now switching to rental application screening software. This approach helps instill confidence in property owners about the prospective tenants’ credibility.
Carefully review each completed application to verify all the information provided, follow up on any discrepancies or red flags, and ensure the applicants meet your minimum qualifications. Look for any missing information, vague answers, or concerning details that need further explanation. Additionally, use a standardized application for every applicant to ensure that you collect consistent information for an apples-to-apples comparison between candidates.
2. Set Clear Rental Criteria
The second critical step in finding good tenants is to establish clear rental criteria and minimum qualifications that all applicants must meet. These criteria will serve as the foundation of your tenant screening process and set expectations right from the start. Important factors to consider upfront include income requirements, credit score minimums, rental history standards, criminal background check policies, and any other decisive criteria aligned with your target tenant profile.
Publish these rental criteria prominently in all your property listings and application materials so prospective tenants understand the standards at the outset. Setting clear expectations upfront will discourage unqualified applicants from applying and streamline your screening process later on. Moreover, well-defined criteria can provide written documentation to legally defend your reasons for denying any rental applicants.
3. Run Credit & Background Checks
While rental applications provide self-reported details from the applicant’s perspective, independent credit and background checks offer an impartial third-party view of their finances and history. Thoroughly run credit reports and criminal background checks on all adult applicants to verify their income, rental payment history, and records.
Set clear minimum credit score requirements as part of your criteria, such as scores above 620 or 650, to filter for financially responsible prospects less likely to default on rent payments. While credit checks cost extra, they are worthwhile investments that can save you thousands in unpaid rent and eviction costs down the road.
4. Call References & Previous Landlords
Speaking directly with an applicant’s personal references and previous landlords provides candid insight you won’t find on paper. Ask about the applicant’s past rental payment history, property condition, complaints, personality, and eligibility for re-rental. Listen closely for any pauses or hesitations that could hint at possible red flags not evident from the standard application.
While applicants handpick references they know will be positive, a detailed conversation can reveal important between-the-lines impressions and character clues you otherwise wouldn’t gather. Even if a reference seems positive, inconsistencies in the details provided can be telling. Make sure to circle back to the applicant about any concerns raised during these discussions to allow them a chance to explain their side. Though time-consuming, these candid reference calls are invaluable for making an informed tenant selection.
5. Meet Applicants in Person
While application paperwork provides useful background information, meeting prospective tenants in person can give you a better firsthand impression beyond just the facts. Pay attention to subtle cues like punctuality, appearance, attitude, questions asked, and how they interact with you. A polished, courteous impression can speak volumes about their respectfulness and responsibility.
However, take care not to discriminate against protected classes. Consider bringing a colleague for a second opinion. While not a replacement for proper tenant screening, meeting in person can provide valuable insights.
6. Trust Your Instincts
Even with rigorous tenant screening systems in place, evaluating applicants still involves some subjective intuition. If something seems off about a prospective tenant, don’t ignore your gut feeling, even if you can’t quite articulate specific reasons. You may subconsciously notice subtle red flags or inconsistencies that don’t show up on paper. Politely decline any applications you feel uncertain about rather than overlooking concerns. It’s better to keep looking than potentially regret a decision. Your gut feelings provide valid additional context beyond just the hard facts.
7. Require Upfront Rent & Security Deposits
Tenants who invest their own money upfront tend to be more responsible during the lease term. Require all new tenants to pay a security deposit plus the first month’s rent and/or last month’s rent upfront once approved. Security deposits compensate you for any damages, while upfront rent payments demonstrate financial commitment. For riskier tenants, consider asking for larger security deposits. However, never rent to someone unable to pay their move-in costs, even if you really need to fill a vacancy.
8. Use a Legally Binding Lease
Well-crafted lease agreements protect both landlords and tenants by clearly defining the rental terms and conditions in writing. Consult a local real estate lawyer when creating or updating your standard lease document. The lease should specify policies, fees, and expectations for maintenance, guests, pets, smoking, noise, late rent, termination protocol, and other important clauses.
Requiring tenant signatures makes the lease legally binding. This limits misunderstandings down the road and provides accountability on both sides. Ensure all adult occupants sign the lease, which should allow you to terminate for lease violations. A watertight lease gives you recourse if tenants breach the agreement. Defining policies upfront provides vital protection when done properly.
Conclusion
Finding and screening tenants thoroughly takes time and effort upfront. However, the investment pays off exponentially over the entire tenant lifecycle. Proper vetting and selection minimizes problems and maximizes rental income.
While no process is perfect, consistently following the abovementioned tips will help you build a portfolio of responsible, reliable tenants. Taking the time to be selective ultimately results in fewer headaches and greater profitability down the road. With the right renting criteria in place, you can sit back and enjoy the returns from your rental property assets.
