You bought investment property to make money. But nothing can destroy your investment, impede your cash flow, and cause you stress like the wrong tenant.
The wrong tenant can damage your property, pay rent late or not at all, and create expense and more stress for you if you have to evict them. The key to avoiding this is to select the right tenant.
The economy has spurred an uprising of people who either can’t buy due to credit restrictions, or would rather rent than buy to limit liability and keep their situation more flexible. The good news for rental property owners is that you have a bigger pool of renters to chose from, and rental prices are increasing dramatically.
So how do you know if the potential tenant will be a good one? Here are a few tips to save you time and headache.
Pre-screen your potential tenants:
Before you show them the property, pre screen your potential tenants over the phone. Ask as many questions as you can think of.
- Do you have any pets?
- How many people will be living in the household?
- Can you verify that your income is three times the rental price?
- Do you have good rental history?
- Can I talk to one of your previous landlords?
- Do you have references?
Talk to their previous landlords:
If you can, speak with at least two of their previous landlords. Ask the following questions:
- Did they pay rent on time?
- Did they comply with the lease specifications when they moved out?
- Did they get along well with their neighbors?
- Did they damage the property, other than normal wear and tear?
- Did they complain or request maintenance often?
If the potential tenant has no rental history, you might want to consider requesting a co signer.
Run a credit check.
If the tenant has a lot of debt, they may have trouble paying the rent, regardless of their income. A credit check will let you know their bill paying habits, and alert you to any bad debt or previous judgments or bankruptcies that they may have.
Run a criminal background check.
All you need is a name and date of birth to view a criminal record with state and county courthouses. Keep in mind that if a tenant has lived in multiple states, you might not see the applicant’s entire history.
Trust your gut.
If you have a bad feeling about an applicant, don’t rent to them.