As an investor in single-family properties, procuring the ideal remuneration isn’t solely about having the right property.
After purchasing a property and making any necessary fixes or improvements, it’s time to find a tenant. While rushing the process to start that cash flow seems like an easy thing to do, you’ll want to make sure you’re handing the keys to an ideal tenant.
The tenant is the life of your investment. You’ll want a trustworthy individual where payments are on time. Tenant turnover costs add up quickly. An advantage of single-family properties is they typically attract longer-term tenants. You don’t want to lose this advantage by not finding the right tenants initially, thus increasing your turnover.
Below are ways to know you are securing a good tenant while following the federal Fair Housing Act of 1968 & Fair Housing Act Amendments Act of 1988.
1. Good Credit
A strong credit track record is always important as it showcases financial responsibility. Always obtain a credit report on all the applicants as well as potential co-signers. It’ll provide their history of timely payments and any other current financial obligations. This is something you’ll need to receive permission to obtain, and you can do so by requesting it on the rental application.
2. Knowing They Can Afford It
You’ll want the tenant’s income to be 2.5 to 3 times the asking rent amount. Between this and a strong credit report, you’ll have a great indication of the tenant’s financial health.
3. Speaking with Positive References
Much like a job interview, a prospective tenant will have good references you can speak with whom are capable of elucidating on the character of the tenant. Better yet, this includes past landlords. By speaking with references, you’ll be able to verify anything that came out of the interview or have the reference expound on something from the tenant’s application.
4. Conduct a Background Check
A background check further provides insights into your potential tenant. To ensure tenants of the highest quality, many landlords avoid ones with felonies or on the sex offender list. Background checks, which can cost anywhere from $20 to $50, typically includes a state and national criminal report, a sex offender database search and prior address history verification.
5. Be a Good Landlord
It’s just as easy for a tenant to do their homework on a landlord. A good landlord attracts good tenants. A good landlord is honest, reliable and carries a strong reputation. Establish beneficial rapports with tenants so they are able to pass on the kind of reviews that will attract future outstanding tenants.
There are leasing obligations on both sides of the landlord-tenant relationship. When landlord’s hold up their obligations – like not holding maintenance items due to lack of rent from the tenant – then if something does go wrong with the tenant, the landlord is able resolve issues much quicker by showing this. For example, if you ever end up having to evict a tenant, they can go to court and use the lack of maintenance as a way to draw out the process even longer.