4 Tips for Finding World-Class Tenants for Your Properties
So, how does someone find more of the great tenants and fewer of the bad ones?
If you want to succeed as a landlord, you must do just that. You must learn how to discern which are world-class tenants to avoid renting to scumbags.
Well, today I want to share four tips for attracting word-class tenants.
1. Think like a funnel.
In business, a sales funnel is the idea that you want to get a lot of leads coming in, knowing that only a few will ever buy from you. For example, 1,000 people might see an ad for a pair of socks in the newspaper, but only a few dozen of those will go to the store, and maybe just a couple will buy a pair of socks. That’s a sales funnel, and it’s found in almost every industry — including landlording.
Your job as a landlord is to use this exact funnel to attract tenants — a lot of them.
Think of it this way — if you get just one person to call about your vacant property, what’s the chance they are going to be a great tenant? It’s kind of a gamble. But what if 1,000 people called about your property. Could you find one that is going to be perfect? I would hope so — or else you probably need to move towns.
The point is, the more people you can put in the top of your funnel, the more picky you can be to get the one ideal tenant at the bottom.
So how do you do this? You need to have an advertising system that’s going to bring you qualified leads. This could be Craigslist, Zillow, Postlets, the newspaper, a sign in the yard, a post on Facebook — or, if you are like us, you could do ALL of these. The more marketing we do for tenants, the greater chance we have of finding that needle in a haystack.
2. Set high standards.
In our landlording business, we have carefully defined the standards that state who we are willing to rent to — and who we are not. This list is written on our website, written on every piece of marketing material we put out, and verbally told to every prospective tenant over the phone.
Our standards are simple:
The tenant must earn 3 times the monthly rent from documentable income sources.
The tenant may not have any prior evictions.
The tenant may not have any felonies.
The tenant must have a 600+ credit score.
The tenant must have excellent references from past landlords.
If a tenant doesn’t meet these requirements, it’s unlikely we’ll ever rent to them.
Having this carefully defined list of standards helps us in two distinct ways:
It discourages time-wasting prospects from even contacting us.
It helps us look at each candidate objectively rather than emotionally.
Yes, I’m sure we could rent to a tenant who had a prior eviction, one who has bad credit, or one who had a bad past experience with a landlord — and maybe they’d be fine.
But maybe they wouldn’t — and I don’t like to increase my chance of dealing with a bad tenant because of the HUGE negative consequence of a terrible tenant.
I’ll let other landlords take that risk. I’m in this game to win, not gamble.
OK, on to number 3.
3. Screen like your future depends on it.
Because it does.
Tenant screening is not some afterthought so you can check off some boxes.
It’s perhaps the most important step in the process — so give it the attention it deserves.
Screening is the process of verifying that the tenant meets all your minimum standards that we discussed in step two.
Because — let’s be honest — people are not always truthful. It’s your job to verify everything.
For an in-depth, step by step guide to tenant screening, including the actual application I give to tenants to fill out, check out “The Ultimate Guide to Tenant Screening” or pick up a copy of The Book on Managing Rental Properties on Amazon.
But let me give you a brief overview of how we do our screening in three easy steps:
1. First, call their place of employment to make sure they earn three times the monthly rent.
2. Next, check with past landlords to make sure they’ve been a good tenant in the past. The kind of tenant they’ve been is the kind of tenant they’ll be. This is one of the most important steps in the screening process and the #1 most often ignored by landlords learning how to find tenants — to the peril of many landlords.
3. Finally, run a background and credit check on the tenant. There are numerous resources you can use to do this, such as RentPrep.com, MySmartMove.com, or one of hundreds of similar companies online.
Look for past evictions, judgments, felonies, and other indications that the tenant might be a troublemaker in the future.
Of course, be sure to review local, state, and federal Fair Housing Laws to make sure you are not engaging in any illegal discrimination when screening tenants. The penalties are severe for landlords who violate these laws.
Now, if the tenant makes it through your screening process, then you can feel confident that you are placing your bet on a winning horse. It’s time to sign the lease and move them in.
But getting a world class tenant doesn’t end there. For that, let’s go to step four.
4. Train and manage effectively.
The final step in finding incredible renters who will take care of your property, pay on time, and help you build tremendous passive income is training your new tenant to be world-class.
You see, most tenants want to be great, but many just don’t know how. It’s your job as the landlord to train them to be so.
Train up your tenant in the same way you would train up a child: Establish rules, make them known, and instill consequences for breaking those rules.
For example, your tenant should know perfectly well when rent is due, where to pay it, and what happens if they don’t. If they decide to pay late some month, don’t be lax on the late fee, even though you’ll want to. Imagine setting up rules for your toddler and then never enforcing those rules. What are you going to end up with? A spoiled brat that causes you nothing but headaches. In the same way, your tenant will likely become more and more difficult the longer you let problems go unanswered.
But that also means you need to live up to your end of the contract as well, taking care of maintenance issues promptly, keeping lines of communication open and honest, and treating your tenant with the highest levels of respect.
Be firm but fair in your treatment of tenants, and you’ll enjoy years of mutual respect and a truly world-class tenant.