As real estate investors, my husband and I try to keep our business goals in focus at all times. We want to make sound decisions that will cause our investments to be profitable. Fortunately we have found success renting out our properties (on just two properties we bring in $1,200 per month of revenue from rents). While dealing with tenant issues can be challenging, we make it a habit to deal with problems by not allowing our emotions to get involved.
A few years ago, a prospective tenant explained her bad credit by telling us that she didn’t pay rent at her last apartment because of a rat infestation. We believed her story. We were short on cash and time, so we just took her money and let her move in with a roommate.
It wasn’t long before there was trouble. Around 2:00 a.m., the tenant threatened her roommate with a knife and he called the police. While the cops had her in holding, he moved out.
From that point on we never received a full rent payment- apparently the tenant felt like she should get a 50% discount on rent since her roommate left her in a tight spot. Counting costs for paper work, applicable fees and uncollected rent, we lost about $5,000- but we were finally able to evict her from the property! The worst part about the situation? If we’d have just been more patient in our search to find a tenant, the whole thing could’ve been prevented.
Nowadays, we follow a strict process for finding and screening tenants:
1. Show the property in good condition. If it doesn’t show well with the existing tenants living in it, wait until they move out. Good tenants have choices, and if the property doesn’t look attractive, why would they want to rent it?
2. Make the price extremely competitive. We like to set rents just a little below what the market can stand. Sometimes a drop of just $15-$25 dollars can increase your applicants exponentially.
3. Run each applicant’s credit report and call their previous landlord ” the landlord before their current one. If they have caused problems, their current landlord could be anxious to get rid of them and may not be truthful.
4. Verify employment status. Ask for pay stubs for those with a job and even call company to personally check to ensure that they work where they say they do. For self-employed clients you want to see tax returns to make sure they can afford monthly rent.
These are all straightforward steps that we follow when choosing tenants for any of our properties. Never let the fear of having a property sit vacant cause you to make a poor business decision. A decision like that, as you can see from our example, can end up costing you much more in the end.
Tags: being a landlord, buying rental property, finding good tenants, investing, money making, personal finance, property management, real estate, real estate investing, real estate investment, wealth