7 Step Process to Choosing Good Tenants
Many small to large scale landlords might agree that tenant quality is the lifeblood of most rental property investment strategies.
Yet how many rental property managers have a thorough process to filter in the best candidates? A good process that begins with knowing who a good tenant is and advertising carefully to attract good tenants.
The best property management companies put an emphasis on finding the best tenants – those who really do want to live in your rental home, pay on time, and treat your property with respect.
On the other hand, Realtors who manage rentals look for the best future buyers of your home. That’s not really representing your best business rental income interests, because you want long term, consistent renters — not those considering the buy vs rent question.
Those renters with high credit ratings are actually more likely to terminate their lease when they can buy. Finding well-employed, long term renters who are content with being renters is the gold standard.
Benefits of Acquiring Great Tenants
- lower your long term tenant acquisition
- consistent cash flow and lower tenant related costs
- more responsible tenants as your customers
- lower churn and turnover costs (leasing, advertising, inspections, move ins)
- better performance reports for your landlord owner clients
- lower workloads and extra time saved
- reduce rent collection and eviction costs
Before Launching Your Renter Acquisition Process
Before you embark on an effective vacancy advertising campaign be certain of the renter you want to attract. Advertising in the wrong places to the wrong renters puts your business in jeopardy.
Good tenants are a pleasure to have as customers and they generate a worry-free source of revenue and help to maintain your assets in good working order. Bad tenants are a liability. You can’t educate renters to be good great tenants. They are what they are.
Can I Just Automate the Whole Tenant Selection Process?
You can automate the common items, yet writing your ads well, renter interviewing questions, and background checks must be done properly. Automation in property management is happening, but you must review and validate everything that is happening. Automation, even the much vaunted AI automation doesn’t save you from this important work.
One landlord app type in demand is tenant screening apps. Landlords want to check out applicants quick to save time and energy. Sure apps are helpful, yet we still need a more professional process to acquire the best tenants.
You can automate certain parts of the tenant acquisition process, but automating without thought and a thorough screening strategy is not wise.
A Professional Level Screening Process
Maybe you’ve gotten that old advice about trusting your instincts. It might be wiser to trust your screening strategy.
The reasoning is simple. A screening strategy goes beyond instincts and impressions to ascertain the applicant’s true fit, ability and intent.
This article was originally written before the pandemic where landlords became the victims of their own weak screening processes. That disaster proved for certain that tenant screening strategies are valid.
Tenant-generated losses are perhaps the worst that most landlords suffer. At some point in the coming years, a recession will hit and once again landlords worst fears will be upon us. Property management companies can distinguish their value propositions with a tenant screening process.
How Much Can You Learn About Prospects?
To deal with a lack of reliable knowledge about tenants, some tenant screening services are digging in deep using social media tools. They’re controversial, however at this time they’re not illegal in most states and countries. It’s important to follow the law, and it’s important to represent rental property owner’s best interests as well. Mistakes all come home to roost.
What Can You Learn About a Prospect?
The point of tenant screening to learn what it is about the prospect that makes them suitable to your requirements as a rental property income business.
- ability to stay employed and earn sufficient income to pay rent continuously
- ability to get along with neighbors
- ability and intent to pay the rent (who will make a priority or those who are chronically late)
- conscientious and responsibility in taking care of the property and appliances
- willing to develop good landlord/tenant communications
- loyalty and willingness to lease for a long period
- whether they will appreciate the rental or dislike it until they find another rental
- whether they will agree to the lease contract (no pets, no smoking, no big parties, additional tenants living for free)
7 Ways to Get Much Better Tenants
1. Have a Clear Idea of your Ideal Tenant. Take an inventory of your best long term tenants, read up on what a good tenant is.
Certainly you can’t discriminate in who might rent in your units. Yet you should visualize the characteristics that make a good long term, responsible, easy to maintain, regularly paying tenant. Cash flow and low maintenance and ability to pay higher rental rates when necessary, are priorities too. Inflation will put more pressure on tenants and you.
2. Don’t Discriminate. Do you discriminate against a single person who would like to rent your house? Do you cancel disabled people right away? If you focus on their character and ability to pay, you can avoid common discrimination charges which can be a mark on your landlord reputation. Just because they work in the neighborhood doesn’t mean they’ll be at that job for long. Their religion, family status, and physical limitations might actually make them stay longer, thus reducing your liability to loss.
3. Advertise in the Right Places. Professional marketers know that you are where you get your customers come from. The source is everything. Advertise in upscale apartment rental websites or websites related to the interests of your ideal prospect. Desperate advertising in the wrong places brings the wrong tenants who could be more costly long term. Google, Linkedin, and Facebook have targeted ad capability and can help you gain fine tuned exposure to the ideal tenants.
4. Write Your Apartment Rental Ads Carefully. As we describe in this post, how you describe your rental opportunity pulls in specific renters. You determine what you get. The renter you want should like your words and phrasing of the specific features and benefits of living in that home.
Just selling the rental opportunity isn’t enough. You’d be fishing with a big net and catching unwanted prospects.
5. Tenants with Good Credit and Income. Tenants with at least earnings of 3 times the rent are best if you can attract them. What is their debt to income ratio? Tenants with a solid record for paying bills on time and who can meet emergencies are better. With rents and inflation growing, the tenant’s ability to keep paying is in question. Even one default can create a lot of work for you.
Definitely use one of the tenant screening services and assess the types of “negative marks” on their credit history. And of course, check for the usual prior evictions, civil judgments against or bankruptcies as a general indication.
6. Tenants with a Good Work Record. Anyone who changes jobs frequently raises the likelihood they’ll have to move at some point. Upwardly mobile people are great, but they move on. Call their past employers to confirm length of employment, attendance, and exact earnings to compare to what the prospective tenant stated. Ask them if they intend to move in the next year.
7. Tenants that Stay and Don’t Damage the Home. Call the former landlords and ask about relations with that tenant. Did they pay on time? Did they say they were looking long term and then cancelled their lease after one year? Did they get along with neighbors and establish a lasting situation for themselves? Ask the prospective tenant about their former residences and what they liked and didn’t like about the unit, neighbors, and the landlord.
Drill Down for Real Insight
If you drill down in each of these areas, you’ll get a better view of renter prospects, free of your own misconceptions and prejudices. That could wreck your vacancy advertising. It might be your own marketing and screening habits that hold you back from higher property management performance.
When owners see you’re this in-depth about your practices, they’ll be impressed and respectful. This is one of the ways you can build demand for your services and build your reputation with owners and investors.
Combine your professional skills with a great property management solution and you’re ready to excel. Take ManageCasa for a test drive while you’re here. See why ManageCasa has more to offer for enterprise or SMB property managers at an affordable cost.
Tips for Property Managers and Landlords
See also: Apartment Advertising | How to Write a Lease | Property Management Companies | Credit Checks for Tenants | Background Checks | Landlord App | Rising Rate Effect | Landlord App | California Housing Market | Texas Housing Market | San Francisco Housing Market | Atlanta Property Management | Georgia Property Management | Texas Rental Market | South Florida Rental Market | Rental Housing Market | Rental Property Management Software | Best Cities to Buy Rental Property | Reduce Churn | How to Use Rental Property Software