You have a rental property. Now you are ready to rent it out and start making some money, but you have one last step. It is time to find a tenant. That is probably the hardest part of being a landlord. After years of real estate investing, I have discovered these 7 safeguards to guide you to a good tenant.
- Go see where they live.
One of my real estate mentors told me that the best way to check up on a tenant is to see where they live now. So, bring the rental application or lease to them. That way you can see where and how they live.
- Use a detailed rental application.
Be sure to have any tenant fill out a detailed rental application. One reason this is important is because bad tenants will often disqualify themselves from candidacy for your property simply because of the questions on the application. On the rental application, ask for at least five years of residence history so that you can determine patterns in their rental history. Also ask if they have declared bankruptcy, been convicted of a felony, been evicted, or refused to pay rent.
- Check all references thoroughly.
Be sure the rental application includes authorization for you to call prior landlords and employers. You’ll also want to have the tenant authorize you to check their credit report and criminal history. Be diligent in contacting the prior landlords and employers. This will give you the opportunity to ask about the tenant and gain better knowledge. Use this as a screening process.
- Check the tenant’s credit report and criminal history.
This is your chance to get a third party (credit bureau) to tell you about the tenant’s credit. Some landlords skip this step, but it is an important step and could save you some problems in the future. Landlords that review credit reports are 60% less likely to have to go through an eviction process. So, check their credit worthiness. Are they behind in payments to any creditor? Remember, you are liable for any illegal activity that takes place on your property, so be sure you check out your tenant. Check on people’s history and make sure that they don’t have any convictions that you’re not comfortable with.
- Use a printed lease that complies with your state laws.
State laws are written to provide guidelines for the tenant-landlord relationship such as limits on deposits, accepted lease terms, and prohibited forms of discrimination. So, it is always best to use a printed lease that complies with the state laws.
- Require a security deposit along with first and last months’ rent.
Asking for this money up will give you a sense of security. The security deposit will provide income to fix any damages on the property. And asking for the first month’s rent payment upfront is no big deal because it covers the first month the tenant will actually be occupying the property. Collecting the last month’s rent provides a greater sense of security that the tenant will finish out the term of the lease.
- Complete a Statement of Condition signed by tenant and landlord.
The purpose of a Statement of Condition is to prevent disputes between a landlord and a tenant. When you move in and when you move out, a statement of condition should be filled out. This statement must list must list the conditions of everything in your rental–the walls, the ceilings and everything in between. This is your agreement on the condition of the property and will be used to determine the amount of security deposit that will be used for damages or returned.
Using these 7 safeguards should help guide you toward a good tenant. Which of these 7 safeguards do you think will be the most beneficial to you as a landlord?
To find out more safeguards and to get more knowledge about real estate, join our Real Estate Workshop.