As a rental property owner, it can be tempting to rent your property quickly in the interest of making money. The idea of letting your property sit vacant is far from appealing. However, it’s also essential that you protect your investment. You don’t want your property to be damaged, nor do you want to have to evict a tenant. The key is to learn how to find a good resident. Here’s a quick guide for doing just that.
Picking a tenant is ultimately a business decision. Though it can be tempting to rent to tenants you “click” with, you should pick your tenants based on objective facts instead of subjective thoughts. Leasing to the right tenant is crucial to keep your property both occupied and profitable. According to TransUnion, the eviction process can cost an average of $3,500. When screening prospective tenants’ applications, here are a few factors to consider.
According to Buildium’s 2021 Rental Owner’s Report, 30.9% of renters’ ability to pay their rent each month was negatively impacted by the pandemic. Unsurprisingly, this resulted in 31.3% of rental properties’ profitability being negatively impacted. Clearly, it’s more important than ever to make sure that your renters have the financial capability to pay their rent. Ideally, you should find a tenant who has a monthly income of at least three times the monthly rent. You can verify this information by asking for a copy of their pay stubs.
Another element to consider when finding a good tenant is their credit score. A credit score doesn’t necessarily paint the whole story of a tenant’s ability to pay rent, but it can give you some insights into their previous behaviors as well as their debt ratio. A credit report will also show you whether a prospective tenant has ever been evicted or filed for bankruptcy.
As a landlord, you can use one of three credit bureaus. These include Equifax, Experian, and TransUnion. All you have to do is create an online account with any of these three bureaus. Whatever fees your chosen bureau charges can be passed on to your renter. After your credit bureau verifies your identity, you’ll complete a short credit check request form. Once your report is ready to view, you’ll be able to read your tenant’s credit report online. Depending on which credit bureau you use, you may receive different kinds of information.
Generally, you should be looking for accounts consistently paid on time, a stable employment history, and a reasonable debt to income ratio. On average, you should look for renters with a credit score of 620 or higher. A credit score lower than this may be an indication that your applicant is a financial risk.
You may be also able to use your chosen credit bureau to complete your tenant’s background check, as well. A background check will give you information related to a potential tenant’s criminal history, address history, credit inquiries, and known aliases. This information can prove useful, should you find yourself having to choose between two applicants. (Note that in some states it’s illegal to reject a rental application based on an applicant’s criminal history, depending on the crime.)
Before you begin searching for your future resident, you should become familiar with national and state laws pertaining to landlord and renters’ rights. It may be wise to consult with a lawyer in order to learn more about your local and state laws.
Federal fair housing laws state that you cannot reject an applicant based on their race, color, religion, age, sex, nationality, family status, or mental/physical disability. If you reject an applicant for any other reason (eg. a poor credit score), the Fair Credit Reporting Act requires that you inform the applicant. Lastly, if an individual with a physical disability applies to rent our apartment, you must provide accommodations for them, such as installing a ramp.
Additional provisions are made for both landlords and tenants in state and local laws. You can find a comprehensive list of these laws, by state, online. These laws cover everything from where you can and cannot hold a security deposit to whether or not you’re required to provide notice before entering the property once it’s occupied.
Now that you know what to look for in a tenant, you can work on attracting the residents that’ll value your property the most.
There’s an art to writing the perfect rental listing. At a minimum, every listing should include the information tenants will need to determine whether or not your rental property is a fit for their needs. This information includes:
Your listing should also include your contact information. You want to be easy to reach.
Once you have all these fundamental details on the page, you can start to get creative. Pick a punchy title for your property. For example, “Farmhouse-Inspired Luxury in the Heart of Downtown Nashville.” This title evokes the image of rough-hewn beams, marble countertops, and a vibrant nightlife, which you can emphasize in your photos of the listing. Just like that, your future tenant can picture themselves in their new home.
The body of your listing should be similarly original. This is where you can really set your rental apart from others. Focus on the unique features of your property. If you have installed new bathroom tiling, call that out. If your property’s ceilings are vaulted, make sure to write about them. If your unit has been recently renovated, write that in the description. Get as detailed as possible where it counts.
Though your listing will, and should, include good pictures of your property, the way you write your listing can create an emotional reaction that will make readers excited and interested to apply. Ultimately, at this stage of the leasing process, you’re selling prospective tenants on the fact that your property has more to offer them than your competitors’ properties. How will they know that, unless you tell them?
Buildium’s 2021 Rental Owners’ Report found that a majority of real estate investors prefer that their listings appear online. In today’s digital age, this should come as no surprise. Though it’s still possible to post an ad in your local newspaper, Multifamily Executive reports that most renters find their future homes online. If you’ve decided to try listing our property yourself, there are a variety of online listing resources to use. Here is a small selection of some of the best online listing sites.
There’s no reason you have to do all the work when it comes to finding tenants for your property. Using a realtor or leasing agent can take some of the strain of finding leads off your shoulders. A qualified realtor can take on marketing and advertising tasks. They’ll also spend time with your tentative tenants, guiding them in their search for their perfect future home. Through their meetings with these prospective tenants, as well as the property showings they’ll manage, your realtor will be able to tell the “window shoppers” from the serious applicants. One thing to note, however, is that working with a realtor is almost never free. Realtors charge a fee for their services. While some landlords pay their realtors out of pocket, some charge their tenants a “broker fee.” If you have your heart set on working with a realtor, this is a choice you’ll have to make.
Once you’ve started attracting applicants, you can begin showing your property. This step in the leasing process is crucial. After you’ve gone through the trouble of listing your property, you’ll want to put your best foot forward. Make sure your property is cleaned and staged. If you currently have tenants, you may want to consider offering to pay for a cleaning service before showings.
During the showing, be sure to highlight the benefits of your property. Though your listing will have hit the high points, this is your chance to elaborate in person. If your property has natural sunlight, mention that. If you offer in-unit laundry, that’s obviously a huge plus. But don’t just talk about the property’s features. If the neighborhood is particularly vibrant, that can also be a wonderful selling point to touch on. You may also want to share testimonials from previous tenants.
If the process of posting a listing, culling through applications, scheduling showings, and then drafting a lease sounds daunting, you’re far from alone. Buildium’s report found that 70.8% of rental property owners wanted a property manager to take care of leasing and marketing responsibilities. A property manager can market your apartment, show it, clean it, draft a lease, screen your tenants, and also handle any future tenant requests.
Avoid the headache of an eviction by getting it right the first time. Whether this means going it alone and following the tips highlighted above or hiring a property manager to take care of the whole leasing process, keeping your property occupied and making money starts with finding the right tenant.
Is finding the right tenant proving to be a challenge? Consider reaching out to a property manager! Find a local property manager, here!