Being a homeowner is a lot of work and a costly investment. If you happen to manage multiple properties and rent them out, homeownership can be even more stressful. After all, buying a house costs hundreds of thousands of dollars. The last thing you want is for something serious to happen to your property that can ruin or destroy it.
One of the best ways to put your mind at ease when renting out your properties is by picking trustworthy tenants. Tenants who are respectful, responsible, and careful will keep your properties in good condition, while you get to sit back and enjoy your passive income. However, picking the perfect tenant isn’t always as easy as it sounds. Take a look at the six steps you should follow to find the ideal tenant.
Step 1: Create a rental application
Once you have a property that’s ready for someone to live in, it’s time to create a rental application. Your rental application will outline all of the qualifications a tenant must meet in order to occupy your home. You’re the boss, so you get to decide what criteria can qualify an applicant or not, as long as they follow all fair housing laws.
In your rental application, collect the following information:
- Full name
- Date of birth
- Current address
- Contact information (phone, email)
- Current employer information and salary
- Two to three personal references
- Vehicle information
- Any prior convictions
- Why they’re moving
- Pet information
- Co-applicant information, if applicable
Along with the mentioned information, you should also charge an application fee between $25 and $75. This will show you they’re serious about renting your property.
Step 2: Show your rental property
Once you have a handful of applicants, begin showing your rental property. In some cases, a prospective applicant may work with a reliable real estate agent who will work with them to ensure your property meets their needs, so it’s important you stage your home and make it look like a great place to live to attract worthy applicants.
As you show your property, re-ask some of the questions you listed on your application form. This will give you a better understanding of their situation and why they’ removing and will also allow you to determine if they fit the profile and seem interested. Showing your property also allows you to form a gut feeling, and if it’s off, it may be for good reason. If an applicant is in another state and can’t view the property or meet you in person, consider hosting a phone or video interview to get to know them better.
Step 3: Conduct background checks
Once you begin receiving applications, conduct a background check. In-person and on paper, an applicant may look perfect. However, after a background check, you may realize the applicant was lying and has a history of criminal convictions or a poor credit report with missed payments.
The last thing you want as a property manager is to sign on a tenant with a history of late payments or missed payments altogether. Credit reports from SmartMove can be run in minutes and provide pertinent information, such as an applicant’s credit history and credit score. Additionally, a credit report won’t impact the renter’s credit score and will keep their personal information safe and secure throughout the process.
Step 4: Check references
On your rental application, it’s important to ask for references, especially from the applicant’s previous landlords. Reviewing references will give you first-hand anecdotes from landlords who already worked with the applicant. A positive reference will provide peace of mind that the applicant is a trustworthy candidate, while a not-so-great reference will make eliminating a candidate much easier.
Step 5: Pick your tenant
After you’ve conducted a background check and reviewed references, pick your tenant! Remember, it’s important to comply with all fair housing laws, so you can’t discriminate on factors like sex, race, religion, age, family size, and so forth. Rental properties are a great real estate finance option, so choosing the right tenant is crucial.
Step 6: Draft a lease
Now that you have your tenant chosen, draft a lease. A lease is a contractual agreement between you (the landlord) and the renter, which outlines how much rent per month is when rent is due, and additional information such as your pet policy, whether smoking is allowed, and so forth. When drafting a lease, you may want to consider hiring the help of a lawyer to ensure it’s fool-proof and complies with the law.
Wrapping up
The tenant you choose to occupy your home will make or break your real estate endeavors. A trustworthy tenant will make owning rental properties a breeze. A reckless or irresponsible tenant can land you in legal lawsuits, a damaged home, and in debt. With these tips on finding the perfect tenant, you’ll be able to sleep soundly at night, knowing you made the right choice.
