Tenant Screening – Find and Keep the Best

One of the biggest concerns new or prospective landlords have about purchasing investment property is about finding paying, responsible tenants.  Knock on wood, in my more than 5 years as a landlord, I have been able to find good tenants and have never faced an eviction.  Maybe I’ve been lucky but I think avoiding eviction is all in screening tenants and keeping the tenants you have satisfied.  Here are some things I do:

Check, check and check again.  Surprisingly, many landlords don’t do credit & background checks.  I always do.  And if the tenants don’t have that kind of history due to age or newness to the area, I always have at least one co-signer who gets the full check.  Everyone who will be living at the apartment must pass the check.  And, it doesn’t cost me a penny.  I tell prospective tenants that they pay for the check themselves and it’s a non-refundable fee.  I find that this statement alone chases off people who may be a problem down the road.

Set Rent Higher Than Market.  The first time I advertised an apartment for rent, I nervously set the rent price a little below market value.   I received more than 50 calls and was impressed with myself because I felt that I had the pick of the litter.  Only after sifting through all the calls did I discern that only very few of the callers actually qualified.  I later told a mortgage lender I know and long-time landlord about my experience and he told me that my rent was too low.  If I raised the rent just a bit, I’d weed out the low-price shoppers.  I only want people who want to live in nice, well-maintained home.

Next time I had a vacancy, I set the rent at $50-100 more/month than other apartments in the area.  I received far fewer calls but almost all the people I pre-screened on the phone were qualified and almost all showed up on-time at an open house I held for the apartment. 

Make Prospective Tenants Pass First Test. I hold an open house and when people call to see the apartment, I give them the date and time of the open-house.  If they come, they’re likely qualified and very motivated. – that’s my first test.  If they don’t come, I’ve got 5 or so other people coming at the same time and I will rent the apartment that day.  I will not agree to show the apartment outside of that time. Period. 

When you have existing tenants, it’s an inconvenience to them to have you in and out of their apartment. If a caller balks at this, I just tell them that if they rented from me, I will be just as respectful to them.  If they can’t make it at that time, they’re not motivated and they’re probably not that interested anyway.

Allow Pets.  Most landlords will think I’m crazy but I like pets in my properties.  I think it makes my property stand out from the crowd, makes me money and I’m helping people who often have trouble finding a place to live.  Plus, I think having a pet shows you’re stable, responsible and flexible – all qualities of a good tenant.

I don’t allow just anyone with pets.  I make prospective tenants go through a lot of trouble and if the tenant is willing to make the effort, it shows me that they are worth the extra effort on my part. For dogs, I require that they be licensed, have a certificate or affidavit from a reputable trainer that the dog knows basic commands, is friendly and well-treated, have a letter from a vet, be spayed or neutered and have all their vaccinations.  Each year, I ask tenants for an updated list of vaccinations and their license.  

For cats, I require a letter from a vet, a list of vaccinations and a spay/neuter cerificate.  I also do not allow more than two animals per apartment, regardless of type. For all of this, I charge a non-refundable pet fee of $300 per pet.  This goes to pay for things like damage to the lawn, wear and tear on flooring and woodwork and any inconvenience I have to endure if the neighbors complain. And I also have to meet the pets before I’ll accept.  I want to see that they’re well-loved and friendly – this also says a lot about the prospective tenants.

Make it a nice home. When I bought the property, it needed work.  It was the ugliest house and most run down on the street.  Its condition warranted the low rents the former owner was charging.  When I purchased it, I did so to live there.  I spent about $10,000 on redoing the interiors – total redo of a bathroom (down to sub-floor and studs) in one unit and new kitchen cabinets and appliances in another unit.  I also put down new flooring in one kitchen, ripped out 7 layers of flooring in the other, and spruced up the common stairwell.  Everything was painted, I cleaned up the landscaping outside, re-painted the exterior and eventually re-built the back porch.  All of those things show potential tenants and current tenants that I care about my property.  I’m also there frequently to do a little work or to just take a look around. 

Fresh Paint.  I don’t mind painting and am pretty good at it.  So, whenever I have new tenants, I offer to paint the unit for them.  And I don’t paint the apartment white!  I use colors that are neutral and each room is painted to complement all the other rooms - they make the apartments feel like home and stand out from others on the market.  Whenever I show prospective tenants the apartments, people love the paint. 

Treat Tenants Like Customers, Not Second-class Citizens.  I used to be a renter so I know what it’s like to be ignored by your landlord.  (My former landlord wouldn’t fix a bathroom light that shocked me every time I went to turn it on.)  When my tenants call, I try to be as responsive as possible.  If they feel like I’m on top of it, they’re usually pretty reasonable.  I’m flexible when I can be and am respectful of the fact that they have keys to my house! 

I will send little welcome gifts to my tenants when they move in, along with a note reminding them about my address, rent due date and amount due.  When I send out renewal leases, I always include a note thanking my tenants for renewing the lease and for being a good tenant.

Put it in writing. I’ve learned the hard way that if something isn’t spelled out in the lease, it’s up for negotiation.  Over the years, I’ve rewritten my lease based on my experiences with the previous tenants.  I go over this lease with the tenants after I’ve accepted the deposit and am flexible over revisions if it’s warranted.