A tenant can be a landlord’s greatest asset or their worst enemy. Which of these two scenarios plays out depends on a property owner choosing the right tenant for their rental home. Experienced landlords agree that securing good tenants is one of the most challenging yet vital functions of rental property management.
Incorrect tenant choices can have dire consequences. Tenant turnover is a costly experience as it can result in a property standing vacant for a month or two, with the landlord not earning any rental income. Additional costs, such as repairs and maintenance, might also be necessary.
Here are the steps to follow when choosing a rental property tenant:
Leave the process to the professionals
Landlords find that hiring a property management company operating in Denver or in other US cities helps to get the right tenants that occupy a rental home long-term, pay their rent, and do not cause undue problems. Evernest, Mynd Property Management, and Colorado Realty & Property Management Inc. are local operations that provide landlords with a full suite of services, including tenant screening. Evernest has an outstanding reputation for having its professional property managers offer its clients value for money while delivering outstanding services. It operates in the major Colorado metropolitan centers of Denver, Fort Collins, Boulder, and Colorado Springs. Evernest also operates in Tennessee, Arkansas, and Ohio. Companies like Greystar Real Estate Partners LLC and BH Cos. are large rental property management companies that operate in various cities and states across America.
Real estate management companies have enough time and resources to perform thorough tenant vetting processes. Not putting potential tenants through rigorous vetting and screening processes is a sure way to get the wrong tenant in your home, putting yourself at risk of non-payment, property damage, quick tenant turnover, and dealing with an eviction.
The contents of your rental advertisement can act as a tenant screening tool if you pay sufficient attention to it. Be specific about any criteria for renting the house, and it will discourage potential tenants who cannot meet them from applying. Examples of things you should include in the ad are your pet policy, whether smoking is permitted, stipulating that a credit and reference check are mandatory, listing a security deposit as a prerequisite, and limiting how many people can live in the home. Clarifying these matters right from the outset means you will not need to sift through dozens of applications from ineligible tenants.
Beware of posting advertisements that could get you into legal hot water. The Fair Housing Act stipulates that you cannot discriminate against tenants on many criteria, including race, religion, nationality, sexual orientation, and religion. If someone can prove you refused to rent them your house based on criteria prohibited by the Act, you could face costly lawsuits.
Insist that potential tenants list references on their application forms, including former landlords, family members, colleagues, or community members. Having several references allows you to build a detailed picture of that person. Their past behavior is an indicator of how they will act in the future. Therefore, be cautious if someone on the list gives you a less-than-stellar account of their interactions with the applicant.
Making these phone calls or sending email correspondence is time-consuming. Time might not be a commodity you have in abundance, especially when you need to fill a vacancy quickly. However, checking references is time well-spent as it can save you future hassles, such as trying to get rid of a nightmare tenant.
Some of the most crucial pieces you need about a potential tenant is how much money they earn. While an applicant might supply you with paystubs, it is best to contact their employer directly for information. Formal verification of an applicant’s salary lets you determine if they can afford the rental amount you intend to charge. A standard rule of thumb is insisting that the tenant earns 2.5-3 times the rental amount after deductions.
This ratio ensures that they have sufficient disposable income to afford their monthly rent. Not taking this step could be shooting yourself in the foot because you could end up with tenants who either short pay or do not pay at all, and the process of getting rid of them could cost you plenty of money in legal fees and lost rental income.
Do not stop your screening efforts after verifying an applicant’s income. As an additional step, insist on running a credit check. A tenant might earn enough money to afford the rent, but that will not be helpful if they must spend most of their income servicing debt, such as personal loans, vehicle financing, and credit cards.
A credit check reveals a great deal about an applicant’s financial responsibility. A history of incurring debts and failing to service them is indicative of someone who will persist with such behavior, leading to unpaid rent.