The nightmare stories that keep people out of landlording almost never concern the actual brick and mortar. It's almost always about the people that live inside. Here are five steps to find a good tenant so you can avoid those horror stories.
1. Create a High Quality Advertisement
When you're looking to buy a new car, your first impression of the car is determined in large part by the ad you see. The same applies for good tenants seeing your apartment ad for the first time. If the ad is shoddy and looks like the letters are falling off the page, chances are the apartment is shoddy and the wallpaper is falling off the wall. Good tenants are looking for good apartments shown in the best light.
There are various places to advertise, including craigslist. If you want to know more about how craigslist can help, you can read our prior article. Craigslist is interesting because they have deliberately "dulled" the ads on the site. This means you only need to learn a few tricks before your ad is "best in class."
Give your ad a differentiated headline. There are a million apartment ads that start with "nice two bedroom." But how many start with "Great natural light"? A good headline grabs good tenants.
Your ad should make it easy for a tenant to contact you. Provide a phone number. Good tenants are busy people. They might have half an hour in which to look for an apartment on any given day. If they find your ad and like the look of it, they will call you right away to schedule a tour.
Finally, showcase some really beautiful images. Pay attention to dangling cords, bad lighting, crooked blinds, and other things that detract from the overall scene.
2. Conduct Rigorous Phone Screens
When the phone rings, answer it. Good tenants don't need to leave voicemails. They can call a different landlord and get a different apartment.
When you're on the phone with a prospective tenant, you each have slightly different aims. The tenant wants a tour of the apartment. You the landlord, on the other hand, want to give a tour only to a qualified applicant. If the tenant smokes and your building is no-smoking, don't give a tour. If the tenant has an iguana and you don't allow pets, don't give a tour. If the tenant begs and pleads for you to give a tour to their eight family members but the legal occupancy is only three, don't give a tour. Saying "no" over the phone helps you screen out the bad tenants and save time.
The most important thing in the phone screen is to verify that someone is likely to pass your income, credit, and reference checks. Don't be shy about asking if they have first and security. If they don't, don't give a tour.
3. Give a Tour and an Application to Everyone Who Passes the Phone Screen
Once you determine that someone may qualify for your apartment, invite them to take a tour.
If you're using craigslist, you may be worried about the kind of stranger you'll meet. Tell them that you check ID's and that they need to bring their driver's license for the tour. If you're very worried, take the license, lock it somewhere on the premises (e.g., office or combination lock box), and leave it there for the duration of the tour. At least this way if anything happens to you, the police will have a clue. Most would-be bad people are afraid to show their ID and will not show up.
Give the same tour to each applicant so that you're prepared and polished when the good tenant arrives. Highlight money-saving features like insulation, amenities like washer dryer hookups, and conveniences like modern electrical. For instance, say, "You can plug in an air conditioner in every room. Some old houses can't tolerate that because they have old wiring but the electrical here is brand new."
Unless someone says flat out that they don't like the place, give them an application and show them how easy it will be to fill it out. Explain that you need to see their ID at some point to verify the application information, and that everyone must fill out the same application.
Say, "Everyone completes the same application so you can be sure your neighbors are good people."
You can get help with the application here.
4. Use an Objective Scoring System
It's easy to feel good or bad about someone without thinking about their ability to pay. If you use a point scoring system like the one we advocate, you can look objectively at the prospective tenants' merits. You don't have to share the same taste in music to have a great relationship together as landlord and tenant.
The best thing to come out of a rigorous application check is continued interaction. You'll probably have to meet the tenant again after the tour to collect copies of pay stubs, view their ID, or receive the signed application. Sometimes you'll have follow-up questions. The more you interact with someone, the better you can predict how that first maintenance request will go. Are they going to provide additional information for the application? Later on that cooperation will let you into their apartment to fix that leak.
If their application is approved, and you have some calendar time, you can also meet them to collect move-in monies separately from the agreement signing. This lets you verify that personal checks will clear before you hand over the keys. Good tenants don't bounce checks.
5. Go Over the Application at Signing
When a prospective tenant applies for an apartment, they don't know that your quiet hours are between 10pm and 8am, or that they can't play loud music at all. These and other agreement-specific terms should be spelled out and explained in plain English at the start of the tenancy. Then you needn't worry about misunderstandings, which often develop in the first 30 days.
This also gives the tenant a chance to ask questions, get clarification, and potentially tell you about their plans. When you explain the part about long-term guests, they might say, "What do you mean I can't have guests stay for longer than 10 days? My mother might be moving in later this year." That's very useful for you both to talk about in advance.
When you finally hand over the keys, thank them and ask them to call you right away if they see anything wrong. This leaves them with the impression that you're a through and reasonable person. Good tenants will stay put if they know they have a good landlord.
Those are the 5 steps to find a good tenant.
What do you think? Leave your comments below.