To avoid ending up living a nightmare, you must put in the time and effort to find your dream tenants. Otherwise, property damage, unpaid bills, and high turnover rates could end up costing you dearly in the long run. Thankfully, by completing thorough screening procedures, you can find quality tenants, ideally those who will care for their property like it is their own. To help you navigate this process, here’s what you need to know about finding good tenants for your rental property. First, let’s review the reasons we want good tenants to keep our asset cash-flowing positively.
The Cost of Having Bad Tenants
The cost of having bad tenants can quickly grow if tenants fail to care for the property and pay their bills on time – or at all. Here are a few ways that bad tenants can cost you.
Tenants should never cause more than normal wear and tear on the property, such as worn out paint and flooring. Unfortunately, careless tenants can leave behind pure havoc in their wake, including large holes in the walls, missing appliances, and plumbing leaks. Whether these problems occur due to direct action by the tenants, or an overall lack of care, the costs quickly add up and are up to you to resolve in the end.
Bad tenants can leave behind thousands of dollars in unpaid bills — and that’s not even counting your missing rent payments. Depending on your local rules, you could get stuck paying the bills to avoid getting a lien put on your property. Oftentimes, this happens when the city owns and operates the utilities, as is found with electricity, gas, and water.
High Turnover Rates
When tenants do not pay their bills or take care of the property, you will likely need to complete an eviction process, and then find new tenants. Eviction alone can cost you over $5,000 to simply get bad tenants out of the property for good. Finding new tenants can then run you around $2,500, putting you well in the hole for the year and that is before you even factor in the cost of repairs and unpaid bills.
How to Tell Good from Bad Tenants
Now that you know what you want to avoid, it is time to explore how to tell the good tenants from the bad. Unfortunately, this is virtually impossible at a glance, as there are no telltale signs you can spot on your own. In fact, take it from a veteran New York private investigator, Darrin Giglio, who has run countless background investigations in his career: “You can’t tell about people. The most plausible seeming, and the ones you feel really good about, can turn out to be the complete opposite. The only way to be sure of someone is with a background check, as deep as fits the situation.”
So there it is: bad tenants can present themselves in a positive light, giving you all the right documents to pass your checks. And, despite your diligence, it is far too easy to break state and federal laws when running these checks yourself. Fortunately, with assistance from a tenant screening service, it’s easier to gauge the likelihood that prospective tenants will pay their bills on time and take care of your property. Even better, a service will handle every phase of the screening process for you, providing accurate information and eliminating the risk of breaking laws along the way.
Steps to Choosing Excellent Tenants
Although it does take time and effort to select excellent tenants, it does not have to feel overly complicated or hard to approach. As your marketing efforts draw interest in your available properties, here are a few easy steps you can follow in verifying that applicants qualify in full.
Ask the Right Questions
Before you can ask prospective tenants any questions, or even advertise your rental, you must know what state and federal laws allow. To abide by Federal fair housing laws, for example, you cannot discriminate against applicants because of their protected classes, such as race and religious background. What you can do, however, is ask all applicants to complete your pre-screening questionnaire to verify they are a good match for the available rental.
Perform a Thorough Screening
Handing over the official screening process to a dedicated company can free you from the stress while ensuring you thoroughly vet your prospective tenants. Tenant screening companies tend to offer several different levels of screening, ranging from credit only to criminal background checks, past eviction, and more. Services can begin as low as around $25 – a modest cost compared to the costs we discussed earlier.
Screening services may even offer all of the credit, criminal, and eviction screening plus verification of all employment, references, and other important documents. You just have to select the level of screening that will give you the data needed to see if applicants meet your qualifying standards.
Identify Your Ideal Qualifying Standards
In order to make proper use of your tenant screening results, you must have something to compare it to — and that’s where your qualifying standards come in. While working within state and federal laws, you can identify the metrics applicants need to satisfy you they qualify to rent your properties, including income and credit scores.Make sure that the standards you select accord with all laws and apply equally to all applicants. Otherwise, you could be open to discrimination claims and legal action. When you have standards in place and follow strict professional tenant screening procedures, you can decrease your risk of signing on bad tenants. Your efforts can help maximize your return on investment and keep your stress levels low.