Picking a high-quality tenant for your rental property is one of the most important decisions you’ll make as a landlord—the choice could determine whether you make or lose money on your investment.
Certain tenants make you regret choosing them. They might habitually pay rent late … if they pay at all. This creates stress, wasted time as you try to get your money, a possible eviction process, and a loss of income.
Not telling you when something’s wrong with the property also causes problems. When that happens, what could have been a quick fix can turn into an extensive (and expensive) problem.
What about the tenant who uses your property as a bong store, a cat rescue, or a drug lab? Those are true stories.
When you get into the landlord business and buy property to rent it out, you want to make money by renting to people who will pay the rent on time every month and who will take care of your property as you would. But how can you help ensure you get those types of tenants? One way is by identifying the traits of a high-quality tenant.
You can usually count on a responsible person to do the right things. A responsible tenant will make sure to pay the rent on time each month and will abide by the lease terms. You can relax when you have a responsible tenant and feel confident that your place is in good hands. But how can you tell whether a person is responsible?
Here are four ways:
- View the applicant’s credit report. You can do this with Cozy’s screening tools. Doing so tells you how financially responsible a potential renter is. Note that the actual credit score, while a good indicator, doesn’t always tell the whole story. Read the entire credit report. There might be a good reason for the low credit score, such as a one-time medical bill from five years ago. A low score is probably not as much of an issue with an applicant who has been paying their bills on time for several years versus an applicant who is currently late with bills.
- Interview past landlords. Responsible tenants make minor fixes around the house themselves and will let you know immediately when something major needs to be done. Ask past landlords if the person you’re considering did those things.
- Note communication skills. Responsible people are typically vigilant about communicating. They will let you know right away about that leaky ceiling or other problems. Look for applicants who respond to you in a timely manner and who tell you pertinent information about themselves before you ask.
- Notice whether they do what they say. If you set up a showing, a responsible tenant will be there on time. If they are held up in traffic or are late for another reason, they’ll apologize and let you know when they’ll arrive.
Even after responsible tenants move in, it’s still good practice to schedule regular inspections. Do so at least once or twice a year to make sure your property remains in order.
2. Ability to pay
A high-quality tenant will be able to pay the rent. A good way to determine whether a renter can afford your place is to verify income. They should make enough that only about 30% of their income will go to rent. But also look at their credit report to determine how much debt they owe. If they don’t have much debt, then their income can be lower. But if they have a heavy debt load, they may need to make more money to afford rent each month.
College students, or others, who can’t afford the property on their own might be acceptable to you with a co-signer. If you consider a co-signer, make sure you have the co-signer apply too.
Some applicants lie on their applications. Shocking but true. You don’t want to rent to someone who lied on the application—they may be trying to cover up something that would prevent you from renting to them, such as being evicted or losing their job. Plus, if they lied on the application, they might be sneaky as a renter, and might try to do things like let someone move in who isn’t on the lease.
You need to verify everything on the application. A background check, which you can get using Cozy’s screening tools, lets you know about any sort of criminal activity. This includes evictions, since those go to court. Also, make sure you call the applicant’s employer to verify they work there and their income.
A note about self-employed applicants: Don’t just trust what they say. Ask self-employed people to show you six months of bank statements, three years of tax returns, and a savings account with at least three months rent in it.
Once you get a high-quality tenant in your property, it’s ideal if they stay for as long as possible. If they have ties to the area, such as family or a job, it will be more likely for this renter to stay longer than a year.
When you have a high-quality tenant in your property, you may wish to give them an incentive to renew at the end of the lease term, such as not increasing the rent. If that isn’t possible, you could offer to improve the property somehow, such as painting the interior or replacing an older appliance.
The bottom line
Landlords who struggle are usually renting to bad tenants. And landlords who choose high-quality tenants are typically successful. Choose your tenants wisely, so you’ll experience success.