Being a landlord can be a very rewarding at times. While at other times can be a very costly and become a pull your hair out type experience.
It all comes down to tenant selection. The real question is how to find good solid tenants and avoid the pitfalls and costly mistakes of the terrible tenant?
Follow these tips and your chances of enjoying the benefits of your investment will increase dramatically. First and foremost you must have tenants fill out a complete application. An application must include authorization for you to complete a credit and background check. Also have them include not only their current landlord but most importantly their prior landlord(s). The reason this is essentially because I know you find this hard to believe but not all renters tell you the truth about why they are moving. If you call their current landlord you must be aware that their current landlord might tell you anything you want to hear just to get rid of their current bad apple so to speak. By calling prior landlord(s) they no longer have anything to do with your prospective tenant and are far less likely to tell you a white lie. Another key is to look up the prior landlords names and make sure they actually own the house and not just one of the prospective tenant’s friends posing as a landlord. You can typically find this information online or go to the registry of deeds for your area and check it out.
Another trick of the trade is to ask if you have ever been evicted on the rental application, but you must and I repeat must check the court system and found out if this is actually the truth. A renter trying to get an apartment when asked that question might just not tell the truth and hope you don’t complete the necessary due diligence. You can go to your local housing court and ask the clerk how to find out if someone has ever been evicted? They usually have a computer right there for people to just look up names. If someone is in the housing court system as currently being evicted or previously evicted then goes with saying, don’t rent to them. Unless of course you want to go to court and spend money and endless amounts of time evicting them again.
A credit report is a must; renters typically have credit scores lower than home owners or they themselves most likely would have purchased their own property. However knowing if they ever paid past utility bills, car bills etc is a key indicator of whether or not you will be important enough to pay on time, isn’t?
Prior rents is very important people for example get used to paying $500, but when they move and market rent is now $800 this could pose a problem in the near future. Therefore current income is a very large indicator of whether or not they will be able to pay their bills. I have had people who are great tenants on paper but they for example make $1,200 per month and their rent alone would be $800 without utilities. Obviously making rent every month would be an issue. A quick rule of thumb would be rent/income ratio be absolutely no higher than 50%. For example someone looking for an apartment where rent is $1,000 per month, then they need to make about $2,000 to have sufficient income.
$1,000(rent)/$2,000(income) = 50%
Keep in mind the lower the percentage the better for you and your ability to continue to receive your rent month after month.
Biggest tip I can give a fellow landlord is to have patience and don’t take the first person through the door, even if it takes you a couple weeks longer to find the right tenant. It is far better than 6 months of lost rent and damages trying to get the tenant out of your property.
As a landlord you should be able to get up front first, last and security. First and last month’s rent is a must no matter what the prospective tenant’s sob story is do not accept less. That way you have some protection against loss if they don’t pay month two. Security deposit is also a good idea however state laws are very strict on how security deposits must be handled so make sure you read your states laws regarding that and follow every word of the law. In some cases tenants can sue for three times damages if security deposit is improperly handled in any manner.
In conclusion due your checks and take your time to limited your chances of the tenant from hell!