Thu, March 28, 2024

Free Access: Real Talk Real Estate: How to find a good tenant

In the future, you may find yourself with an investment property. I have clients who did not necessarily purchase a home as an investment property but ended up keeping it as one.

One of my clients was in the military, and when he got stationed at Fort Gordon they purchased a home. Three years later the husband was re-stationed and instead of selling the house, they turned it into a rental property. Suddenly, they were property managers with the daunting task of finding a tenant.

Let’s face it, just like other investments, rental properties can be risky. One of the risks with rentals is renting to tenants who do not take care of the property and leave without paying for any repairs. If you take the right steps to qualify the tenant, you can avert most of that risk.

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I’d like to preface this list by stating that there are companies like My Smart Move that will run reports on everything I am about to list. It is free to sign up, and you pay as you screen. It will even let you pass that payment on to the applicant!

Credit Report
This should be done on anyone you consider renting your house to. Find out if they pay their bills on time and how much their monthly debt payment is. Credit requirements can be determined differently by each individual landlord, but we require a 620+ credit score. Scores between 580 and 620 we will consider but require a larger security deposit amount. This will decrease the risk of being left with repairs that are more expensive than the security deposit.

Eviction Check
If someone who has ever been evicted tries to rent a property from you, they should automatically go to the back of your list. If it has happened more than once, you should remove them from the list. I understand that some people have been under bad circumstances and things happen. However, your main concern should be for your property, and this just screams “Risk!

Prior Residence
Always get as much information as you can from applicants, including any past residences and the name and contact of previous landlords if they have rented before. In order for the previous landlord to give you any information on the prospective tenant, you must obtain written permission from the applicant to do so. Finding out what kind of tenant they were in the past will help you make a decision. Like I said, bad things happen, but if they have a good rapport with their previous landlord, that is a fantastic sign.

Income Check
The best proof of income will come from obtaining two or three of their most recent pay stubs. That will tell you their wage, the hours that they work, and how much they have made year-to-date. My general rule of thumb is that the monthly income should be equal to or greater than 3x the monthly rent.

Criminal Background Check
Lastly, obtain a criminal background check on all applicants. Things to look out for would be violent criminal offenses, repeat DUI offenders, and anything else that is not a common street ticket. Use the previous reports and your discretion if the report is borderline, and decline the people with a long rap sheet.

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