Income Property Investing Guide: How to Find Quality Tenants
Once you have purchased and renovated your first income property, that’s when the real work kicks in. Even though owning rental properties is often considered to be a source of passive income, there are still a lot of things you’ve got to do.
Some of your tasks as a property manager will include finding, screening, and managing tenants, as well as managing the property and its finances. In this article, I’ll focus on finding the right tenants for your newly acquired income property.
How to Find Tenants for Your First Income Property
Whether you’re managing a rental property by yourself or you’ve hired a property manager to handle things on your behalf, you’ll still have to keep up with the right strategies when it comes to finding tenants.
After all, it is important to make sure your business is heading in the right direction. Avoiding costly evictions will help you get to your goal ROI and remain profitable as a landlord. With that said, it is important to screen tenants before signing them and select high-quality ones to avoid evictions.
Have a Script
Before you go out there and start communicating with potential tenants, make sure to put together a good script to vet them on the phone. Without a script, you’re likely to forget to ask important questions or get lost in the conversation without covering the most important points.
When interviewing potential tenants, make sure to ask questions such as:
Why are you moving?
Do you have any pets?
Do you plan on getting pets in the future?
Do you smoke?
What do you do for work?
How was your experience in the past unit you occupied?
There’s a lot that goes into creating a good tenant interview script. This is something I teach my students in my mentorship program called Your First Income Property Investment.
If you’re interested to learn more, I set aside a few quick calls each week to connect with people who are aiming to purchase and manage rental properties. Feel free to schedule a call at any time that suits you.
Check References
The next step when screening potential tenants for your first rental property is to check their references from previous landlords. It is important to understand why the tenant moved out of their previous home and whether there were any issues that motivated them to move out. Understanding the tenant’s motivation behind moving will help you determine whether that person is a good candidate for your rental property.
Obviously, if there were issues with the previous landlord, you should think twice before getting yourself into the same position. Make sure to check whether the tenant had paid their rents on time and whether there were any issues or damages in the apartment once they moved out/
Do Credit Checks
Besides checking the references, make sure to do a deeper background check and look into the potential tenant’s credit information. A credit check is the best way to ensure the tenant can actually afford to stay at your property and that they manage their finances responsibly.
A credit score of 650 is usually the lowest score that can be tolerated. Anything below 650 is usually a concern for the landlord since such a low score indicates that the tenant is not really good at managing their finances in a timely manner. Moreover, criminal and eviction history checks will give you a more complete picture of your applicant’s background and their likelihood to pay on time.
Keep Your Standards High
Last but definitely not least, make sure to keep your standards high when screening potential tenants. Don’t just approve the first person that comes along. This is a mistake that many newbie property managers make, usually because they’re worried that they won’t find anyone else if they reject one tenant. In reality, there will be plenty of people to take into consideration, as long as you’re marketing your property the right way.