Find a diamond-in-the-rough apartment. Check.
Secured funding for it. Check.
Made the apartment complex move-in ready. Check.
Discovered the right tenants for your brand-new apartment investment? Well…not quite yet.
I would offer consolation by saying, “Don’t worry, you’ll find your first good tenant eventually.” The truth is, choosing the right tenants is one of the most important things you can do as a real estate investor. After all, a bad tenant can easily cost you thousands of dollars if you end up having to evict him or her.
The good news? You don’t have to go blindly into choosing tenants for your property. Here’s a rundown on what to look for in a good tenant for your syndicated property investment.
Look for Good Credit Scores
If you’re wondering how to screen tenants, one of the first things you need to look for is a strong credit score. That’s because a good credit score shows that a potential tenant is financially responsible. Therefore, he or she will likely pay rent in a timely fashion. After collecting applicants from possible tenants, you can simply run credit checks to see which tenants have a history of making their bill payments on time.
No Criminal History
Checking potential tenants’ criminal backgrounds is another vital part of pinpointing a good tenant for a syndicated property investment. To do this, you’ll need a potential tenant’s name, as well as his or her birthday. Check the individual’s identification before performing a criminal background search to make sure that the data they give you is indeed accurate.
The great thing about criminal background records is that they are public. However, no database exists for these types of records nationwide. Therefore, you might want to have a company that screens tenants search your state’s criminal databases as well as other states’ databases before you give any tenant the green light to stay in your apartment complex.
A Good Tenant Possesses a Strong Rental History
People’s rental histories provide a glimpse at whether they have previously made great tenants. For this reason, it’s a good idea to ask your applicants where they’re moving from, as well as their reasons for moving. In addition, ask for the names of a couple of their previous landlords, who can serve as their references.
It’s wise to speak with a minimum of two landlords, as your potential occupant’s most recent landlord might falsify information just to get rid of the tenant. Questions you can ask the references include whether the tenant’s rent was paid in a timely fashion and whether the tenant took care of their properties. Also, make sure that the renter provided the landlords with a minimum of 30 days’ notice before relocating.
A Good Tenant Has Integrity
If you’re wondering how to screen tenants, another smart move is to double-check everything your possible occupants tell you or include on their applications.
You ultimately want to go with applicants who don’t lie to you about paying rent, their financial situation, or any damage they caused to the properties they previously rented. If certain applicants can’t be honest with you upfront, then you’ll never be able to trust them with your syndicated property investment.
Has Verified Income
A good tenant always has a consistent income; after all, that’s the only way he or she will pay his or her rent on time. So, be sure to ask your applicants for pay stub copies as well.
The ideal situation when you’re looking for the ideal occupant is to find one whose income each month is triple the monthly rent amount. Of course, you’ll still need to take into consideration how much debt he or she has. That’s where the credit check comes in.
As a general rule of thumb, you’re better off going with a tenant who has a lower income than another tenant does if he or she also has lower debt levels. The less debt that renters have, the easier it will be for them to make full payments to you on time every month.
A Good Tenant Respects You
An incredibly effective way of determining if a person would make the right occupant for your syndicated property investment is gauging how respectful he or she is.
If tenants respect you and/or your management company and your property, they’ll let you know if something at your property requires attention right away. So, listen to your gut when interacting with your applicants: Do they treat you in a mannerly way? And did they arrive on time to meet you and your property?
Also, listen to what their references have to say about them: Did they take care of their prior landlords’ properties, or did they damage them? Did these landlords receive complaints from the tenants’ neighbors?
Disrespectful tenants may try to exploit you by paying their rent late or giving you excuses about the damage they cause your property. In fact, they may simply neglect your property, treating it as your responsibility, not theirs. That’s the exact opposite of who you want occupying your property in the months or years ahead.
Master How to Screen Tenants and Start Generating Income Today!
If you’re ready to start making money from your rental property, screening tenants is a step you absolutely shouldn’t discount. Of course, being a landlord is a multifaceted job filled with a slew of responsibilities even after you’ve settled on a good tenant. So, it’s easy to become overwhelmed.
Fortunately, you don’t have to navigate the process of overseeing your apartment investment by yourself. Contact me, Joe Fairless, to learn more about how to protect your investment by choosing the right tenants and making other smart property management decisions. With my help, you could be well on your way to achieving your financial goals in the real estate investing world.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.