People love the idea of having rental property and collecting all that money each month. So, what’s holding so many people back from actually becoming landlords? I’ll tell you what.
The proverbial “I don’t wanna deal with phone calls about a backed up toilet at 2 am!” is what comes out of people’s mouths when you ask them why they haven’t taken the plunge (no pun intended!) into real estate investing.
Or the another common concern goes something like this: “Didn’t you read that story the other day online? These renters had sheep, goats, chickens, & who-knows-what-not else living in the house! They completely destroyed the place & then disappeared. No thanks! I don’t need the headache.” And they walk away from one of the easiest ways they’ll ever have to make serious money in their lifetime without hardly having to lift a finger.
If you want to become a landlord and ignore all of the naysayers, then it’s time to learn the ways to find and keep a great tenant! Read on and figure out one of the best ways to become wealthy!
7 Ways to Find and Keep a Great Tenant
The following is a guest post from one of our regular readers! Leona W. has been a landlord for many years and has some great advice she’d like to share. Enjoy!
Here’s a real example from my own life. Let’s say you have a basement suite or in-law suite in your house and you charge $800/month rent. You live upstairs and would be paying a mortgage anyway (or paying the rent) so the $800/month is really all profit for you every month. Kind of like a second income from a part-time job—except you don’t have to go to work anywhere for that second job…or do anything hardly.
You can come home from your day job…
- make supper,
- visit with your partner, kids, whoever,
- put your feet up and watch TV while the calendar rolls on ‘til the end of the month…
…at which time you receive a pay check for 800 bucks! Yeah! That’s what I’m talkin’ about! Real money for almost zero time and effort.
Most months in fact, you’ll do ABSOLUTELY NOTHING and you’ll still get paid. So, tell me again—why aren’t more people collecting this extra paycheck? Tenants! I know not everyone can afford to get themselves some rental property but many who could are just afraid of that T-word…tenants.
(You know how to get over it? Read articles just like this and learn ways to find and keep a great tenant! Duh…)
Some of you may be thinking “What does she know about tenants?” Well, I’ve had rental property and collected some nice fat rental “paychecks” for the last 17 years—a lot of that time as a single woman working a regular job and without a significant other to fall back on to fix that proverbial backed up toilet.
I’ve had various kinds of rental property consistently for the past 17 years including basement suites in my houses, and rental property in other places in the city. And you know what? I have had to deal with backed up toilets. You know how often I’ve had to do this? Once in 17 years. And most of my properties were not new or renovated properties. They had older, seriously pooped-in toilets so the risk of them “backing up” was pretty high.
I often look back and wonder how I’ve managed to get so lucky to have such awesome tenants. And then I realize part of the reason: I’ve learned how to find a keep great tenants…with experience.
Here’s 7 (almost) guaranteed ways to pick a great tenant:
(Take note, the below is Leona’s perspective on choosing a tenant. She is careful not to deny anyone based on their religion, age, gender, disability, or family status, BUT if she isn’t comfortable with them and finds that one of her criteria isn’t met, she’s definitely moving on to the next available candidate).
1) Go with your gut!
This is my most important criteria when choosing tenants. Forget the landlord references and credit checks. These are also important to do but before you waste your time doing reference and credit checks, do a “gut check” the first time you meet the prospective tenants to show them your unit. If there’s ANYTHING that makes you feel uncomfortable about having them as a tenant, I say “Next!” and move on. I politely show them the unit and then keep looking. There’s a reason you were born with a gut-instinct. Use it every time you screen prospective tenants.
Related: Reject Tenant on Gut Feeling?
2) Keep rent just below market-value
What the heck?! And leave money on the table? Yup! You got it. And here’s why this is smart to do.
- First of all, you’ll have lots more prospective tenants to choose from who are interested in your rental. Of course, this increases your odds of finding a great tenant.
- Plus, once you find your great tenant from this slew of applicants, they’ll want to stay renting from you as long as possible because the rent is so cheap compared to what else is out there.
This means less hassle for you repeatedly finding new tenants, less chance you’ll miss out on a month’s rent because you’re searching for a new tenant, and less wear & tear on your unit from people moving in and out all the time.
I offer my rentals for approx. $100 below market-value and I’ve had all my units fully occupied for the last 17 years—even when there’s been a lot of rental properties on the market. That’s right. I’ve not missed a month’s rent in 17 years because I couldn’t find a renter. Do this and you’ll hugely increase your chances of finding and keeping a great tenant for a long time.
3) Opt for tenants without pets or children
I know this sounds bad and I’m really not anti-pet or anti-kids. I’ve had tenants with children (but not pets because I’ve renovated enough properties with pet damage). I love my nieces and nephews and I have lots of family and friends with pets and kids that I enjoy. BUT…from a business perspective and wear & tear on property, I prefer to have tenants who don’t have pets or children.
Things happen. I know. And I’ve found “things happen” more often with kids and pets so, why not avoid that if you can?
Remember, federal and state laws prohibit housing discrimination based on various different criteria so be sure you’re informed of and following the laws in your area. However, all things being equal and you receive 2 or more rental applications from prospective tenants within the time period that you’re accepting applications, why wouldn’t you choose a prospective tenant that you think is the best fit for your rental property? It just makes sense.
4) Choose non-smokers
Trust me! You want non-smokers every time. Sorry but they will likely smoke in your unit even if they say they won’t. We’ve had this happen to us a few times now. We even had a property manager rent a condo from us in the same complex he managed. We told him we didn’t allow smoking in our unit and this was written in the rental agreement as well. He told us that wasn’t a problem because his wife only smoked outside.
Over a year later, he and his wife moved out of our condo and when we went to do a walk-through of the unit, a wall of stale smoke hit us as we opened the front door. What the H-E-double hockey sticks?!! My husband and I were livid.
So, my husband phoned up this property manager/former renter of ours and asked him “if” anyone had ever smoked in the unit. “Well, my wife did the odd time when it was too cold outside and she didn’t want to go out. Why? Can you smell anything in the unit?” Smell anything??? Our noses were burning and we could hardly breathe in there! And the nicotine stain on the formerly beige colored walls was disgusting.
After having the carpets cleaned twice, applying 3 coats of paint ourselves, and having the windows open for a week with industrial fans running day and night, we finally had to pay to have an ozone machine brought in to treat the unit and neutralize most of the smell. Unfortunately, the smoke smell still wasn’t totally gone after the ozone treatment. We decided to sell the unit and not rent to smokers ever again.
It took us 2 weeks of our time to paint the unit plus hundreds of dollars out of our pocket in addition to the damage deposit to remediate the smoke damage. Lesson learned the hard way.
5) Advertise for long-term tenants
Once you find a great tenant, you’ll want to keep them forever. So, be sure to include in your rental ad that you’re looking for a long-term tenant. By this I mean a tenant who is prepared to sign a 1-year lease. Again, who wants to spend any more time than necessary looking for new tenants and having more wear & tear on their property from the revolving door of tenants coming and going? Selecting tenants this way has helped me retain my tenants for 2 years on average. Some of my tenants have stayed for more than 2 years. And that’s because I…
6) Rarely (or never!) increase rent for great current tenants
Again, you’re probably thinking “What the heck? She’s leaving money on the table!” Maybe. But it also depends on how you look at it and what’s important to you as a landlord.
I don’t like having to find great new tenants. It’s hard. Ok, call me lazy. It’s a risk.
Will I find someone as good as the last tenant I had? What if I can’t find someone I want to rent to before the beginning of the next month? I’ll lose out on that $800 rent.
I know I keep harping on wear & tear but again, there’s more dinged up walls, scuffed floors, and dirty carpets when you have tenants coming and going like it’s a Motel 6. Not interested! Just give me a GREAT tenant who pays the rent on time every month who wants to stay forever (or almost!) and I’ll hold off raising the rent as long as I can.
7) Advertise to get single individuals as tenants
Yikes! First I say no kids, pets, or smokers ideally. Now I’m saying “look for single individuals”? What gives?
Again, I’m saying this from a business perspective and from 17 years of experience renting to lots of people.
I actually just realized this myself a few years ago when I was getting ready to post a rental ad for a new tenant for our basement suite…
- Our tenants who just moved out were 2 sisters who signed a 1-year lease and said they wanted to rent from us for a year but they started not getting along. One moved out to live with her boyfriend and didn’t want to keep paying her half of the rent (understandably) so they decided to give us notice and break their rental agreement.
- Another couple was dating and broke up while they were renting from us. They gave early notice and broke their rental agreement with us too because they obviously didn’t want to live together anymore. In hindsight, I realized this was another pitfall to keeping great long-term tenants.
The solution? Advertise in areas where more single people would see your post.
- The library
- Nearby colleges
- The video game store
As noted above though, make sure you’re not discriminating against families and couples that also meet your criteria. If you get a family applicant that fits everything you’re looking for and applied before all the other candidates, you are required to offer them the unit first and foremost.
It’s Time to Find and Keep a Great Tenant
Follow these guidelines and you’ll be much more likely to find and keep a great tenant. In addition, you’ll spend minimal time and money maintaining your rental property while putting some serious cha-ching in your pocket! Less hassle, more money. Perfect. You can do this!
If you’re a regular reader and would also like to contribute your wisdom on this blog, let me know! Email me at derek (at) lifeandmyfinances [dot] com so we can chat about your options!
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.