So, after you've followed the criteria for purchasing a rental investment property and snapped one up, how do you screen your potential tenants?
I've been a landlord for a few years now and I've seen it all when it comes to tenants. Good ones, bad ones, all shapes/sizes, and all financial the predicaments you can think of.
When I first started landlording, I didn't have a lot of specific criteria when accepting tenants. I basically took anyone who was willing to pay me money. Big mistake. I was completely naive to the fact that not everyone is responsible with money and can/will pay their rent on time (or ever).
From my mistakes, I have come up with some rules that must be followed before I allow a potential tenant to move in.
1. Must have a verified job
- This may seem obvious, but I've had tenants who told me they had jobs but turned out not having any steady work. No work, means no money to pay rent. Simple solution, make sure they show you a recent pay stub along with employer contact info so that you can call to verify employment. Note, I don't have any student housing, so this rule may not be valid in that situation.
2. Must have at least 2 good references (from previous landlords preferably)
- Get referrals from landlords prior to their current landlord. Their current landlord may give them a good reference just to get them out of their place. To me, landlord referrals are extremely important when screening tenants.
3. Should have decent credit
- You can get the tenant to show you their most recent credit report, or you can get it yourself from various sites online. Tenants with poor payment history usually results in a higher probability of rent payment default.
4. Must have enough cash for a security deposit and first months rent (see local rental guidelines in your area).
- If the tenant doesn't have the cash for security and first months rent on or before move in date, then I move on. Some tenants will try to pay you a portion of each because they don't have the cash. To me, having some cash in the bank shows money management responsibility which means lower chance of rent default.
5. Prefer not to have a single older lady (or man) as a tenant.
- Nothing against single older ladies (or men), but from my experience, they are very needy as tenants (am I going to hell?). I'd prefer low maintenance tenants.
- However with that said, I would accept them providing that they meet the other criteria.
6. Prefer no pets.
- I don't mind if the cats are spade/neutered (spray is deadly), but not all pet owners are that responsible. I love dogs, but tenant dog owners don't seem to clean up after the dog in the yard. So I just keep a general rule of no pets.
7. Absolutely no smoking inside the premises.
- This one is self explanatory. Smoke causes a stink that lingers. The only way to get rid of the smell is to wash/repaint the walls and/or wash/replace the carpets. Besides, indoor smoking in Canada is slowly becoming taboo.
8. If one tenant is viewing the home, I must meet all parties before application is accepted.
- If the potential tenants are a couple, it's usually the good one who views the apartment. I've had experiences where I accepted a new tenant based only on meeting one of them and it turned out to be a big mistake. The 2nd tenant turned out to be psycho. Never again.
Can you tell that I've become a disgruntled landlord? :) For you landlords out there, do you have any tips for screening tenants that I didn't mention?If you would like to read more articles like this, you can sign up for my free weekly money tips newsletter below (we will never spam you).