Rental properties are a recommended way to diversify your assets and to build passive income. But how passive is it? Tenants never treat your property like you want them to. Is it possible to find a tenant who will treat your property like a home?
SAVE MY RENTAL:
WHAT YOU NEED TO KNOW
ABOUT TENANT SELECTION
TIP 1: Meet with your prospective tenants.
Do you have the opportunity to show your properties and meet applicants yourself? If you are your own property manager (or manage properties for someone else), I recommend showing your properties personally. Make a note of how applicants present themselves. Are their clothes in good repair? How is their hygiene? How do they stand and speak to you?
Not all tenants will present themselves as a confident and educated individual, and that’s ok. You are looking for respect, honesty, and genuine answers. You are looking to make sure they take care of themselves, because if they can’t care for themselves, how will they care for your property?
TIP 2: Make sure to have an application.
I am always interested to see how many wish to take it with them, versus how many want to complete it right there and then. Of the ones who complete it right there, did they come prepared? Did they bring a pen? Do they know their employer’s number?
If they choose to take the application with them, I would say it’s a one-in-three chance of actually receiving the application, if not less. Take note of the condition of the application when it’s returned to you. Is it still in pristine condition, or are there remnants of yesterday’s breakfast on it?
TIP 3: Ask where they work, and what their income is.
Seems like a “no-brainer” but knowing their income is a great tool to know if they can afford your rent. I like to use the 30-35% rule.
Example: if their family income is $2,000/month, then 35% of that amount is $700.00. If the asking rent was $700 or lower, then they would be considered. If a family earns $2,000 and they are applying for a $1,000 rental unit, I would not consider them because of the risk. One sick day, a layoff or even jury duty could undo their finances. The math does not work in their favour.
Secondly, I’m about to let you in on a little secret. How do you check if your applicant works where they say they do? Most phone providers and cell phones have a number blocking option. Block your number, call the employer and ask for your applicant. You are looking for a positive confirmation that they exist. If they ask you who you are looking for, and don’t recognize the name, then there’s a good chance Tommy Jones doesn’t work there.
By blocking your number, you cannot be traced back, and your applicant will not get into “trouble” for receiving a personal call.
Sly Side Note: Ask for “Tommy”. if they say Tommy who, then give the last name. Most people do not call and ask for someone by their first and last name.
If they ask who’s calling, you will need to be creative. You could just answer with “Stacey, just returning his call.” It’s also ok to say wrong number if you haven’t used the last name.
TIP 4: Ask for references.
Did you know it’s more important to SEE references than it is to call them? Are their references from work? Good. Friends? Ok. Family or service providers? Nah.
Not everyone will have a great list of references. However, if they do not have one or two professional references, then my next question would be, why not?
A service provider will be limited in what they can say, if anything at all. A friend or family member is not likely to speak honestly about the applicant. Work references are more likely to be honest, or at least refrain from commenting on any “bad” stories.
Sometimes the results of asking for references shows more about the character of the applicant than what the actual references say.
TIP 5: Listen to their stories.
Ask questions. Listen. Here’s a little insight to what you will find.
Ask the applicant why they are moving.
A) I’m new to the area.
- Ask where they are from, why they moved there, who’s in the area. If they are without any strings, you could be looking at a tenant who might rock a midnight move. If they are not answering any questions, they could be hiding something, and as a property manager or landlord, you do not need drama.
B) I didn’t get along with my boyfriend/girlfriend and/or mother/father and/or neighbour/etc.
- Drama. Tread carefully. This could be a choice to create better boundaries OR this could be a tenant who is always the “victim” of some conspiracy.
C) I didn’t get along with my landlord.
- Pay rent, keep the peace and maintain your unit. There’s not much else that a landlord asks for. What didn’t happen that your landlord “hated” you? Ask more questions. Beware of drama.
D) Looking for more room/less costly place/somewhere to stay longterm because…
- These are more truthful answers, and less based on drama.
Remember that properties have labels too.
The amount of rent you charge will also dictate the applicants you receive. The lower the rent, the lower the income of the applicants you will generally receive. The higher the rent, the more diligent you will need to be of higher value properties, but that usually means the applicants are of a higher income stream as well.
Do not misunderstand the above as taking away from anyone in crisis. That is a different situation altogether, and every effort should be made for those in crisis. Unfortunately, it’s like the boy who cried wolf – too many times, people will use a crisis story for sympathy, and it’s not real.
TIP 6: How did they get to the property?
Notice the method of how they got there. With a friend/family member? Do they drive? What kind of vehicle do they drive? Is it in good repair?
TIP 7: Deposit/Last month’s rent
How do they want to pay for the deposit/last month’s rent? Do they plan to give you a cheque that is certified or a bank draft? Do they want to give you cash? Some will also ask if they can split it up, and pay it as they go. (The last option is usually an indication of affordability – see #3)
TIP 8: Know your rights as a landlord and as a tenant.
If you want the respect of a tenant, don’t be a greedy or sneaky landlord. By knowing the rights and responsibilities of being the landlord in your area, you will make better decisions and more importantly, ones that will stand up in court – if it goes that far.
For example, the following are not allowed in Ontario (in regular rentals):
- No pet clauses are not allowed and cannot be enforced
- You cannot demand payment by post-dated cheques
- You cannot require a pet damage deposit
- The only deposit allowed is equal to, and represents, one month’s rent
- Tenants cannot be held responsible for (a lack of) snow removal or lawn maintenance
Remember that respect can go two ways. Be the first to give it, and the good tenants will give it back in spades. (Or at least rent and care of your property!)
TIP 9: Pets
Ask about pets. You may have a bias towards those who have pets in rentals, but the best advice is to not share it. Ask if the tenant has pets, and listen to the answer. If they have pets, but plan to rehome them, I don’t think I would believe that.
If they have cats: are the cats declawed? Neutered? Spayed? Up to date on shots?
If they have dogs: what size? Are they trained? Does someone let them out during the day? Are they friendly? Are they neutered? Spayed?
TIP 10: Insurance
Lastly, require tenants to show you proof of tenant insurance. It may not be something you can require or mandate in your area, but you can certainly ask and recommend it.
It’s much like anything in life – the more you respect your surroundings, the more you want to keep things in good repair, insure in case of loss or emergency, and pay to keep a roof over your head.
Take your time, and show your unit to as many people as it takes to get a good tenant. Waiting an extra two weeks for a good tenant far outweighs the months required to get a tenant evicted. Use your “gut instinct” and don’t be taken in by stories of false loss.
Don’t show units alone. Bring a friend or a partner. Have them act as the handyman if you don’t want to be obvious.
If you are showing the unit alone, leave the door open, and unlocked. Be sure to keep the door closest to you. Bring your cell and have an emergency number on quick dial.
Show units in daylight hours. If you must show at night, bring someone or your dog.
Leave a note on your calendar or at the office that says who you are meeting, their contact number, and the time of the meeting.
Stay alert. Be cautious. Most people are good people, but you never know which one will make you wish you listened to that twinge of concern.
I hope that you find the tips helpful. Please feel free to submit your questions below, as I love answering real estate questions!
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