Tenants are vital to the success of every investment property. In the long run tenants pay off the property and assets. It's left in their care, normally with a minimum amount of direction. Quality renters add to a great investment experience. Lousy renters will often convert a wonderful income property into a massive problem.
How do an individual pick out renters for income property?
You ought to judge three matters: character, collateral, capability.
Character is identified by a meeting. Prepare a credit form that asks for name, date of birth, address, employment, past residences, car, etc. The objective of the credit application is twofold. The specifics themselves are beneficial, but each question will give you the option to embark upon a discussion with the prospective renter. Don't be reluctant about asking personal questions. Be sure to remember that you are thinking of entrusting the tenant with an incredibly valuable asset over a protracted period. Its not a one time sale. The fact is, it's almost like getting married. Try to determine as much about the renter as you can, and see how you get along with them. I like to ask potential renters to tell me about their work and how their business operates. You'd be amazed how much some people will open up about their jobs, and when a renter can explain the ins and outs of their employment in detail its an indication that they're telling the truth about their job.
Don't be afraid to ask about marriage break ups, or relationships, if they come up. If a single parent mentions that they have kids two weekends per month expand the chat. You may find the kids live very close, and that they used to own a house nearby, or that their credit was impacted as a result of the divorce. This will impact your choice.
The best measure of character is the credit report. Always do one of these. Make it standard operating procedure.
Collateral consists of the security deposit, and any other deposits that can be legally collected, like a pet deposit. Illegal, or off the books deposits are . In some jurisdictions a renter can unilaterally apply excess deposit funds to rent.
Generally speaking the collateral represented by a deposit will not be sufficient to cover any actual damage, so its nice that there is other collateral in case of a actual difficulty. You may not get a charge or pledge against it, but if the tenant owns a car, an RV, a boat and some quads, and they're in decent shape, you could assume that the prospect is pretty reliable (don't choose a junk collector with a lot of busted toys).
Capability, or capacity, indicates the renters' power to pay the rent. This means getting a look at bank statements or backing up claims of employment. Ensure that the job is real. Google the company. Talk to the prospect's superior. Make sure that the work on the credit check is the same one as thejob on the credit application. If there are multiple tenants make certain that you get employment information for everyone.
Occasionally tenants are on pensions, either old age or disabililty. Make sure you talk with a pension administrator for verification. You might need the tenant's permission, so try to obtain it before hand.
A couple of last thoughts. First, asking personal questions is best done when the stress level is down and everyone feels comfortable. Its your job to get the renters to that state, because its your job to get the info. If a prospect won't open up, don't pick them. They'll probably going to be tough for you to deal with, for whatever reason. Second, references are not worth what a lot of people imagine they are. People almost never give poor references, so when you call on a reference you can bet that they'll say the tenant is fine. Yet, if the renter turns out bad, the reference isn't likely to pony up for lost income. If you want to test a reference, ask them to be a gaurantor.