You have just purchased your first investment property, you fixed it up, and now you want to start getting a return on your investment. The key ingredient here is to find a tenant. You want to find a good tenant, one that pays their rent, and does not complain too much right?
Well there are a few ways to go about this. You can put an ad in the local paper, and you are very likely to get many responses as many people prefer to rent. A tenant will scour the local paper and may phone quite a few places, and yours could be on the list.
Find a Tenant in the Paper
The only problem with this scenario, is you have no idea who they are. You will have to do a thorough tenant credit check and check references. This is a good thing, you should do this with all potential tenants. But another good way is word of mouth.
Word of Mouth
When you purchase the property, mention to the real estate agent that you are planning on renting out the property, she just may know someone, or the lawyer, the banker. Let your friends and family know, and chances are they may just know someone who would make a good tenant for your property.
Personally, word of mouth worked well for my property. We were renovating this property, and I wanted to install a new kitchen. The local Home Depot was my best friend during this renovation, and I got to know the staff quite well. The kitchen designer, worked with someone looking to rent and had been describing our renovations to her.
This is how we found a tenant. I still did a reference check, and credit check, but she worked in the same town as the rental, and was highly liked by her co-workers.
Keep it Business to Find a Good Tenant
It is good to like your tenant, and that helps in the long run, but you need to start off your conversation with a business point of view, like you are interviewing for a job.
I had a list of questions to ask the potential tenant in our first conversation. Based on these answers, I would decide whether I wanted to go any further. For example:
How long have you lived at your present rental?
Why do you want to leave it?
Can I contact your landlord right now?
Where do you work?
Will you produce a credit check for me?
How many are there in your group or family that wants to rent my rental.
Can you afford this rent?
Will you sign up for the utilities?
These are some good basic questions to get a conversation going. You will notice right away if there are any hesitations. If your potential tenant has to roll their eyes up to think about it and come up with a answer they think you will like, chances are they are lying, or you caught them off guard.
The one question that worked well for me, was "can I contact your present landlord right now?.. I was standing there holding my cell phone. The first person, suddenly started explaining why their landlord hates them, and that it was not a good idea, until she talked to them... I did not get a good feeling..
The tenant I do have, was through word of mouth at Home Depot, and as soon as I said can I contact your landlord now, she was actually rifling through her purse looking for the number, and then gave it to me.
She was presently living in a 2 bedroom house, and needed an extra bedroom, and wanted to be close to the school that our rental was near. She was quite happy to produce a tenant credit check, and told me upfront any financial problems she had in her past.
I felt comfortable with this one right away. I did phone the landlord, and then I got a reference in writing. I also visited the rental she was at, and asked the neighbors about her. There had been no problems, or noise complaints, no crazy visitors, and they were sad to see her go.
There is no fail safe way to get good tenants, but if you do a bit of homework in the beginning, then you and your tenant should get along nicely.
Use a Local Lawyer
Another tip my lawyer gave me, was to use a local lawyer when purchasing your rental or investment property. A local lawyer is in tune with most of the "dead beat tenants" in the area, and would gladly scan your list of potential tenants.
Also get your lawyer to draw up the lease. Yes it may cost you, but if you have a local lawyer to the rental property, they are aware of many of the potential problems in that town.
Lawyer Written Lease To Find A Tenant
He wrote things into the lease that I had never thought of, plus if you have a lawyer written lease, it can make it easier to evict a tenant, compared to the pre written leases you can get at the office supply store, or off the internet that can be disputed.
My lawyer did a good job on a basic easy to read no big words tenant lease. It basically had a couple of blanks for me to fill in (the rent and the length of the lease)
One great way to do a tenant credit check, is by getting them to sign up for the local utilities. If the local utilities does not want them, then chances are they will not pay your rent. This was advice my lawyer gave me and this has worked like a charm. I had one potential tenant, that I interviewed, who sounded great, had a good job, but when I told him he would have to pay his own utilities, he was OK, thinking that I was getting them and he was to pay me. It was only when I gave him the form that the utility company gave me to give to a tenant, to get utilities in their own name that he look panicked. Then starts telling me the fight he is in with hydro, and how they cut him off twice for this or that, and how the gas company charges too much... I said "sorry" that is the deal breaker right there.
This usually works well in a house situation, which is what I have. You can also have your name in the background at the utilities as the homeowner, and that they are to let you know if the tenants default on utilities. After all, this is your house, and you don't need the heat or water cut off. It is grounds for eviction. (that was put in the lease, that they must keep up with utilities)
To get a good tenant, you also have to have a good rental. If you want to get the higher end of the scale for rent, then you should decorate or renovate your rental with this in mind. Would you live in it? Just keep asking yourself this question. To get respect from a good tenant, you also have to be a good landlord.
You never seem to hear about the good tenants, just the bad ones, so don't let those horror stories ruin your future financial plan.
Get a good local lawyer for the property purchase
get a lawyer written lease
word of mouth amongst the professionals you use
ask the tenant for a recent credit check (let them pay for one)
follow up references, and make sure to get a landline or an address for the previous landlord.
renovate or decorate as if you would live in the property.
This way you will find a tenant to rent your property.