Why am I getting low quality rental applicants?

[Kenya Arnett]

Hi all! I'm new to BP and new to this real estate investing world. My husband and I are under contract for our first intentional investment property (to which we will be moving and renting out the basement.) We own our current home and have listed it for rent. This is where I need help. Its been listed on a well known online local classified site since 2/12 and I've had a steady stream of people calling and coming to see it, and have gotten a handful of applications. The problem is the quality of applicants has been pretty poor. I'm getting all the people with sob stories, who barely make the minimum 3X rent, have past bankruptcies, have unreliable rental history (renting from family, or other "landlords" that seem questionable), people who smoke, illegal immigrants who work under the table and don't have verifiable income, etc. (the list goes on). Here is the listing: https://www.ksl.com/homes/listing/rentler/?ad=1793458 Am I doing something wrong? Could it be that I'm asking too much for rent? Any thoughts or suggestions?

[Michael Boyer]

You will get better and better at this over time Kenya! There are lots of tips on BP for the overall process. Here are some quick, general ideas.

Some good news:

1. The place shows well (I might take down a few photos and the cat tree but otherwise looks good). 

2. Interest is high (so the ad and marketing is working)

3. Your application or process is screening out those that are not a good fit (actually good news, more than bad; bad news being they are getting through and becoming your problem tenants).

Some Ideas:

1. Check the "all in" costs of comps. The ad would seem to pre-screen tenants some financially with the terms: deposit (2.4K) and rent amount (1.5) or $3,900 to move in. Decent chunk of change for your target market I would guess. But I might double check if that is common for the move in cost for comps. It could be that the very best, most creditworthy tenants are getting the better deal or lower move in costs (savvy shoppers) and know the opportunity costs of money. Or you could add more specific screening criteria up front in your post if you want to narrow the funnel more (you do state credit and background check, so maybe they are not reading it all; so less could be more in the info on the listing, or position it higher/more prominent/ALL CAP CREDIT CHECK, etc).

2. Be realistic, but don't settle. Renters in general are financially fragile in America (see this study for example:

http://www.finra.org/newsroom/2014/finra-foundatio...). 

So you want to be realistic, without settling. That is, get the best possible renter for your market and your property. But keep in mind those with ideal credit and work history may well own or be buying (like you!). Make sure your process and criteria can realistically and reliably produce people who pay the rent and respect the property. They need not be perfect.

3. Vacancy beats a deadbeat any day. I would keep marketing, maybe try a new channel or two with a different demographic, keep polishing the place up, and accepting applications until you get someone who meets your criteria. A strong tenant could be your next call.

4. Keep Improving the Process:

• Study your market, make any necessary adjustments to terms or price or application process. For example, would a six month renewable be worthwhile or a slightly lower deposit.
•  Have an honest third person go through the mock showing/open house, and application and get feedback (smells, fees, deposit amount, curb appeal, rapport, etc). Make sure a strong renter will not be deterred at any point. Ask specifically about any defects in the process.
• The pet on approval angle might be one to sell more (but just leave it at that and pull the cat clues if possible for showings). The stronger "cat" friendly bias in the ad may turn off some good renters from applying. 
• I would put No Smoking in the ad to screen them and not waste their time or yours (not sure if that was in the details). 
• Make sure the applicants can see themselves (psychologically) in the place, so the very personal items might be taken out for showings.
• Imagine your target market (e.g., young professional couple with a pet, etc) and gear the marketing process to them and what might appeal. 

Best of luck