How do you find great tenants?

Question

We set our requirements and have interviewed so many people. I’m wondering if our requirements are too strict.

The market is great. The house is awesome, great neighborhood. People want to live here.

3 families have offered me a year cash up front to skip the requirements. (I don’t get it. What happens year 2?)

My requirements are:

3x DTI

Stable job/income

700 FICO

Good rental history

No cats

1st, last, security upon move in.

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Sharlene Mulchandani · Answer

I would suggest lowering your credit score requirement, because 700 can tend to be quite high. Most landlords usually just charge the first month's rent and the security deposit, so that's another thing I noticed. I wish you all the best with your search!

Jessica S. · Answer

My experience is that people are just really unpredictable so rigorous screening isn't that helpful.  When I was just starting out as a landlord, I rented to someone who seemed perfect on paper.  Except, as it turns out, he was so perfect that he decided to break his lease three months later so he could buy a house.

The next family I rented to had terrible credit because they'd done a short sale.  They were annoying people, but they always paid their rent in time.

Someone above said not to rent to anyone who offers rent a year in advance. I rented to someone who offered me a year's worth of rent in advance because she really wanted the house. (I said the advance wasn't necessary) She's been a good tenant.

That said, your requirements don't seem that rigorous to me, but maybe they are in your area.  I usually give renters the option of paying their last month's rent over time so the upfront cost is more manageable (first half is due on Day 15 of month 2 and second 1/2 is due on Day 15 of month 3) do you think that might help?

Oh, I just noticed you're local to me.  I have rentals both in Portland and up in Sandy.  My requirements for tenants in Sandy are much lower.  There, I basically just look for someone who is employed and assume they will have bad credit. I've never had to do an eviction, and all my tenants pay their rent, even during Covid, but it really is just luck, I think.

Dennis Cosgrave · Answer

This may sound a little weird but I developed a 6th sense for problem tenants. I just get a bad feeling regardless of how good the paper work is. Another little trick I learned, was to take a look at the prospective tenant's car. If it was dirty and the interior was filled with trash, that would usually reaffirm my bad feeling. If that is how they treat their own property, are they going to treat your property any better? Btw, I had only 2 evictions in 25 years with 50+ units.

John Teachout · Answer

We use 600 for a credit score and even that screens out a lot of prospective tenants. The first and last months rent seems to be a regional thing. No one that I know of collects a last month's rent around our area of Georgia. For most tenants, the first month's rent, security deposit, animal fees and deposits they need to pay to the utility companies is a huge amount of money for them.

Jon Morgan · Answer

@Kenneth Garrett agreed, 700 credit score is high, 650 would be a good lowering point. Maybe even 625?

David Jay · Answer

I found the best way to get great tenants is to have a great product at a realistic price. I focus on A to B SFRs and remodel with laminates ot LVP, granite counters etc.....I’ve found if I put $20k in a house I’m usually getting about $3k a year in extra rent which is a 15% return. I’ve had no problems asking more then the same house down the block with stale carpet and old appliances. I find tenants that value cleanliness and style and are willing to pay for it. They generally treat the properties well, pay timely, and stay for a spell. The lower turn overs and lower hassles are worth the investment. I use smart move to screen. I don’t focus so much on credit score, there are good people with lower scores due to student loans, divorces and medical bills. I focus on job stability, current cash flows, and history of paying rent on time and treating property well. I’m OK with pets when the owners are responsible.

Jim K. · Answer

For us, with a small number of tenants to place every year, the main thing is screening. You'd be amazed what you can learn about people online through local public records and other sources, and that's not even bringing out the big guns, paid screening. I frankly make my tenants work if they want my rentals. They give me a lot of information upfront, before they even see my rental, and I painstakingly check them out. Then comes a video walkthrough with Zoom (COVID-19 has really helped make this the new first walkthrough), and Round 2 on the information/background checking.The flakes usually balk at the initial detailed questionnaire, because it's obvious from it that I know the score when it comes to weeding out bad tenants. So when I get to the end, and I've assembled what I feel is a realistic picture of these people, I then pay to have them checked out by TransUnion Smartmove. I suppose I could make them pay, but it's an insignificant expense by that point and almost always unnecessary.I firmly believe this is easier to do in long-term C'class SFR than in other properties. Obviously, if you're looking for new people for 100 units who turn over ever year, a student housing situation, you can't do this, but if you're looking for people who stay an average of 6-7 years in your 25 rentals or less, I think this is the best way.Another thing is carefully figuring out what gets you quality applicants. You can put out a promoted Facebook Marketplace listing with pics taken from a decent camera with good lighting and you'll get hundreds of applicants over the course of a week. Half of them will tell you that they left their last job because they were unfairly put upon there, the rest will assure you that they make well over your income requirements even though they can provide no proof of it. We tend to advertise the low-tech way, bulletin boards in larger places of employment where we think we'll find a good match.

But if you're offering a very good product at the right price in long-term C'class, sooner or later you'll have a waiting list, people who need to wait out the rest of their lease before they can get away from their own landlord and rent from you. Our best leads tend to come from word of mouth. It's amazing how we tend to discount how much our tenants stand around a water cooler or coffeepot at their place of employment and gripe about their LLs to other tenants. If your tenant has the fewest obvious gripes around the cooler or coffeepot, sooner or later you're going to get inquiries.

Calvin Ozanick · Answer

NEVER FALL FOR THE CASH UPFRONT TRICK. Make sure your tenants meet your requirements and do not violate those. I wish you the best of luck on your search. Never deviate from your system and then you can know you are placing good people. If you are struggling to find the right people, maybe you can then loosen your requirements a bit in smart areas.

Jill F. · Answer

https://www.experian.com/blogs...

The average FICO score by age doesn't surpass 700 until the 50-59 age bracket. If you are looking to rent to families with school age children, you might have to relax your FICO requirement because the people with above average FICO scores are qualified buyers, and not likely long term renters.

Zachary Ray · Answer

As I know you already are, I would avoid paying cash. Certified funds only, or get a software for rent collections. It can get real messy dealing with money. I think it may even be illegal in some places. Your requirements seem right on par. Would you automatically deny someone whose credit score is under 700? Maybe allowing pets could be a great way to attract more applicants. Just be sure to collect the non refundable fees and charge pet rent if needed.

How do you find great tenants?

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