Epic Real Estate Investing - How to Find Good, Long Term Tenants | 778

Episode Date: September 17, 2019

This week, Mercedes shares what she and her property managers do to find quality and long term tenants. Reducing tenant turnover by keeping the good ones for a longer period of time can help you be a more profitable landlord and investor! Therefore, tune in, and take a listen. Our turnkey girl has some hot tips for you!   Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. So you want to be a real estate investor, but you don't want to do the work. If there were only a way where someone else could do it for you, now there is. Tune in here each and every Tuesday on the Epic Real Estate Investing show for Turnkey Tuesdays with your host, Mercedes-Torres. Hello and welcome, welcome to Turnkey Tuesdays, brought to you by Epic Real Estate Investing. My name is Mercedes Torres, the turnkey girl. And I am lucky enough to be partners in crime with Mr. Matt Terrio, the guy who created the epic real estate empire.

This show is for busy people, busy people just like you who understand the importance of real estate, but just don't have the time or the desire to do it all yourself. So if this is your first time here, glad you made it. make yourself at home. If this is not your first time here for my repeat listeners that come back every single week, glad you made it, my friends, good to see you again. So, for those of you who already own properties, it is no secret that the loss of tenants, or better yet, the loss of rents, just absolutely sucks. Tenet turnover is awful. It will cost you time, effort, brain power, and money. So reducing or eliminating your turnover expenses by finding and keeping good tenants longer

can help you be a more profitable landlord and a better investor. There are many advantages to finding the right tenant and keeping your tenants longer. I mean, every minute that your unit sits empty, it's costing you money and the expenses can run up to thousands of dollars. Now, in many cases, the incentives that you offer your tenants could potentially cost you much less than the expense to carry a vacant unit. So on today's show, I'm going to share with you what I do for my properties and what our property managers do to find quality tenants to not only occupy my property, but to stay in my properties longer. Now, I personally do one-year leases at a time because I like to increase the rent every year.

However, with that being said, my tenants stay an average of three years and nine months. And generally speaking, I even have tenants that I don't even know their names because they pay their rent every single month and they hardly call the office for maintenance. And that's what I shoot for. I shoot to find the tenant that's going to stay in my property for a lot. long time and that I hear as little as possible from. So here's how I do it. And I'm going to share with you exactly the five points that I really go out of my way and that my property management teams go out of their way to exercise so that my tenant is happy, pays rent every month, and stays the longest. Okay, here we go. So number one, I create a

a detailed rental application. Now, it's taken me years to create this application, but using a rental application to screen potential tenants, well, that's a no-brainer. But knowing what to include on the application itself can really be confusing. And over the years, I've been able to perfect what's important to me and what I've been able to detect what keeps the tenant happy, thus keeps them in my property longer. Now, if you don't include the right questions on your application, you'll have no way of weeding out the potentially great tenants from the potential nightmare tenants. I am very specific and I state up front what I'm looking for. And I not only state that in the body of the rental advertisement.

But I also stress it once the application comes, or once they ask for an application, whether it's us handing them an application personally, or whether it's them downloading an application online. I make it very clear what I'm looking for. So I say the minimum household income for this property is X amount. generally looking for a $50,000 a year for certain properties. Sometimes it goes up, sometimes it goes down, but generally I state it in black and white,

very clear as to the minimum household yearly income. I also even state the credit score. Now, that will also fluctuate, but I never look for a tenant with a credit score less than $620. Now, that's a good score. it's an okay score and there are some landlords that will accept a lower score and we'll talk a little bit about that as well but I do state what my minimum credit score requirement is and I also state if I'm willing to accept pets or not now there are some properties where I do not want pets

and there are other properties where I'm perfectly okay with pets I love pets but I make it very clear on my application whether I'm going to accept pets or not. And I also make very clear that they can have no previous evictions and I state no smokers across all of my properties. That is an absolute must and I make it crystal clear from the get-go that this is exactly what I'm looking for. So this information makes it clear to what type of applicants will be declined. So when I decline an applicant because of one of these reasons, it's very easy for me to say your application was declined because my minimum FICO score was this and your FICO score falls below my minimum requirement.

Now, that allows the door to be open. If I do get a FICO score, that's a little below my minimum, but there's a reason. but there's a reason for it. And if I want to know what the reason is, well, I have an application and I've gained the right to ask questions. You may still receive application, my friends, with qualifications that, you know, don't meet your qualifications. But generally, if that's the case, they will explain if they wish to proceed with the application process. Next, I ask for personal and professional references that are not related to the applicant. Rather than just looking at the information that I receive, friends, I take the time and I call the references.

Oh, and one thing I absolutely do is I call the previous landlord of my applicant, not the current landlord that's currently leased. to them, I call the previous landlord. Now, I'm sure you're asking as to why, while I do this. Well, for example, if the tenant is terrible and they are currently living with a landlord that can't wait to get rid of them, that doesn't pay their rent on time, that is demanding, and that conducts unlawful activities in their residence, for example, the current landlord may be dying to get rid of them. So this is the reason why I call the previous landlord, because the previous landlord has no skin in the game and there are likely to answer more truthfully than what the current landlord is willing to disclose at the time. Then I dive into detailed questions about

what's important to me about the particular tenant. I also dive into the employment history of the tenant. Now, I ask for two years of employment history, and it's okay if they don't have a lot of employment history. But seeing how often the applicant switches jobs is critical. It will give you a really good idea of whether or not they're stable and reliable. That is really, really important to me. And an individual that job hops, that changes job frequently, says a lot about their character. And there's a close resemblance to how a potential tenant acts at work. And when their employment to how they behave in their own residence. So same thing goes for previous rental history. I follow up, as I mentioned previously, on older landlords. And I asked those older landlords

about their timely payments, the housing condition. How did they keep their house? And particularly, particularly how they kept their lawn. That's really important to me. With all of my tenants, once the tenant moves in, the gardening, the lawn, the trees, that's the tenant's responsibility. So I want to know with, you know, by asking their previous landlord and their current landlord, how they're keeping the house and how they're keeping the lawn. Now, any good tenant, will have nothing to fear with you talking about the previous landlord and asking the previous landlord questions. Now, you must follow the Fair Housing Act, and it is your responsibility to follow the laws to the finest detail. And this is one of the reasons I employ a property

manager because I am in 10 different markets and in each market the laws are different. Naturally, I'm in different states. So the rules apply differently. So I make sure that I'm very specific and that I'm careful as to what I'm asking for on our rental applications and what I can advertise. Okay. Now, also very important. Number two is a credit.

check. I ensure that the credit is decent and that their debt to income ratio is on point. Every landlord knows that they should run a background check on potential tenants, not only for them personally or their criminal record, but more importantly, or just as important, is a credit check. Now, a credit check is a useful tool for determining whether or not your particular potential tenant is financially responsible. Credit checks will let you dive into previous bankruptcies and prior evictions or civil judgments related to their financial history. But for me, my friends, a credit score, believe it or not, is not the end-to-all-be-all. I merely use the credit score as a starting point. And here's what I mean.

If I see a credit score that is low due to, for example, medical collections that transpired, you know, eight years ago, I start asking what happened. There's usually a story. And if I see that there is an attempt to rebuild that credit and the newer stuff, like I'm talking three years back, is starting to get more on. point, more parallel to show that this individual is making an effort to get back on track. I absolutely will consider that tenant, even if the FICO score falls below my minimum. And I will have a full-on conversation with a potential tenant as to why are these in collections? Is there a payment plan? are you doing something to mitigate it or is it just going to stay on your credit forever?

I absolutely have those conversations if and when I see that there's some type of reestablishment happening. However, if I see a car repossession on their credit or collections from a utility company or a water company, there is no way in hell I'm going to rent to them. And here's why. You see, if a tenant allows their transportation to get repossessed or if they have a utility company on their credit, meaning they didn't pay their water bill or their electric bill. And it shows up on their credit report, then there's no hope, my friends. I mean, if they don't pay the car or if they don't pay their lights, what would make me think that they're going to pay their rent? So that for me, my friends, is a deal breaker. I will never rent to a tenant that has that type of

repossession on their credit or, of course, an eviction. However, I will rent to somebody that perhaps had a bankruptcy or a foreclosure and they are showing to me that they are attempting to reform that behavior. And when I mean attempting, I don't just mean a couple months, my friend. I mean, they need to show me that they've been trying to correct this behavior for at least two years. And a lot of it has to do with the conversation with the tenant. But once I get into the conversation with the tenant, I will be able to see a little bit more about their honesty and their desire to get back on track. So the information on the credit report that, I gain gives you a sense of financial savviness and really responsibility of whether they're going

to pay their rent on time. Wow. Some of this information cannot be used as a landlord. A lot of the financial data will help you determine if that's a tenant that can be trusted or that's responsible to make wise financial decisions like pay their rent on time every first of it. the month. Okay. So that was number two, the credit report and the debt to income ratio. Let's hop on to number three. Verify the employment and income. So again, another no-brainer, my friends, but call the listed employers that your tenant actually works for. And for me, what I confirm is their attendance. Our rule of thumb for income is that the tenant should be making three times as much as the cost of the rental unit per month. So if my property is being rented

for $1,000 a month, I will not consider a tenant that's not making at least $3,000 a month for that property. But once they meet that criteria, I then call the employer and I verify how long the potential tenant has been working there. And more important, how reliable are they? Do they miss every Monday and do they leave early on Fridays? Or do they call in once a year? So I use the employer more so to verify the dependency of the potential tenant. Now, my income requirement of three times as much as the rental unit. So the tenant needs to make three times as much as the rental unit. That's not a hard rule, but it's a good main rule to follow. I will fluctuate that based on the rental history and the employment history. With that information, I then calculate the debt to income

ratio. This can also be found on the tenant's credit check. If the tenant has a lot, high income, but they also have a whole lot of debt. This could still be a risky choice, my friend. And this is why I said that the credit report is not my end-all be-all because they could have an amazingly high score, but if they have crazy high debt, that doesn't make me feel too confident and I consider that a risky tenant. Okay. Next, hire a property manager. You've probably already learned how complex it is to find a great tenant if you are doing

this on your own. Not only is it time consuming, but it takes a lot of energy to weed through the potential applicants and screen the calls that you're receiving for your rental. So it is for this reason that I absolutely consider a property manager. Now, you do have to browse through a lot of applications. And if you're doing this yourself, figuring out which tenant is the right fit for you is complicated and messy. And again, time consuming. The good news is that, With technology today, there are truly a lot of resources at your fingertip that really helps. So rather than spending years refining the tenant selection technique, you can rely on

systems that have been created for you so that the experience is not so bad. However, again, it is really time-consuming. And even if these tenant screening packages are sold online. I have learned that that human element of a property manager and their experience and expertise makes all the difference in the world. Now, how I have been able to be so successful at it is I have gone extremely out of my way to hire quality property management. You know, I say it all the time, my friends, I simplify my life and a property manager that does this day in and day out for 10% of the rent, it just is a no-brainer to me. I mean, hiring a property manager makes life so much easier. It makes sense to hand your property over to somebody that does this

every single day that interacts with potential tenants and tax. every single day. So for me, that's a no-brainer. And eventually, if you start to become a real estate investor full time, trust me, my friends, it is the answer. It is the solution of simplification to your life and really to weeding out what could potentially be the risky tenants. Now, again, there are tenant screening services out there that offer several levels of packages, but nothing replaces that human element of the experience a potential tenant is going to undergo when renting your property. So our property management companies have this down to a science.

And at the end of the day, my friends, numbers do not lie. If you want a long-term tenant and someone that is going to take care of your property and someone that's going to oversee the managing of your property, then you want to look into that professional that's going to manage your property. Now, I speak from experience, my friends. it is absolutely well worth it. But again, if you have the time and the desire to weed out your own tenants, then by all means, do it. If you want to simplify your life, you want to make the tenant selection seamless so that you are only viewing the qualified applicants.

Then, my friends, hiring a professional property manager is. key. Number five, keep the good tenants. The reality is that your quest to becoming a better investor and a better landlord should be more about you finding good quality tenants. Because let's face it, at the end of the day, my friends, if your tenant does not pay rent, nobody makes money. So your focus, after you purchase your investment should be about how to find and keep good tenants. Finding good tenants, as you've learned, it's a very difficult process that can take a lot of time, and it really interferes into your daily schedule because a lot goes in to finding that tenant. This is why I rely on a quality property management team.

But once you find that tenant, it is really important that you not only are kind and respectable, and you think of your tenant as a human and not a dollar sign. And here's what we do. First, we treat our tenants really, really well. Now, this is basic, but every landlord, every potential investor, remember that tenants can and do come and go. So what I do is every Christmas, I send my tenant a holiday card with a gift card. And the gift cards that I usually send are grocery gift cards. Those go such a long way to send a $25 gift card to your tenant. I also, in some states, I even send birthday cards out to my

tenant. I don't necessarily send a gift card with it. Sometimes I'll include a Starbucks card because let's face it, who doesn't like Starbucks? But I will personally handwrite a card to our tenant for their birthday and say, happy birthday. Here's a Starbucks card. You know, have a coffee on me. And I also give them a courtesy call twice a year, usually six months to their anniversary. So six months when they moved in, and then again, three months before the lease expires. This has created not only a stronger bond between ourselves and our tenants, but really, it allows them to feel like they're truly being cared for. Tenants who like their landlords are likely to move less, and they move unless they absolutely have to,

and this is what makes your business more profitable in the long run. Now, from the beginning, I let my tenants know that feedback and concerns are welcome at any time. So I let them know that they can reach out to the property management team and I often give them one point of contact at our property management offices. So they always speak to the same person. So they develop that relationship with our property management. So it's not intimidating for them to call in. And what I have found doing that is a tenant is more likely to take care of the smaller maintenance needs because they don't want to call Sally every month to tell them that the toilet is clogged, for example,

or that the doorbell isn't working. So I have found that giving them a point of contact and calling them twice a year goes a long, long way. You know, you want your tenants to tell you when things frustrate them about the property and you want to ensure smooth communication at all time. Because at the end of the day, my friends, good communication leads to good relationships and good relationships lead to longer, lasting rental periods. Oh, and something that's super important, I respond to tenant request in an extreme time matter. Now, our policy is same day or worst case scenario the next day. But when our tenant calls in to share a concern or to share a maintenance issue, they get handled if not at the same time they're calling in that same day. And if we can't get out to them that same day, we will say to

them, we will have somebody at your property tomorrow at such and such time. So it's really important to respond to tenants' problems promptly because if they start to feel like you don't care, they're going to start to not care about their roof over their head. And the first thing that goes out the window, my friends, is their on-time rental payment. So I always make them feel like their call is important to us, even if the call is a pain in the butt maintenance call. Oh, something else that I always tell my tenants about is I always let them know that we have other properties in the area. Even if your tenant loves their property, they may need to move to a bigger space or to another area for various reasons like job reassessments or even job relocations. So I make it very clear and I make it a habit to let my tenants know up front that we have other rental properties in the area.

Keeping good tenants in your business is a great way to secure the future of your cash flow. Last but not least, my friends, my key to keeping tenants for an average of almost four years is I ask a lot of questions and I do not settle. The most important and final tip that I can give you is exactly that. Ask a lot of questions and do not settle. When you or your property management team meets with a potential rental tenant or a rental applicant to tour the property, be sure to talk about the property with them and then ask questions. about their needs, their hopes, their rental goals. Like, I specifically ask, well, why are you moving? I also asked where they lived previously and what they liked about that property.

And then I asked, have you ever had problems with your property or your landlord? Oh, really? Tell me more. I want them to talk as much as possible. And then I ask, do you have pets? Do you smoke? And I specifically ask, how long do you plan to rent? Or how long do you plan to live here? Do you have a stable job? What do you do for a living? Oh, really? How did you get into that? I really want to know more about the tenant and what their future goals are. And when I mean future goals, I don't expect the tenant to be there 10 years. years, but believe it or not, I do have 10-year tenants, but I do want to know that they're going to at least occupy my property for at least three years. And then I ask, what do they want in a home? What specifically are they looking for? By asking the applicants, all of these questions, I not only get to know them, but you'll gain an instinct about what type of tenant they will be.

This landlord instinct, trust me, my friends, I've cultivated it over times, but this is why I have a property management team to handle this now because they have a ton of experience and can weed out the rotten apples, if you will. It will ultimately help you be able to choose those great tenants more frequently that are going to stay in your property longer. finally, be patient. This is the hardest part of my job is being patient, just waiting for that right tenant. The right applicant, trust me, my friends, it may not always be the first or the second or the third application. And it often can feel like a waste of your time for the right application to come in. But trust me, my friends, it is absolutely worth it.

if you're patient and you wait for that perfect ideal tenant. You know, settling for that less than idea tenant often leads to problems such as evictions and chasing your late rental payments and property damage. So at the end of the day, all of these things I have shared with you will help you wait for that qualified applicant. So being patient, my friends, and seeking the right tenant is well worth it. Revolutionize your future as a landlord, my friends. Hire an experienced property manager.

I speak from experience. And I truly feel, my friends, that your time is more valuable being spent on creating more passive income. saving to buy your next cash flow, then it is being spent screening out the perfect tenant. Well, there you have it, my friends. Everything that you need to know to find and keep a good tenant to change the future of your investment has just been divulged here. You don't need to spend your valuable times on unnecessary and frustrating problems caused by you know, renting to the wrong people. Instead, the key points I focused on will help you find good tenants. So in review, here's the breakdown. Number one, creates a strong rental application.

Number two, get help from either a reliable screening, tenant screening service, or my preference is to hire a quality property manager. Number three, use the information from the credit report to verify the tenant stability. Number four, call references and previous property managers and old employers. And number five, most importantly, use your gut instinct and be patient. My friends, this is a lot of work. And if you are a full-time something else and you're not a full-time investor, you really don't have time to do it all.

So hire a professional to do all the dirty work. And the good news is that here at Cashflow Savvy, we do it all for you. So if you'd like to learn more about how we can help you do it all for you, and we can help handle your properties, help you acquire cash flow, manage the property, and collect the rents. I will be more than happy to connect with you. Reach out to me, reach out to one of our cash flow savvy team members, and I will help you fill in the blanks to help you start cash flowing rental properties all done for you. Email me or go on to our website at cashflow savvy.com. That's cash flow savvy with two Vs. Connect with me and I will help you not only

create more passive income, but more importantly, collect your rents because we've placed the best tenants for you. That's it for this week, my friends. Until next episode of Turnkey Tuesdays where cash flow is king. Does your money work for you as hard as you do for it? If not, no worries. You do not have a money problem. You merely have an idea problem. We're cashflow savvy.com and we'd like to share a new idea with you around income real estate that can transform your financial future and accelerate its arrival. Go to cashflowsavvy.com and download a free investors package. Cashflowsavvy.com. You do not have a money problem, merely an idea problem. Cashflow savvy.com. More ideas.

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