Epic Real Estate Investing - How to Pick the Best Tenants | 854

Episode Date: December 2, 2019

The better the tenant, the better the cash flow! Therefore, in today’s episode, Matt shares 8 tips to find the best tenants for your income properties. Tune in and find out more! Learn more about your ad choices. Visit megaphone.fm/adchoices

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so let's talk today about finding better tenants for your investment properties because these properties, they don't cash flow themselves. You need tenants. And the better the tenant, the better the cash flow.

You know, whether you are managing your own properties or you've delegated management responsibilities to a property manager, I've got eight tips today that are going to help you find better tenants for your income properties. All right, number one, you want to create written standards for what you deem an acceptable tenant. And you want to have those standards written out before you ever screen the tenant. And you're going to want to make sure that you and your standards, you want to address a tenant's income.

You want to address their credit history, their rent history, their employment history. And, you know, if you want to go for extra credit, apply a scoring system to it. whether it's best out of five or one out of ten or maybe you got a one to five star evaluation, whatever it is. Do it do how you want. But just kind of rank those different categories, their income, their credit history, their rent history, their employment history, all in a sequence where you can add points to it. So if they got mediocre credit, they get three points.

If they got great credit, they would get five points, for example, on a scale of one of five. And what that's going to do is not only will it establish, you know, and create clarity for yourself of what you're actually looking for. It's going to make it quicker and easier for you to make objective decisions when choosing a tenant. As well as it can keep you out of hot water should you ever be summoned to court for something as awful as discrimination. Right. So that's number one. Create written standards for what you deem as an ideal tenant. Number two, you want to create your own rental application. I know that sounds daunting because it's why would you want to do that when You can just go out to Office Depot or Staples and just grab one of the templates that they've got over there.

And you can certainly use that as a starting point. But a lot of those applications, they're not complete. Everything that you really need in there is not addressed. I mean, a lot of those will just leave out vital information that you need to pick the best tenant. So in your application, you'll want to ask for stuff like this, like permission to call previous and current landlords, it's permission to call previous and current employers, permission to call references, stuff like that. And I would really advise you to go and have an attorney draw one up for you and just get

something really solid in your favor in your application. All right. So that's number two. Create your own rental application. Number three, get written proof of the following. You want written proof of a driver's license or a picture ID? You want two weeks of most current pay stuff. from their current employer that they listed on the application.

You want proof of car insurance. You want voided personal check to verify that they actually have a bank account. And then if they're self-employed, you're going to request their tax returns and proof of any other income that can help you make a good decision for yourself. All right. But you want to get written proof of all of that. And what you're really looking for is stability. Number four. actually confirm everything that you've been granted permission to do in the application.

So if you have any sort of curiosity about your tenant that will deem important information or will be important information to help you make a good decision, confirm it, verify it, call, and satisfy all your curiosity about that tenant, all your concerns if there are any. because once they're in, they're in. And now you've got a whole new situation to deal with if you missed something. Okay? So confirm everything that even remotely, I don't know, not even a red flag, just an orange flag or a yellow flag or just anything where your spidey sense is tingling.

And even if it's not, still confirm everything. Okay. Number five, get references. You want to get references from them. And some questions that you can ask. One is how do you know the applicant? to would you describe them as reliable and trustworthy? And three, a good question is, would they make a good neighbor?

Now, granted, most tenants will not give you, I don't think any tenants would give you references that they would feel that we're going to give you bad information, but ask those questions and then just kind of see how they respond. Like, you know, put your old lie detector helmet on. And, you know, just trust your gut here, trust your hunch. I just turned 50 years old, and I think that's one of the biggest lessons I've learned looking back.

I just kind of looked back and saw all the mistakes I've made, all the money that I've lost and the bad deals and bad decisions I've made. I could have avoided so many of those just by trusting my gut. So as you're following up and checking with references, ask those questions or questions like those and just trust your gut. All righty. Number six, run a background check that looks at credit, looks at their criminal record and it looks at their eviction record.

And there are a number of services that will do this for you. Turbotenant.com is one that I know a lot of people use. There's another one, tenant screening report.com. Those are two good examples. Or just a quick Google search. We'll come up with a few. But run the background check on all adults that will occupy your property, not just the person filling out the application,

but everyone that's going to live in that property. Run a background check on all of them. So that's number six. And number seven is you want to pass that screening expense, pass that on to the tenant by way of an application fee. And so not only does it cover your expense, so it's nothing out of your pocket, but what it also does is it filters out all of the tire kickers. Right. It narrows it down to just the people that really want to live in your property. And it saves a bunch of time for you screening tenants that aren't serious.

Right. So that's number seven. Number eight is, and I kind of already touched on this a little bit. I mean, ultimately, with all of these steps, you're just trying to zero in on stability. If you want stable cash flow from your property, you want a stable tenant. So you're looking for longevity in their residence, longevity in their employment. My experience is that if those two boxes are checked, then you've likely got a pretty good tenant. Now, it's not a requirement because people have situations where they got to move and, you know, I wouldn't say emergencies, but just things come up unexpectedly.

And people might not be at their last residence too long or their last job too long. But so it's not a requirement, but probably the closest thing that you have to a crystal ball with your tenant experience. All right. So those are eight things that you can do to find better tenants. One is create written standards for the ideal tenant, create your own rental application, get written. and proof of all that important information, and then actually call and confirm everything that you've been given from the tenant, and get references and trust your gut there with the answers from those references,

and then run a background check, and then pass that screening expense onto the tenant is number seven by way of an application fee. It's a really good filter, plus make sure that you're not spending any money that you don't have to spend. And then number eight, just zero in and look for stability to make the best decision for yourself, based on my experience. It is the closest thing that you've got to a crystal ball with choosing the right tenant what that experience going forward

is going to be like with that tenant. All righty? So now you are set to screen your next tenant turning your income property into the cash flowing machine that you deserve it to be. God bless and to your success. I'm Matt Terrio.

Living the dream. Yeah, yeah, we got the cash flow. Yeah, yeah, we got the cash flow. Yeah, yeah, we got the cash flow. You didn't know home poor, we got the cash flow. This podcast is a part of the C-suite Radio Network. For more top business podcasts, visit c-sweetradio.com.