How to Find the Best Tenant for Your Rental Property

Owning and managing rental properties can be very profitable. (From just two rental properties, my husband and I make $1,200/month in positive cash flow.) As a rental property owner, you may find yourself dealing one-on-one with tenants. Make sure you handle these encounters as business transactions, and don’t let your emotions – or your desire to fill a unit – prevent you from making sound business choices.

A few years ago, a prospective tenant explained her bad credit by telling us that she didn’t pay rent at her last apartment because of a rat infestation. We believed her story. We were short on cash and time, so we just took her money and let her move in with a roommate.

It wasn’t long before there was trouble. Around 2:00 a.m., the tenant threatened her roommate with a knife and he called the police. While the cops had her in holding, he moved out.

We were stuck with an unstable tenant with bad credit who decided she shouldn’t have to pay all of the rent because her roommate had left her in the lurch. It took us almost three months and nearly $5,000 in fees and lost rent to legally remove her from the premises. The most painful part was that the situation was totally preventable.

Now, we follow a strict process for finding and screening tenants:

1. Show the property in good condition. If it doesn’t show well with the existing tenants living in it, wait until they move out. Good tenants have choices, and if the property doesn’t look attractive, why would they want to rent it?

2. Price the unit slightly below the market rate. $20 per month below competing units will attract more applications.

3. Run each applicant’s credit report and call their previous landlord – the landlord before their current one. If they have caused problems, their current landlord could be anxious to get rid of them and may not be truthful.

4. Verify the applicant’s employment. We usually ask for a recent pay stub and call the company to verify that they hold the position they claim.

Taking these steps is common sense. But when you are a beginner and you don’t have much money (or you’re spending most of your money on renovations, like we were), dealing with a vacant unit and the prospect of missed rental income is terrifying. You may find yourself justifying bad decisions that you otherwise would never allow yourself to make.

[Ed. Note: Real estate is just one of many strategies you can use to reel in big profits – even in this economy. Learn how to get your hands on over $17.3 million in moneymaking ideas right here.]

Comment on this article

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  • Chris

    Great article. The desire to obtain money (rent) often drives us to do things we normally wouldn’t (or shouldn’t) do. Thanks for the tips!

  • Yes, horror stories about deadbeat tenants abound. Thanks for the insight. http://www.proapod.com

  • Brenda

    Good article – but what happens if you do a credit check but then your tenant loses their job? A good tenant becomes a bad tenant.

  • If you don’t want to deal with people. It might be a good idea to have a property management co. There is a price, but it is so well worth it.

  • Great post! you want to make sure that you check with any references that the tenant may have offered – if they are good, that is a good sign that they are going to be the right match for you.

  • Joy

    Great post. I have made similar mistakes with choosing tenants in desperate situations. I hope that you were able to get at least some of that 5k back in court! I hate to say it but equally important to having an efficient process in place to find good tenants is having an efficient process to evict them. Sad to say.

  • tenant rental history

    What is the best way to preform tenant screening and tenant background checks?

    • Angela Cowley

      To my personal mind one the best ways to perform tenants screening is to post your property with rental service, like Rentberry or Zillow. Then you can receive credit reports and background checks on all candidates along with their applications.