BiggerPockets

Tenants - How to Choose and Manage

Friday, June 26

A lot of money can be made in real estate with the buy and hold strategy.  The downside is the fact that you have to deal with tenants.  Although this can be a hassle, the benefits of owning real estate far outway the problems associated with tenants, especially if you do it right.

To begin with, you must do your due diligence on all potential tenants.  If you have a property manager instruct them as to what you expect them to do when qualifying a tenant.  Then all documentation must come to you for your final approval. Remember, it is YOUR business and not the PM's so lay down the laws and make sure your PM enforces them.

Always do a credit and background check on each adult that will be living in the property.  Of course most tenants will have less then perfect credit so don’t expect it to be perfect.  Verify that there have been no evictions.  You’ll want to verify their income and expenses to be sure they’ll have enough money each month to pay the rent.  You’ll also want to call their last 2 to 3 landlords.  Many times their current landlord will tell you anything you want to hear just to get the tenant out of their property because they’re lousy tenants.  They’ll lie to you so that their tenant becomes your problem, and no longer theirs.  The landlords before their current landlord will be much more honest with you.

If I have a property manager I still usually like to talk to potential tenants.  I introduce myself and ask a few questions.  Of course never give them your full name or the state you live in.  You don’t want them contacting you directly.

·       Ask “why are you moving?” a few times.  Asking this question a number of times over the course of the interview will give you a better chance at the truth.

·       How long did you live in your last residence?  How long in the property before that?

·       Inform them that you will be doing a credit check and a background check.  Ask them “what will I find?”  See if they’re honest.

Rent is due on the first, late after the third; and eviction starts on the fifth.  Evict immediately.  It doesn’t matter what the excuse or situation is.  You are not a welfare source.  They either pay or they are out.  You must have a very strict policy or you will be taken advantage of.  Of all the tenants I’ve had over the years, to date I have not found one that has been honest with me.  Unfortunately, they’ve all turned out to be liars, and very convincing liars at that.  There are honest tenants out there, you just never know which ones are so keep the same policies with all.  Make policies and no matter what you are told stick to them.  Tenants, like children, will push the envelope to see what they can get away with.  When they see that they CAN’T get away with ANYTHING, they will be much better tenants.  Just remember, that if your tenant can’t pay one month’s rent, they probably won’t be able to pay two months’ rent.

More to follow in my next post on Tenants.

William Barnard is Managing Partner of Nationwide Property Investments, LLC and President of Barnard Enterprises, Inc. Will participates in millions of dollars in real estate transactions each year and has experience in nearly every aspect of real estate investing, including rehab flips. Join his FREE Membership at www.nationwidepropertyinvestments,com and start or continue on your journey to creating wealth through real estate!

Comments

1. 

   Will Barnard Reply
   over 2 years ago

   Read our entire three part series on this information about tenants - how to choose them and manage them.

2. 

   Charles Perkins Reply
   over 1 year ago

   Thanks Will, appreciate the solid advice.

3. 

   Dale Osborn Reply
   over 1 year ago

   Realtors push location - location - location. In selecting tenants the words are prescreen - prescreen - prescreen. It is better to have the unit empty than to put the wrong person in. You then have to evict them, they cause damages and cost you money!

Post a Comment

Your Name:
Your Email:
	Subscribe to comments?