How to cleverly identify tenant is going to be long term?

Question

Hello friends, I am sure a lot of you would have gone through signing a new lease with your tenant where within 1 or 2 years of tenancy the tenant vacates a property. You had done a lot of due diligence and research on the tenant, yet it failed to identify the tenant is going to stay long term.

What are the clever tricks you have used to be sure this tenant is a long term rental prospect? When I show the property I ask them questions about current life situation. But try not to directly ask a question how long you plan to stay. Sometime the tenant himself mentions I will be buying my own home but need a year or two to save for downpayment (red flag for me as a landlord), however not all tenants are forthcoming. Some will fake their intent and say I plan to live here long term.

Any tricks and ideas how you would go about this?

David Krulac · Answer

We ask, "If we rent to you how long do you plan to stay?"  We sometimes offer 2 or 3 year leases, but not usually as the first lease.  We look at how long the tenant has stayed at their last 2 leases.  And we ask "Why are you moving?"  One tenant had stayed at their current leased apartment for 16 years. They wanted a a single family detached home, which I provided and thought they might stay a long time.  They only ended up staying 2 years and bought a bigger house on the next street over from my rental.  So the technique is not 100% fool proof.  Another current tenant said, the LL is selling our current house.  I check to see that was correct and their current property was being list in MLS and was being sold.  They had lived there 10 years. They currently have lived at my property 11 years now.  Another tenant prospect told me that they wanted moving to move to my house for the acclaimed public school system.  They stayed for 13 years until their youngest child graduated high school, before moving. (Even though the father traveled 75 miles to work for those 13 years.) I have another tenant, who had specific wishes/needs for their rental property. I did not have anything that fit their criteria, so I showed them properties listed for sale, which I would buy and rent to them.  We found a desirable property for sale and I reached an agreement that I would buy and they would rent on a 3 year lease.  They stayed 25 years.  Why would they move this was their dream house!  Once that worked I first time I rinsed and repeated for another tenant who had specific wants. First step, do I have anything that fit their needs?  Secondly is there a listed for sale property that fits their needs in the MLS?  If not, I went into phase 3 and decided to build them a very specific house that fit their needs. I gave them some limited control of the design of the house to be built to satisfy their requirements, but also make sure I wasn't creating a white elephant that would be difficult to sell or re-rent.  Same 3 year lease requirement, and happily they are working on a lease until the 27th year of their tenancy.  But they're NOT my longest tenants;  I've had several tenants that have stayed more than 30 years.  One of which started on a 1 year lease and another started on a month to month lease. I'm not opposed to making accommodations to satisfy a tenants needs and wants. I've been renting a long time and have tenants stay an average of 12.5 years.

Marcus Auerbach · Answer

When you look at the data, the #1 reason why people move is because the landlord sucks. So, don't suck

There is no benefit to a landlord in signing long-term leases, only downside.

In Wisconsin a lease of 365+1 day requires longer notices. So be careful to write Jan 1 to Dec 31st and not an 1 to Jan 1 which is more than a year.

Frankly, it's in landlords best interest to rent only MTM. The irony is that most tenants prefer that as well. A lease will not stop a tenant to move. The best thing you can do is make your property nice and offer a good quality of living.

Some are more expensive, but others don't cost much. For example, we install dimmer switches in living rooms and kitchens, we install nicer light fixtures. We also do an annual inspection and fix little things. We do a weed & feed service in spring, which is incredibly inexpensive for how much better our properties look.

Wesley W. · Answer

@Marcus Auerbach understands.  MTM for the win.

Zach Lemaster · Answer

@Andy S. the best thing to do is provide quality housing, good communication, quick maintenance repairs.  Not much else you can do to keep them long term.  Some tenants move after one year, some stay for a very long time.  That is up to them, but you want to do everything you can to encourage them to stay if they are a good tenant.  Just don't get too attached to any particular tenant.  There are many good tenants out there, so I would focus the most of your attention on properly vetting tenants upfront to set you up for success.

Jon K. · Answer

There's no need to be tricky, just ask.

Drew Sygit · Answer

You can often tell from their credit, savings and residence history if they are life-long tenants that will never buy.

Unfortunately, most application approval systems are NOT set up to gether this info.

Benjamin Aaker · Answer

You should price your rent so that it factors in a month of vacancy and any predicted repairs when the tenant (probably) moves out in 12 months. Longer leases can be a problem as @David Krulac says.

One tip I have: I raise the building's rent every year around $50. When the tenant is at 11 months of their 12 month lease I present to them the option of signing another year's lease with a $25/month discount. If they sign, they are likely there for another year. If not, I expect them to be leaving soon and can plan for it.

Peter Mckernan · Answer

My experience when a tenant has a stable job, and they have savings (not a huge amount) but some savings. For example in my area if they 3-3.5X the security deposit in savings they will be in a good position to stay for longer than one year unless they have some family emergency or something uproots them. If the tenant has 100K in their account or even 50-70K in their account they will be buying a home sooner than later and will be making a move quicker than someone you are looking to stay for 2-5 years. More money more options.. Of course stable job and same family local is another good indicator that will keep them there for longer too.

Peter Tverdov · Answer

Andy good management and having a good property is one of the best ways to get them to stay. In the property management industry, the biggest reason why tenants leave is poor maintenance. So either have a really nice place, or if it's an older building, care for it. If it's a dump...then you're going to have constant turnover or attract tenants who like dumps and treat them like one.

David Krulac · Answer

@Andy S.  There is a downside to 3 year leases, in the last 3-4 years rents have sharply escalated, locking yourself into a lease that becomes less than market affects the bottom line. It a balancing act between maximizing rent and maximizing tenant longevity.

How to cleverly identify tenant is going to be long term?

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