Let me share with you the cornerstone principle of long term real estate investing:
The success or failure of your real estate investments depends on your ability to consistently attract and retain great tenants.
In the end, it doesn’t matter how great of a deal you got on the property or how strong your projected cash flow and return on investment are. Without great tenants that pay rent on time and take care of your property, the equity, cash flow and returns all evaporate into thin air.
So the question that naturally follows is:
How do you find great tenants for your investment property?
The answer is so simple, yet so powerful.
The quality of the asset you buy determines the quality of the tenant you are likely to get.
Therefore, if you want to find excellent tenants for your investment property, you should first purchase an investment property with the qualities that attract excellent tenants.
So a better question to ponder would be:
What do excellent tenants look for in an rental property?
To answer that question, I would like to provide you with the ultimate checklist for finding great investment properties, a lens you can use to filter properties, attract excellent tenants and make more money with your real estate investments. Fortunately, over the last decade, we have worked with hundreds of tenants on behalf of our clients. Many were “just ok” tenants, some were trouble — and some were excellent. Instead of guessing, we surveyed them and asked about what matters to them most.
The checklist you are receiving today contains the top 10 factors that excellent tenants look for in a great rental property in order of importance.
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It may seem like a small thing, but having a solid rental application is the first step in finding great tenants. Since BiggerPockets is all about helping you succeed in real estate investing, we’ve put together a complimentary Rental Application for you to use. Download it today and go find some great tenants!
The Top 10 Rental Features That Attract Cream of the Crop Tenants
The quality of schools zoned to the property was the primary deciding factor for over 85% of great tenants we interviewed. Schools are extremely important to families and single parents with school-aged children, and those tenants use this factor as an acid test. To these prospective tenants, if schools aren’t good, it’s as if your rental property didn’t exist. Furthermore, school quality is the best predictor of neighborhood quality — something ALL great tenants seek (even those without children). Therefore, to ensure your success, only purchase properties zoned to high-performing, desirable schools.
Safety is our most basic human need and a powerful motivator for excellent tenants. One of the main reasons why your prospective tenant decided to spend more to lease a home (as opposed to an apartment) is to provide a safe environment for themselves and their family. Therefore, research crime statistics and only purchase properties in safe neighborhoods.
Move-In Ready Condition
The condition of the property — and more specifically the ability to move right in — is very important to excellent tenants. You can rent out a property that’s not quite move-in ready (requires paint, flooring, cleaning, etc.), but I assure you it won’t be to an excellent tenant. Your target tenant plans to take care of your property and has high standards of cleanliness and maintenance. If you provide a move-in ready home, you are communicating that you share those same standards.
Proximity to Employment
Let’s face it, no one likes to commute! So proximity to employment centers is very important to great tenants. You can have a great, move-in ready home zoned to great schools, but it won’t matter if your tenant has to drive an hour to work each day. As you look at potential properties, think about where your target tenants are likely to work and how close the property is to that area.
Most inexperienced investors subscribe to the myth that their investment properties just need to be “good enough for a rental.” Therefore, they purchase starter homes with cheap finishes and rent them to mediocre tenants for mediocre results. Don’t do that; instead, purchase homes that have strategic upgrades that move the needle with excellent tenants: hardwood flooring, granite counters, stainless appliances, covered patios, etc.
At the very beginning, your tenant incurs a large expense when leasing your property. They have to pay a month’s rent for the security deposit plus the first month’s rent. If your property does not include a refrigerator and a washer/dryer, the tenant would then have to purchase those items, increasing their upfront cost. So remove the friction to make their decision easier by providing those appliances on the front end. Often your tenants won’t mind paying a little more for a property that includes all appliances.
Neighborhood quality determines lifestyle quality. Think about the community you live in — didn’t the neighborhood amenities play a major part in your decision to live there? Wouldn’t your lifestyle be different in a neighborhood with running and bike trails, lakes, community pools, tennis courts, a gym, etc.? Quality tenants care about neighborhood quality. A community doesn’t have to have ALL those amenities, but the more the better.
Access to Transport & Basics
Access to modes of transportation and basic necessities like grocery stores, restaurants and shopping is very important because it affects other important factors such as commute to work and lifestyle quality. When you’re looking at investment properties think about: How easy is it to get to the main highway/park and ride/public transportation? Are there basic services within easy reach?
Here’s one thing investors and their tenants have in common: They both don’t like hassle. The main factor that determines how much hassle either will experience is the age of the property. If you purchase older properties, they will have older systems (plumbing, electrical, HVAC) that break often, inconveniencing both you and your tenant. Purchase newer properties instead. A good rule of thumb is no older than 15 years, less than 10 if you can.
Rent and Price
Last but not least, your investment is ultimately a business decision for you as well as your prospective tenant. Your tenant will be concerned with the rent, and you will be concerned with the relationship between the rent and the price you pay for the property. Make sure the projected rent isn’t so high that it limits your tenant pool and so low that it lowers the quality.
Landlords: Which features do you make sure all your rentals include? Renters: Do you agree with the above list? What would you add?
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