Screen Your Tenants to Make More Rental Profits
Screening is perhaps the most important activity relative to your ability to profit in the rental business, once you have acquired a rental property.
I know. It sounds too obvious. BUT. It has been my experience that is exactly where most rental problems originate. Once you have a decent property in a decent area – a moderate income area, you should be able to turn a profit. This shows up in the form of Net Operating Income (NOI). You would have to really screw up to not make money. The easiest and most common way that people screw up is to lease to the wrong people.
An effective screening process is what is required in order to minimize risks and mistakes and maximize successes and profit. It is better to have a vacant unit than to have a bad tenant. Not only is a bad tenant more likely to not pay rent, on time or at all, a bad tenant is also more likely to be a filthy person and even damage your rental unit. So not only will you likely not collect your rent you will likely lose money due to filth and damage. All the while you will have to pay taxes and insurance, principle and interest if you have a loan, and likely utilities like gas and electric or at least water and sewage.
The negative effects of having a bad tenant can be quite devastating. This needs to be taken very seriously. One of the easiest ways to screen tenants is to use NTN – national tenant network. The bottom line is that if a prospective tenant is not paying other people they will likely not pay you either. Furthermore, if they are getting or have been evicted, it is likely for a very good reason. Believe the current landlord not the tenant when it comes to why they are being evicted. In fact, you not only want to check current landlord references, you also want to find and check prior landlords for the history of the prospective tenants paying on time, being clean and respectful of your property. Sometimes current landlords will give a good reference to get rid of a bad tenant. Beware of this trick from unscrupulous landlords.
I have had prospective tenants give me all kinds of reasons why they are getting evicted. All of them were due to someone else’s fault. And almost every time it was the landlord who was the jerk. They didn’t take care of the place so the tenant didn’t think they should have to pay rent. The tenant started filing all kinds of complaints with every agency under the sun to make the landlord out to be the bad guy. Imagine that – the tenant is behind on the rent and it’s the landlord who is the bad guy!
I have had prospective tenants give me fictitious references. One easy way to divulge this deceit is to ask questions. Remember, before you even entertain the thought of turning possession of your property over to someone, you must get an application and proof of income and residency. This is in the form of paystubs and a current lease. You always want current and previous landlord contact info. This is because you may not want to believe what the current landlord is telling you. Whether you are speaking to the current or previous landlord, use their lease and the application as a guide. If the tenant states they were paying $750 in rent per month, ask the landlord on the phone to verify that the applicant was paying $700 per month and see what they say. By asking questions in this way you can ferret out the phony landlord.
Essentially, what you are looking for is people with jobs and income and a rental history you can verify.
Before any of this begins though you need to do a little marketing and advertising to get the ball rolling. More on this subject in the next blog.
For more information on this subject and others please visit MyInvestmentServices.com, call 1-800-931-2605 or email Gary@WinRealtyAdvisors.com
Written by Gary Wilson, May 21, 2014
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