Yesterday I started a discussion on how finding, screening, and selecting tenants is Critical Success Factor #2 for being successful at owning rental properties. And I began to discuss the four steps that need to be taken to screen and select successfully.
I talked about step 1 yesterday. That was Set expectations up front.
I’ll finish up with the rest of the steps today.
2. Do not advertise your unit for rent too early.
You heard that right. You can advertise too early and cost yourself a ton of unnecessary time and aggravation. Here’s why. Renters generally work on about a 30 day cycle, so they typically start looking for their next place around the time they giving notice on their current rental.
So what this means is if you advertise too early (before it’s ready to rent), you’ll waste a ton of time showing the place to lots of people that will need to or want to move faster than when your house will be available. On my first couple of rentals I thought that I would be slick and put a sign in the window the day I closed and keep it there through the time it took to do the rehab.
I can’t tell you how many people that I showed those houses to. I ended up renting them both to people that – guess what – had just given their notice and wanted to move in about 30 days. So trust me on this. Put a sign in the window, but not until the time is right.
3. Hold an Open House
Do not do individual appointments to show the unit. Ever. It took me two rent-ups to figure this out. Advertise the heck out of your units during the week, and drive all of your calls to a 30 minute “Rental Open House” on either Saturday morning (not too early!) or Sunday afternoon (in the fall I plan the time around Lion’s games). This saves you time and effort and creates a sense of urgency because you’ll get all of your prospects there at the same time. I’ve actually had one bidding war and one near-fight at my open houses, and I can consistently rent out my units after just one of these open houses.
3. Check References
After you go through the trouble of collecting the information, you need to call ALL employment and past rental references. I go back five years for both. There is no substitute for doing this yourself, because I’ve gathered more information from the tone of voice from these references than you’d believe.
4. Require Full Payment Before Handing Over the Keys
And finally, do not hand over the keys until they are 100% paid up in terms of first month’s rent AND the security deposit. Not having all the money necessary to move in needs to be one of your screening devices. The rationale – they knew they were moving, so if they couldn’t save up enough money to pay you up front, what makes you think that they’ll be capable of managing their money well enough to pay you on time every month?
If you use these four steps every time you rent one of your units, you will substantially decrease the likelihood that you’ll end up with a deadbeat tenant.
And that’s a good thing, because my primary goal in structuring my business is that I wanted to sit back and collect checks every month, and not get any calls from renters.
If you need to know more about my particular strategy and methodology for pursuing residential rentals as a business, then you need my “The Set and Forget Metro Detroit No Hassle Suburban Rental Property Bootcamp“. It goes through the rent-up and EVERYTHING else that you need to know to be a successful rental property owner.