Choosing Awesome Tenants.

David drank the last bit of coffee as he signed the rental agreement with his new tenant. The tenant before was self-employed and operated from home as a baker. The entire home was infested with mold. Another self-employed tenant had a sewing business and the furnace was clogged up with dust. A home needs rest, just like an individual. Someone who works a regular job will spend less time at home and the home will remain in good shape. Many professional tenants would claim that they are self- employed because they know that it is difficult to verify their source of income.

Credit is not the most important criteria when choosing a good tenant; the source of income is. Tenants with poor credit and good job stability will stay longer in the property. If a tenant Defaults, you can garnish their Wages, unlike self-employed tenants. Ask the tenant to provide a job letter, two recent pay stubs and their T4 slips for the last two years. Every tenant must complete a rental application and provide a credit report. A credit report is essential because you can assess spending habits. Always check the prospective tenant’s income to debt ratio. If the prospective tenant debt level is high, then chances are they will default. A good rule of thumb is that their monthly debt payment and rent should not exceed sixty percent of their net income. Always meet prospective tenants in person.

Ask the entire family to meet and complete the rental application. It gives you time to assess the potential tenants. Never make your decision based on race, gender, religion, disability or family status. Like a good detective, look beyond. Consider the car they are driving- is it clean inside? If it’s dirty, then chances are that’s the way they will keep the property. Always trust your intuition. To attract the right tenant, it is important to provide a spotless home.

A home that is recently painted and updated with new appliances will attract good tenants while a home with compromising issues such as old dirty appliances, worn carpet and dusty light fixtures will attract compromising tenants. Consider updating the kitchen and the washrooms. Laminate floors and ceramic tiles are easy to clean in the event the home becomes vacant. Address all safety issues such as hard- wired smoke and carbon monoxide detectors. It is better to buy small single-family homes instead of two- families. Tenants mixing can create problems because of different lifestyles. When choosing a tenant, choose a family instead of a group of adults.

A typical family would prefer to live near good schools and close proximity to work, shopping and highways. Families with children at different levels at school will most likely in the rental property for longer period. A group of adults sharing accommodation will lead to more problems such as keeping the home clean and paying utilities. Student rentals can be more profitable but more problematic as well. 

Check the prospective tenant’s past two landlords, employer and references. Ask their landlords about their cleanliness and if they usually pay rent on time. Inquire as to their social behaviors, such as smoking and late-night parties. Query the way they parted-is it under good or bad terms? If a landlord wants to get rid of a bad tenant, the landlord can lie as well. It is a good practice to visit the client’s current place of residence. You can see first hand how they are living. Do not discount social media. Finding good tenants is more of an art than a science. It is better to seek the help of a professional.

 Real estate investment is one of the best ways to build wealth. With a completed rental application, credit check and proper screening, you can choose the right tenant. It is better to spend time upfront screening your tenants than to spend time later trying to evict them.