What type of tenant should you be marketing your rental property to?
General Qualities of a “Good Tenant”
Responsible – A tenant is responsible if they maintain your rental property and keep everything from furniture to appliances to walls and floors in good shape.
Clean – The tenant is eventually bound to move out. What will the rental property look like after the fact? A good tenant keeps the property relatively clean and makes the turnover period and process easier (and less expensive) for you.
Pays rent on time – A good tenant is able to pay the rent in full and on time.
Passes a background check – Run a credit and background check during the tenant screening process. Make sure your tenant can afford the rental property and that they do not engage in crime and/or any illegal activities.
Stable – When considering traditional rental properties, an ideal tenant is one that provides a stable occupancy rate.
What about Airbnb guests? – With Airbnb rental properties, the only major concern is the general maintenance of the property. And unlike traditional tenants, there are fewer background checks you can run and less time to do so. But because it’s a shorter commitment than a long term tenant, the risk is not as high.
The Demographic Split
Now that we’ve listed a few general qualities of good tenants, it’s time to tackle what makes an ideal type of tenant for you specifically. To make matters clearer, we’re outlining a generational breakdown beginning with college students and ending with baby boomers. This, alongside location and degree of involvement, can help you figure out who your ideal type of tenant is. It’s important to understand these generational differences because they reflect need differences.
College Students (Older Generation Z)
For the most part, Generation Z hasn’t started renting and buying property. However, the older segment of Gen Z, college students, are in fact renting property. According to 2017 data, there are around 18.4 million college students in the US. Many of these students are flocking into college cities and towns to study, and well – live. Investing in college towns is a savvy real estate investment strategy.
The best college towns to buy a rental property are Baltimore, Atlanta, and Philadelphia. In these cities, among other locations popular among students, you’ll almost always have a high and steady demand for rental property. What does this mean? It means that investing in college towns can also be a low-risk investment compared to other types of investment property.
In terms of the tenants themselves, college tenants can be less consistent, meaning that the turnover rate for college tenants is higher. Sometimes, you may even have students who are there for a semester as opposed to the entire year. So if you decide to invest in student housing, make sure you plan ahead with the tenant.
Additionally, college tenants may be more problematic. This is not to generalize and say that all college students do nothing but party and invite guests over, but a large portion does. So again, make sure to communicate with your tenant beforehand and explain major ground rules.
As to their specific needs, college tenants look for affordable rental properties, preferably close to campus and other amenities such as grocery stores and transportation stations. Can you offer this? If so, college tenants may be the type of tenant you should be targeting.
“Millennials. Walking around like they rent the place.”
It’s a joke, but it speaks some degree of truth. Studies show that millennials, the largest demographic in the US, are going through life stages later than the preceding generations. And although a very large number of millennials are moving towards homeownership, many are still renting properties.
Today, millennials are mostly concentrated in cities like Chicago, Washington DC, Boston, Austin, Dallas, Philadelphia, San Francisco, and Seattle. More specifically, millennials live in neighborhoods near buzzing city and tech centers (where many high-paying jobs are), and entertainment and cultural hubs. Many are pursuing a career-oriented lifestyle that offers most amenities within easy reach. Millennials are also not hesitant to sacrifice larger single-family homes for smaller apartments that are closer to the lifestyle they strive for. So if you have what a millennial tenant is looking for, then they’re the ideal type of tenant for your rental property.
“Gen Xers” are the members of the demographic that followed baby boomers and preceded millennials. Today, Gen Xers are in their late 30s to early 50s. Generation X doesn’t usually get a lot of attention, especially with everyone talking about millennials and Gen Z. They are also a smaller generation, so their overall effect on the real estate market appears to be less significant than that of other generations.
In terms of real estate property, Generation X looks for bigger suburban single-family homes that are affordable, are in good school districts, and that generally meet their family needs. A few popular cities among Gen X include Houston, Dallas, Charlotte, Washington DC, and San Antonio. It’s important to note that Gen X has moved to home-buying habits, rather than renting. So you’ll likely find less Gen Xers looking to rent.
Once the biggest generation of the US, Baby Boomers are mostly retired and concentrated in cities like Phoenix, Riverside, Miami, North Port, and Naples. At this point though, Baby Boomers have bought rental properties, so it wouldn’t be as common to rent out to a Baby Boomer as it would for any other generation.
Degree of Involvement
How involved do you like to be with the tenants of your rental properties?
Generally speaking, Airbnb guests and college tenants require the highest degree of involvement. With Airbnb guests specifically, the rental property management will encompass dealing with reservations, turnover, cleaning, and stocking the investment property most often of all.
If you don’t like to be involved, then Gen X and Baby Boomers are the ideal type of tenant for your investment property.
So What Is the Ideal Type of Tenant for Your Rental Property?
If you own a rental property in a college town, and you don’t mind a high degree of involvement with your tenants, then your ideal type of tenant is a college student. If your property is near Dupont Circle in DC, then your ideal type of tenant is probably a DC millennial, and so on.
Once you determine your ideal type of tenant, it’s time to market your rental property to this group. Here are 6 Tips to Help You With Marketing Your Property for Rent.
If you haven’t invested in a rental property yet, what are you waiting for? To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.