Maybe you have recently completed the purchase of a new investment property? You must be thinking that the hard work is over, and now starts the time to enjoy your new real estate investing business and make money from it. Well, hold on for a bit! Buying an income property is not the end but rather the beginning of the journey of being a real estate investor and a landlord. Now you will have to take care of managing your rental property, paying taxes, and finding the right tenants. Yes! In most cases being a real estate investor is equivalent to being a landlord, and becoming a landlord is a tough job. However, the point here is not to scare you away from real estate investing as it offers great possibilities for becoming rich but rather to give you some advice on how to choose the tenants to whom to rent out your property.
Related: Becoming a Landlord: The Best and The Worst
After all, the last thing you want is to start losing money from your investment property because your tenants are not paying the rent (so you have 0 rental income) or because the harm they cause to your property is more than the rental income that they bring you. Thus, you should be very careful with the type of tenants that you rent out your property to. To make things easier, especially for first-time real estate investors, following is a list of the types of tenants to beware of when you rent out your property to:
1. Those who have been previously evicted
Before you rent out your property, you should make a very careful check on your potential tenants. Although this will take time and money, it is absolutely obligatory as these are the people on whom your profits will depend. When checking potential tenants’ rental history, never ever rent out your property to someone who has been previously evicted. Of course this person will try to explain that it was not his/her fault but the fault of the landlord who for some unknown reason held a grudge against exactly this particular tenant. Let’s face it, landlords have no other motivation to love or hate their tenants except for the money they make out of them. Someone with previous eviction history is most likely to be a tenant who will again delay rental payments or try to skip them altogether.
2. Individuals who are unemployed or changing jobs too often
Another important factor to check before you rent out your property to someone is his/her job history. As a landlord, you have the right to access such kind of information in order to evaluate how reliable your potential tenant is. Needless to say, stable, high income is no guarantee that your tenant will pay his/her rent on time and cause no troubles but is still a better indication than being unemployed or flipping jobs too frequently. Such a person has no stable source of income and is expected to delay his/her payments or avoid making them at all. It is much safer to rent out your property to someone with a permanent, secure job and established income.
3. Tenants with bad credit history
Once again, you rent out your property to tenants with the sole purpose of making money. This means that you have to find people who are likely to pay you the due money at the end of each month. Someone with poor credit history is not likely to be such an individual. Remember. People don’t end up being tenants just because they are incapable of buying their own home, meaning that potential tenants don’t necessarily have to have no steady job, no constant source of income, and terrible credit history. Someone might become a tenant because he/she moves too often for work or because he/she decided to spend his/her savings on buying an income property instead of a home. So, don’t settle for a tenant with bad credit history.
4. Individuals with criminal records
As a landlord, you want to make sure that you, your other tenants (in case of multi-family properties or condos), and your neighbors are safe. This means that you should perform a check on the criminal record of any potential tenant and avoid individuals with criminal history, regardless of how small their wrongdoing might seem. While it is by no means OK to be discriminative against tenants (and it’s actually illegal in many places), you also want to protect your safety and the wellbeing of your real estate investing business.
5. Tenants who know the legal system too well
We’ve just said above that you cannot simply discriminate against tenants, but it is generally not a good idea to rent out your property to such professionals as lawyers, prosecutors, judges, and anyone else too well familiar with the legal system. It is very easy for these people to find the smallest gap in your landlord-tenant agreement and take advantage of it.
Related: 6 Landlord Laws and Concerns You Should Be Aware Of
6. Pet lovers
Depending on your specific case and your personal preferences, having pets in your rental property could be allowed or not allowed. Well, be careful with people who love pets too much and/or have too many of them. While having a fish tank or even a big dog in a single-family home with a garden could be fine, it is absolutely not OK to rent out your property to the owner of 5 dogs and 10 cats in case of an apartment. The final result will be a massive destruction, in addition to a myriad of problems with the neighbors.
7. Tenants who seem too noisy, too messy, too dirty
If your potential tenants just look dirty and messy and make a ton of noises when visiting your investment property, you can imagine how they will be once they live in it. While you should not avoid families in general, tenants with several young children who don’t stop running around and screaming their lungs out are not good candidates to rent out your property to.
8. People who are too picky or feel entitled
The last type of tenants to not rent out your property to is people who were born believing they are entitled to everything and are thus too picky. If during the visit to your income property, a potential tenant starts complaining that the dishwasher is too old or the paint is not a nice shade of yellow (given that that’s not the truth), avoid him/her. Such a person would keep demanding more and more from you and would make the experience of being a landlord a nightmare.
Related: 6 Ways to Get Your Investment Property Rented
Once you’ve bought a rental property, how successful of a real estate investor you will be depends mostly on the tenants whom you let in your investment property because your rental income will be determined by them. Thus, make sure to take the necessary time and spend the needed money to assure that you rent out your property to tenants who are likely to pay on time and in full, not destroy your property, act decently, and keep in good terms with the neighbors.