Before we get into the secret to picking good tenants, I want to cover the three basic ways to evaluate if a tenant is going to be a good fit for your property.
First off, you have to get rid of the mindset that all tenants are bad. I mean, these folks are ultimately your business partners.
They put money in your pocket every single month. So treat them with respect. Send them a gift card or gift basket. Wish them a happy birthday (and so on). Do you get my drift?
You have to do it. You have to try to treat these people with respect. Ultimately, they are going to be the ones allowing you to live the lifestyle that you desire.
1. Income Verification
OK, let’s get into it. The first thing you need to do when screening potential tenants is to check their income. This is also known as income verification. The tenant needs to be earning at least three times the monthly rent—that’s kind of a guideline my property management company and I like to follow.
To make things very simple for you, if the rent is $1,000 per month, your tenants’ combined income (whether they’re husband and wife or their pets have a job or whatever) should be $3,000 per month. That should be the absolute minimum: $1,000 in rent, they should be bringing home $3,000 net. What we really like to see though, is tenants bringing in $3,000 net even if the rent is less than $1,000. It’s just nice to have a little bit of an additional cushion there.
2. Background Check
The second thing that you need to do is a background check. You need to make sure that these folks don’t have a criminal background. Unfortunately, even though what happened in the past is not necessarily an indication of what’s going to happen in the future (because people change and people make mistakes), it’s still a pretty good indication of what someone’s personality is like or what their character may be. So you need to do a background check.
Keep reading the article here:
Subscribe to the BiggerPockets Channel for the best real estate investing education online!
Become a member of the BiggerPockets community of real estate investors – https://www.biggerpockets.com