Your most important decision that will determine the success or failure of your rental is the person you put in the property. A bad tenant can potentially cause years of stress, headache and financial loss, while a great one can provide years of security, peace and prosperity.
So, don’t underestimate the importance of renting to only the best tenants. While it’s not possible to know with 100 percent certainty what type of tenant your applicant will be, here are six telltale signs and traits that will give you a pretty darn good indication that this person is great tenant material:
1. The ability to pay
The first and foremost quality of a good tenant is his or her level of financial responsibility and ability to afford the rent. Without proper payment, the landlord may be forced to evict the tenant and face potentially thousands of dollars’ worth of legal fees, lost rent and damages.
Most landlords require that a tenant’s (documented) income equal at least three times the monthly rent. Many tenants believe that they can afford more than they really can -- so it is the landlord's job to set the rules to protect his or her investment. If the tenant is already financially responsible, income that amounts to three times the monthly rent should be sufficient.
2. The willingness to pay on time
While some landlords look at late rent as a benefit because of the extra income from the late fee, a late-paying tenant is more likely to stop paying altogether. The stress generated when the rent doesn’t come in is not a pleasant experience and can be avoided by renting only to tenants with a solid history of paying on time.
3. A positive long-term outlook for job stability
While a tenant may be able to pay the rent and pay it on time right now, his or her ability to do so in the future is often determined by the job situation. If this person is the type to switch jobs often or has had long periods of unemployment, you may find long periods of missed rent.
4. Cleanliness and housekeeping skills
No tenant stays forever -- and upon departure needs to leave the property in good condition. As such, it is important that the tenant’s day-to-day lifestyle be clean and orderly. This means taking good care of the property.
5. An aversion to crime, drugs, and other illegal activities
A person who has no regard for the law will also likely have no regard for your policies. Tenants who engage in illegal activities will cause you nothing but stress and expense. So, be sure to run a background check on your prospective tenant to ensure he or she doesn't have a shady past.
That said, keep in mind that a prospective tenant's past history of drug or alcohol abuse could be considered a medical problem -- and thus something you can’t reject him or her over without being guilty of violating fair housing laws. If this person is selling drugs, that’s different from using. Be sure to study up on the fair housing laws in your area.
6. The 'stress quotient' -- how much stress will this person cause you?
The final quality of a great tenant is something I call the “stress quotient” or, in other words, the amount of stress a tenant will cause you as landlord. Some tenants are very high maintenance and constantly demand time and attention. Others simply ignore the terms in their lease and need constant babysitting, reprimands and discipline (late fees, notices, phone calls, etc.). This type of tenant will only be a thorn in your side.
So, is a perfect tenant even possible?
Obviously, no tenant is going to be 100 percent perfect, so deciding how much near-perfection you require is a personal choice that largely depends on your desired involvement and the community in which your property is located. If tenants are difficult to find, it may be financially advantageous for you to rent to a less-than-perfect tenant in order to fill a vacancy.
Notice the use here of “less-than-perfect tenant,” and not “anyone.”
On the other hand, if you have plenty of applicants to choose from, you can be significantly more picky. Just remember, it’s much better to have your unit vacant a little longer while you wait for the right tenant than to rent to the wrong person.
So, how exactly do you weed out the bad tenants and find those quality tenants? The answer involves setting strict qualifying standards and screening your applicants to verify whether or not they meet those standards.
If you want to know more about how I screen tenants, pick up a copy of The Ultimate Guide to Tenant Screening by visiting BiggerPockets.com/tenantscreening.