Finding Qualified Long-Term Tenants

Mike: Welcome back to the flipnerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.

Robert: Hi, how are you guys doing today? My name is Robert Syfert with USA Portfolio Real Estate, Inc. And I’m here for the REI Classroom to host the topic of finding great tenants and maintaining them long-term.

Mike: This REI Classroom real estate lesson is sponsored by theinvestormachine.com, FlipNerd’s private investor coaching program, and your blueprint to investing success.

Robert: So what I want to talk about in that is how do you go about doing that? There are a lot of people that just place tenants simply by saying, “Well, if a person wanted to fill out an application, let’s move them into our property.” Well, the problem there is that you’ve done nothing to qualify who they are. You’ve done nothing to verify their income, and therefore, you don’t know if they’re even a good tenant to move into your property. And, more importantly, in that unprofessional setting that you’ve just presented with them, you don’t know if that’s somebody that’s going to want to stay there long-term anyways.

So some of the things that we like to do within our organization is, one, thoroughly qualifying. It starts with having a professional setting right off the bat. So what I mean by that is, don’t meet them at the Starbucks to sign a lease. Don’t sign them on the hood of your car in front of the house, right? You’ve got to start with a professional atmosphere.

When someone contacts us about one of our properties, the first thing that we do is send them through an application process, where they do need to pay a fee. One big thing here, I don’t care how small or big the fee is, but you need to charge something within your application, because if someone can’t pay something as simple as a $25 fee just to apply for a property, it’s probably not someone that you want in your property, and more importantly, they have no long-term interest. So charge your application fee would be number one in that process, right?

Once they’ve filled out the application, then you want to thoroughly evaluate that from their credit reports, from their background check. It’s a very simple thing to do. If you can’t do it, find a professional company that you can pay to at least do that part for you because you need to know. It’s not really important, in my perspective, as much about their credit score. It’s more about what’s on that credit report. Have they been recently evicted from somewhere? There again, probably a reason not to move them into your house, right? Have they paid on time? And more importantly in there, even if they have a bad score, do they at least have their car payments on time and no utility collections?

Why is that important? The reason that’s important is, at least in our case, most of our tenants pay all the utilities, and those are household expenses. So if they’re not even paying minimal household expenses, like their electric bill, or their DTE, or their cable and stuff like that, how likely do you believe they are to continue to pay rent? So it’s a pretty important one. That’s what we look for mostly in the credit report.

Beyond that, you want to go and verify their income. So if you have somebody that comes in and says, “Hey, I make $5000 a month, but I’m self-employed. Can I move into your house?” There’s a lot of landlords that would say, “Oh yeah, that’s great.” But how did you verify that? Did you ask for bank statements to prove they actually get those deposits? Did you ask for IRS tax returns to see that they actually file that and that they make that income? And if they’re not self-employed, do you at least get a paycheck stub and verify that they still work for the company.

These are all important factors, and I think the things that a lot of people do in landlord business is skip that because they’re eager to get someone into their property. Stave off of your eagerness. You can place a qualified tenant within a few weeks, generally speaking, and pass up on the ones that don’t qualify. And by going through these few extra steps, and maybe passing up someone that sounds okay to getting someone that’s great is what’s going to put them in long-term.

The rest to keeping a long-term tenant is how you treat them once they’re in the home. If they make a call for a maintenance issue, go out there and solve it right away. Or at least notify them within 24 hours that you’re aware of the issue and you’re going to get someone out there to take care of it. These are important things. The more you wait, the more they don’t want to be a part of your property.

The other thing is presentation when they first go there. Make sure you’ve adequately rehabbed it and it’s not just something you slapped a coat of white paint on, right? Make sure it’s a very clean, pristine home because you’re encouraging the likelihood that you’re going to have a long-term tenant. And then even when they have problems, simply when you send them a seven-day notice, or whatever your notice is in your state for law for eviction filings, maybe you’d also want to send out a thing like a text message or a letter along with that to ask them if there’s any problems or anything that you can do to help to keep them on track.

Show that you care about the tenant and not that you’re just looking for the money. If you go that little extra mile, the little extra thing here and the little extra thing there, it’s going to go a long way in keeping your tenants a long term because there are not a lot of landlords that do that. And if you make that difference, you’ll tend to keep tenants for years. So, hopefully, that helps today. I’ll see you guys on the next classroom. Have a great day.

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