The Complete Step-by-Step Guide to Select the Perfect Tenant
Today we are going to talk about how to find your ideal tenant.
Tenant selection is one of the first fundamental tasks you need to master to ensure a long-term, successful, and viable rental business.
Many of you may think that selecting a tenant starts with showing a house and meeting the tenant — talking to them about their living situation, finding out about their job(s), checking credit, and all that.
Well, you are partially correct. But I’d say that genuinely successful landlords begin their tenant selection process back when they first start thinking about buying the rental property.
With this in mind, I’ve compiled 11 steps to find your perfect tenant and a bonus section on red flags to watch out for. Let’s take a look.
1. Starting with a vision and a strategy
Long before you take the plunge and buy that house, you need to consider your vision and strategy for renting out that particular property.
Part of this vision should encompass the type of tenants you want to attract long term.
For example, one of the properties I bought was a five-bedroom duplex. It was next to the metro station (I could see the metro station entrance from the front porch) and had enough parking spaces for five cars.
This was the only house in my portfolio that I rented out by the room. With five bedrooms, I offered a very affordable living situation that generated a significant amount of cash flow and allowed me to pick whomever I wanted as a tenant.
2. Testing your market
Before buying a rental house, test your market. I recommend posting ads on Craigslist and seeing how many serious tenants respond to the ad.
For my five-bedroom duplex, I got around 11 people within my first week of ad posting who told me an ample amount of information about themselves. This showed me that there was definitely a lot of interest at the price point that I wanted to rent out those rooms.
3. Posting ads
There are multiple websites and social media platforms you can use to list your properties. I personally like to use Zillow for single-family home rentals. However, for individual room rentals, I go with Craigslist.
Now there are many strategies out there on how you should post your ads.
Whichever you choose, make sure to provide sufficient information about the house:
List the address and any amenities such as approximate distance to metro, major employers, restaurants, shops, famous tourist sites, or other attractive features. If you are in a popular city, you might also mention the parking situation.
If your property is desirable and you know you will get many replies, maybe incorporate a section about what you’re looking for in a tenant. For example, you could say that you desire long-term tenants. Be careful that your post complies with the Fair Housing Act. You cannot discriminate against race, age, gender, etc.
I always state that credit check and employment verification will be performed without exception (see step 10).
List any hard rules you have, such as whether pets are allowed or if smoking is acceptable indoors.
4. Screening applicant inquiries
Based on the past 10 years of experience, I can typically tell you who is a good candidate for a house showing based on their initial response to my ads.
Here are some tips.
Inquiries that warrant your response:
Potential tenants that actually read your posting and don’t just look over the pictures.
Responses that are tailored to your ad as opposed to generic. For example, they seem serious about renting your house and may tell you about their situation.
Inquiries that don’t warrant your response:
One-sentence responses such as “Is your house still available?” or “When is your house available for a viewing?”
People who don’t actually read your ads (you can tell by their generic response). They may even ask you questions that you already answered in your original post.
Those folks that want to move in your house by tomorrow (or within the next few days).
5. Calling the potential tenant to find out more
Before you respond to potential tenants, I suggest first writing down a list of questions based on what they stated in their inquiries.
The questions you ask should trigger responses that will tell you the following about them and their situations:
Why do they find your house desirable? Is it closer to their work? Is it affordable, or do they depend upon a specific amenity (like a daycare, school, metro) near your house?
How stable is their life situation? (For example, I notice younger couples don’t tend to stay together long term due to more life-changing events (e.g., breakups, etc.).
Do they have a dependable income source that is not subject to economic ups and downs?
How long will they be staying (6 months, a year, a decade)?
How many people will be living in the house, and are they all related? (If you have unrelated tenants, what happens when one leaves?)
Once you write down the questions, it’s time to make the call.
The goal of this call is to find out if they are desirable tenants for you. If they are, then you establish a timeline to show them your house.
Keep notes about their situations so that you can go back and refresh your memory before meeting them in person (if you get that far with them).
6. Ranking your potential tenants
Before showtime, I rank the tenants from most qualified to least qualified based on what I found out during our phone conversation(s), including:
Their stability/ability to pay the rent.
The duration of their rental.
If their reasoning for renting my house makes sense/checks out.
Your gut instinct and common sense will also help guide you here.
7. Preparing the house
I always go into the house at least 30 minutes before the showing to open all the curtains and lights and make sure everything looks clean and bright.
You want the home to leave a positive impression on everyone who views it.
I also review my notes about why they want to rent the house. This way, when I meet the potential tenant, I can emphasize the house’s features that match their individual needs. For example, if my house is next to Fort Belvoir and this potential tenant is a relocating military family, I will emphasize how close we are to Fort Belvoir.
8. Meeting the potential tenants
When meeting possible future renters, I introduce myself, make some small talk, and give them a tour. After they see the house, I play it by ear.
If your potential tenants seem interested, reiterate those house features that match their criteria and outline the remaining steps needed to rent the property.
During this time, you should try to get a better feel of who they are. Unlike in the phone interview, you can see their body language and facial expressions.
Ask casual questions to solicit more information about their living situation, employment/income, stability, how long they want to stay, and overall desirability. This is also a critical time to look for red flags! (Don’t worry, we’ll break these down a little bit later.)
9. Waiting window
After showing the house, plenty of people asked to sign the lease on the spot. I also had people not contact me for weeks and then suddenly want to rent the house. I don’t typically call anyone after their viewing unless I really find them ideal. I just keep advertising until I get a signed lease and deposit check.
10. Verify, verify, verify
Once you go through all the steps and find that perfect tenant, you enter the standard verification process. Here you need to ask for the potential tenant to provide the following:
Income verification: You need their last two consecutive paychecks and the previous year’s W-2 and tax return. If they just moved to the area and have a new employer, ask for a copy of their offer letter.
Credit check: I use TransUnion SmartMove to check the tenant’s credit, criminal record, and eviction notices. This will cost about $40 for all three reports, and I have the potential tenant pay for it.
Application form and copy of driver’s license.
Their current landlord’s contact information (I include this request in the application). This way you can contact their current landlord to see if they have a history of late payments and how well they take care of their home.
Cosigner check: If the potential tenant needs a cosigner, I do a credit check on the cosigner as well and get a complete understanding of the relationship between the cosigner and the applicant; unless the cosigner is a parent or a sibling, I do not rent to that particular applicant.
The hope is that this verification will prove that the applicant’s story is consistent in terms of income, employment, and landlord history.
If this is the case, you are ready for the next step: signing a lease.
However, suppose what they told you doesn’t match up with the information you verify. In that case, you need to go back to the tenant and ask for more information/clarification.
For example, I had one tenant that seemed great but had a low credit score. After looking into it, I realized he missed a cluster of late payments in several credit cards a few years prior, all within a 3-month span. I asked him about it, and he said that at the time he was going through a divorce with his ex-wife but had since paid off those credit cards.
Based on my analysis of his income, debt, and other factors, I decided to rent to the guy after all. He turned out to be one of my best tenants.
On the other hand, I also had applicants that I turned down because I noticed they had consistent late payments multiple times within various years in their credit reports. This pattern of missing payments is more habitual, and I didn’t want to deal with that drama.
11. Signing the lease
Always, always, always have a lease signed by both parties!
If it’s not on paper, it isn’t happening, so anything you can possibly think of needs to be clearly outlined in your agreement from the start.
Here are some unique features I put in my own leases:
Repair deductible: I typically include a stipulation that says the tenant needs to pay a minimum $50 deductible for any repair calls. This clause ensures that the tenant has skin in the game regarding repairs.
Late payment charges: I have a $50 fine for late payments or bounced checks.
Recognizing the red flags
Every situation comes down to what you’re comfortable with, but here are some common red flags to look out for and take into consideration before anyone signs on the dotted line:
1. Unsteady jobs or low incomes
I have had applicants state that their income is below or a little above the monthly rent. This is obviously a red flag since this means the applicant quite literally might not have the funds to pay the rent.
2. Low credit scores
This is just one of those take-your-chances situations. I’ve rented to excellent tenants who always paid me on time, and they only had terrible credit because they missed a credit card payment a few years ago. You won’t truly know for sure until tenants have a chance to prove themselves. But remember, low credit is more concerning if the applicant has missed multiple payments within a few years.
3. Applicants who have criminal or eviction records
(This one’s self-explanatory.)
4. Applicants asking to pay the deposit or the first month’s rent AFTER moving into the house
That’s not how you want to start off your tenant-landlord relationship. Sure, it could be a one-time request. But chances are that if they’re attempting to defer payments now, this is still going to be an issue later.
5. Applicants asking if they can work around the house to substitute for rent
Again, if they are asking things like this before they even move into the property, it’s probably indicative of broader financial instability.
6. Applicants who want to move in within the next few days to a week
Why are they in such a hurry? In these kinds of situations, I typically think over the following questions and try to recognize if any of the following negative traits are presenting themselves:
Is the applicant sporadic or a poor planner? If he or she does not plan ahead, then you will likely be drawn into situations where you have to react with little to no notice (e.g., their lease is ending soon and they don’t give you proper notice as to whether they are going to renew or not).
Is it a con? Under certain circumstances, con artists create environments where the pressure is on you to get them into the house (“I have to move in by tomorrow!”), persuading you to sign the lease without collecting the deposit and rent until after they move in. Now you don’t have time to do a thorough background check.
Are they not giving enough notice to their current landlord? And if they do it to that particular landlord, why wouldn’t they do it to you too?
7. Applicants who have a history of moving around a lot
Every landlord’s dream is to buy a house and rent it out to one awesome tenant forever. But, if we can’t have forever, then we want an awesome tenant to live in the house for a long time. Why does it matter? When tenant turnover occurs, landlords often incur expenses, so we want the least amount of turnover. That is why when a tenant shows a history of moving, say every six months to a year, you have to acknowledge that this might happen with you too.
8. Applicants who tell you their situation to gain sympathy, such as critical medical conditions, etc.
Some people simply overshare with no ulterior motive. Others use this tactic when trying to negotiate rent, lease terms, or other details to their advantage. So just be aware and use your best judgment here.
9. Young couples in their early 20s moving in together for the first time ever
You know the drill. When you’re young, you barely even know how to spell “long-term relationship.” But you want to rent a place with your boyfriend or girlfriend and repaint the house because you’ve never rented own home before.
10. Applicants who could break your hard rules regarding smoking, no pets, etc.
Communicate clear expectations on your non-negotiable house rules before anything is signed (this goes back to making sure you have an airtight lease). That way, if you do rent to them and an issue comes up, you have some sort of recourse.
11. Applicants who can’t produce paperwork and keep finding excuses.
12. Needy tenants
Tip: you can typically tell if someone is needy when they sign the lease because they want to go over every single word before the lease is signed.
Closing thoughts
These are the same guidelines I’ve gone by for the past 10 years, and they’ve helped me avoid many different tenant issues.
I hope you found this 11-step process helpful and that it helped you gain clarity on what you should be looking for — and avoiding — when searching for your perfect tenant.
Please subscribe to my blog, and we will continue to talk about how to succeed in your rental business.