So how does one go about obtaining tenants once you have obtained your first rental property?
Here are my quick steps to finding, selecting and solidifying tenants for your rental:
Identify a valid rental price:
Check Craigslist, Zillow and check with a realtor to find what other landlords are charging for their rentals in the same area. BiggerPockets.com is a good online resource that includes forums for landlords, so see if you can find an expert and run the price by them.
Prepare for the showing:
-You'll want to take really good photos of your rental, check zillow or redfin and determine how others are marketing their properties. You always want to highlight the best view of the front of the house, the kitchen, bedrooms, etc.
It may make sense to pay a professional to help you, which is what did for my first rental. Some professionals will utilize drones, or other high altitude pole mounted cameras to take the perfect photos- all of these are good options which I have used for my properties.
Have your documentation ready well before the rental showing. On the state of California website you can find template documents that can assist you here, such as California Residential Lease Agreement, Rental Checklist, and Rental Application. Spend a considerable amount of time reading through and understanding the lease, as it is your main legal agreement between you and your tenants.
Once you are ready modify the lease agreement for your property. Make sure to have the deposit, late fees and other terms and conditions clearly identified.
Setup an account with a credit agency that will allow you to run the potential tenants credit report, this is a critical step to determine tenant capabilities. Make sure to understand credit scoring, and your minimum acceptable credit score. Your position on bankruptcy, tenant debt to income ratio, etc.
Consider multiple what if scenarios:
For instance, what if your new tenants decide to put in a Tiny House on the large side yard, they then sublet the rooms in the Tiny House. Do you have provisions in your lease to protect you and discourage tenants from this type of behavior. You can also check with a lawyer if you are not comfortable with the language in the lease agreement.
You can use a realtor's MLS or Craigslist to post your rental advertisement. Craigslist has worked well for me. Use the type of creative marketing language that realtors use in their listings. The photos and the language in the add is what will get the right tenants to your rental for a viewing.
Once you create a separate email for your rental business, post the ad on Craigslist for a block of time, say three to four hours on a weekend. As tenants begin to email you, call them back to determine if they are really interested in your property and price, then setup 30 minute appointments for each prospective tenant.
During the showing allow the tenants to check the house themselves, no need to hover around them. Answer questions if they ask, but there is no need to dig too deeply into their potential to rent the property, as your rental application and credit report will provide the data you need.
For the tenants who show interest, ask them if they would like to fill out the rental application offline and send it to you. Remind them that the rental applications includes a credit lookup request. They will receive an email from the credit agency requesting approval for their credit score and details be shared with the landlord.
Once you complete the showing, read through the received applications and look for a ranking that will help you identify a candidate who can afford your property. For the candidates that fit your criteria, ask them if you can submit their name to a credit agency, who will run a credit report on their behalf, which you will receive.
Some prospective tenants are uncomfortable having their credit checked, which is sign that you do not want to consider them as tenants. Credit scores are the easiest way to determine if someone has been responsible in their financial matters, so never rent out your property to someone who refuses to have their credit checked, or maintains a lower credit score.
Terms & Conditions:
Once you identify the tenant, make sure to reiterate the terms of the contract verbally, including provision on pets, cleaning deposit, etc. Also, have your tenant setup a bank to bank transfer of rent directly to your own business checking account setup for this property.
Banking & Your Business:
Never use your own personal checking account for tenant transactions. At a minimum setup a "Doing Business As" business license in your county to help you solidify and organize your property management / rental business. Once you have a valid business name, setup multiple accounts at a different bank than your personal account (I recommend a credit union or other bank than offers low transaction fee's) for the purpose of receiving the bank to bank rent payments, paying for repairs, saving for property taxes, future income taxes, and for the saving and delivery of business profits.
Having this level of financial organization for your business will assist in tax planning, tax law adherence, as well as getting approved for property refinancing, future rental property purchases, and other scenarios that require you to prove the profitability of your property rental/management business.
Collect Rents and setup a Landlord workforce:
I recommend collecting the deposit in person, have the tenant sign the lease and make sure there are no red flags beforehand. Finally, you reach the easiest part of the business- watch your money come in each month. Also make sure to have a group of handyman/handywoman available to you. I have a plumber I trust, and I use several different workers to assist with repairs. All of these individuals are in my phone contacts list, and they respond to me quickly when I need help.
Good luck with your first property rental.
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