Potential Tenant Profile: What should I look for in a tenant
Potential Tenants: Avoiding the Pitfalls
Finding the right tenants can be the difference between enjoying the residual and passive aspects of a rental property and an eviction and lawsuit headache.
10 logical red flags to identify when looking for a potential tenant for your real estate property. Avoid these pitfalls and you are golden. If not, door number two awaits pandoras box of headaches!
Below are red flags from my own experiences and others that will curve a beginner or intermediate landlord’s experience. Many of the red flags to watch out for are subtle and you have to look, listen and read people very closely so be looking for these as well as good indicator signs.
1.Hesitancy to provide background and credit checks
No potential renter wants to spend $30 on a check that they know will be bad. On the flip side, renters with a good background and credit score and more than happy to provide the money and information necessary.
2.“I have money coming in”
Maybe. If the application has a small amount of money stated in their bank account and they claim to have money coming in then move on. They will be telling you the same thing at the first of each month.
3.One unmarried couple and one single person looking at a four bedroom house?
On the surface you think, “So?” The couple will likely take the master bedroom and the single person will take one room. What will they do with the other two bedrooms in the house? Probably something you won’t like. They will fill it with people that are in and out of the house, can’t pass the background check, or grow illegal plants.
4.Short stays at previous rentals
This depends on the landlord and whether or not you mind getting new tenants in every year. Most landlord’s goal is to find a renter that they have no problems with and pays rent on time for years. In this case your best bet is to stay away from a renter that changes address every year.
There are too many potential tenants to choose from to take your chances with this. If the potential tenants are a couple or family and have declared chapter 7 bankruptcy they could do it again under someone else’s name and be legally cleared from paying you for months.
Choose wisely for potential tenants
6.No references, No dice
Speaking to the previous landlords is crucial. Do not skip this step.
Asking the landlord if they always paid on time and how they treated the house is a good indicator of how they will treat you.
7.Verified bank statements
Knowing your tenant is financially sound with liquid funds is as important as a background and credit check. Your application should include a bank account section asking for the account balance. You should also get confirmation from their bank that the information is correct. The accounts should ideally have some money stashed away with an extra rent payment or two if something unexpectedly were to happen. $1,000 total in their bank accounts while your first months rent and up-front security deposit total $3,800 is a red flag.
8.Not being punctual with appointments
In the rare occasion someone has a legitimate excuse move forward, but that’s usually not the case. If they’re a half hour late and your waiting at the house or don’t show and try to reschedule will they pay the rent on time?
9.Several months of up-front cash
It is enticing but don’t take it. This is usually a tactic to have the landlord disregard all other logic in an effort to hide true background, credit, overall history and plans for the property. All too often landlords take the money, usually resulting in a tenant they will soon regret.
10.“Can I pay you in airsoft guns for the deposit?”
The standard security deposit that matches the rent is the defining moment for me. It tells me two crucial factors: if they’re serious about the property and if they will be able to pay rent in the future.
Getting a security deposit, to be withheld until the tenants have vacated and the property is inspected, is mandatory with the first months rent before handing over the keys. The security deposit is your leverage, if the place is thrashed or for whatever reason the tenants cost you money you can at least keep part or all of the deposit.
Pay close attention and keep an eye out for subtle and obvious red flags. Many times landlords have a tendency to overlook red flags and rationalize with wishful thinking and hope everything will workout because they want a renter in and cash flowing. It’s a slippery slope. Always hold out even when it’s tough in order to find the right renter.