What to Look for in a Tenant
For investors looking to invest in buy and hold rental properties, finding the right tenant is an important step towards managing a successful rental property. What are the main characteristics of a good tenant and what qualities should tenants possess before an investor allows them to rent their property? In this blog post we’ll look at some key factors that an investor should take into consideration when screening any potential tenants.
1) Good Credit
First off a prospective tenant should have good credit. Credit is a great way to determine how reliable this person will be at making their monthly payments. If they have a strong credit score then the chances of them making their monthly rent payments on time and reliably are fairly high. However if they have a low credit score and have a history of making late payments it may be in the investors best interest to deny this applicant. An investor should set a minimum credit score that they are comfortable with to screen out less qualified tenants.
2) Steady Employment
Another key factor in screening a potential tenant is their employment status. Having a tenant that has stable employment with enough monthly income to cover the rent should be a quality tenant and someone that the investor would feel comfortable renting their property to. If they seem to have a shaky employment history and it isn’t clear if they will be able to make payments it could be a red flag to the investor.
Another way to screen potential tenants is to obtain references from past landlords. To get a good sense of the type of tenant they would be, who better to ask than someone they used to rent from? If there were any past issues or consistent problems that a former landlord had with the tenant, that information would be very important to determining whether that person would be a good fit.
Owning rental properties is a great way to build wealth through a passive stream of monthly income. To ensure that each rental property has the chance to be successful, having quality tenants is a must. While there is no such thing as a perfect tenant, having a system in place to weed out bad tenants and only rent your properties to tenants that you feel meet your criteria is a great way to build a successful rental property portfolio.
Lima One Capital is the nation’s premier lender for real estate investors. We make it easy to finance all of your fix-and-flip, rental property, and multifamily investments. We are a national lender lending in 41 states as well as Washington, D.C. We have a passion for working with real estate investors and providing the financing they need to be successful!