David Tilney has been managing single-family houses in Colorado Springs, CO for over 40 years. The article below was written by him to share his tips and secrets to success in retaining great tenants for your investment property.
Understand How Investment Property Works in Your State
Understand How Investment Property Works in Your StateFirst, define the job description you have for your tenants. Ours is to maintain and improve our properties, pay the rent on time, get along with the neighbors, stay for a long time, and contact us only when support is needed. Second, learn and obey the various federal, state, and local fair housing laws, your state and local landlord/tenant laws, and your state licensing laws. (Google can get you any information that you don’t have.) Third, create a Policy Procedure Manual to guarantee consistent and equal treatment of every rental applicant and to support your compliance with the applicable laws.
Create Appealing Advertisements
Advertise the property you have for rent, not the applicants you hope to acquire.
Market the sizzle along with the steak in your ads since people usually base decisions on emotions rather than logic. Pick favorable property attributes and write copy with emotional appeal like: “come home to a vacation…” or “imagine entertaining on this lovely, private patio…”, etc.). Show lots of photos and perhaps a video walk-through. List your qualifying criteria at the bottom of your advertising to encourage unqualified applicants to weed themselves out and save you time. Repeat this in your application packets and online applications for the same reason. Currently, we list the following at the bottom of each of our rental ads.
Keyper Corporation believes that our tenants are our greatest assets. We have rented to hundreds of tenants since 1978. We offer well-maintained houses for long-term occupancy to people who wish to take our house and make it their home. Our typical tenants rent for multiple years (our longest tenancy was just under 25 years), and we have never had a tenant forced to move because of a foreclosure. We offer discounted rent to tenants who are willing to take on the responsibility for the minor maintenance that comes with living in a house. If what we offer appeals to you, and you meet our qualifying criteria (listed below), then we invite you to apply to rent this property.
OUR QUALIFYING CRITERIA
- Monthly income equal to 3 to 4 times monthly rent
- Generally 700+ FICO credit score
- Stable employment & income (or retired)
- Positive rental history (and/or mortgage payment history)
**Note: You must meet at least 3 out of the 4 criteria listed above to be approved to rent this property.
How to Vet Potential Tenants
Create rental applications and processes that verify income and credit and also inventory applicants’ skill sets. Check criminal history as part of your process. You are hiring someone to maintain and improve your property and paying them with the “currency” of good rental housing. FICO scores will indicate both their ability and willingness to meet financial obligations but will not indicate how they will maintain your property, so prior rental history is also important.
We require information about rental occupancy and employment during the previous five years. If the applicant has lived at their current address for five or more years, we still require information about their previous landlord. Net monthly income can be dramatically different from gross income, so we require information about both gross and net.
Our approach is to trust everyone but verify everything. We require separate applications from everyone over 18 who will live in the property. This gives us more information on which to base our decision. We also state in multiple places on our applications that tenants will be accepted on a “best qualified” rather than a “first come, first served” basis. We find this motivates people to either compete for our property and sell us on why we should rent to them or help them decide to look for another property. (Beware – If your property is in Seattle, WA, you must accept applicants on a “first come, first served” basis and not a “best qualified” basis. This points out the need-to-know your local law.)
Showing Your Investment Property
Have your existing tenants show the property in person or by communicating with applicants on video phone calls. They will learn things about applicants that you would never discover. Your tenants will tune you in if red flags appear and sell qualified applicants on the benefits of renting from you (assuming that your tenants have enjoyed the experience). A recommendation from an existing tenant is invaluable in helping reduce the suspicions and distrust that many tenants have of landlords. If you ever have a vacancy, then you should create a system that allows for self-showings, realizing that it won’t be as successful as showings of occupied houses by the existing tenants.
The Rental Contract Process
Once acceptable applicants are found, contact them to verify that they still desire the property and that it is also their first choice. If so, set up a time to meet to sign the rental contract. Let them know that you will block out a couple of hours to make sure that they have plenty of time to have all their questions answered before signing the contract. Tenants appreciate this approach since most rental experiences more closely resemble the process of renting a car or signing a software licensing agreement where contracts are executed with little or no understanding of what the contract actually says. Make them aware that your company’s policy is to continue showing the property and collecting applications until a contract is signed and all move-in funds are received. This will motivate them to meet with you right away.
Understand that this meeting is really the final sieve in your screening process, so spend the time well. Share what you expect from your tenants and what they can expect from you. Use stories to teach and make your points stick. Let tenants know that rents must increase annually to keep up with inflation and rising costs. Tell them you first analyze market rental prices, but modify indicated rent by considering the relationship between you and your tenants.
If the applicants like what they hear, then execute the contract. If needs are incompatible, shake hands and wish them well while mutually agreeing that you can’t do business. The cheapest eviction you will ever do is not to put the wrong people in your property in the first place, so be pleased that your process allowed you to dodge a potential bullet. Review other existing or future applications to find others who meet your minimum rental criteria. Contact the best qualified and follow the same lease-up procedure to rent your property.
Closing Thoughts
This process should provide you with happy tenants who will have no misconceptions about what you are offering and the terms and conditions under which you are agreeing to rent to them. It increases your odds of choosing tenants who don’t feel entitled or have a victim mentality. Tenants want to live in well-maintained properties where things work as intended. They want their privacy and don’t want to feel like children who need to be monitored on a regular basis. Meet these needs and trust them to be good stewards of your asset. When they need support to solve a problem – act quickly! Don’t over promise and under perform in your landlord responsibilities. Do the opposite by under promising and over performing in order to change preconceived opinions they might have about landlords and to gain their trust. Become a coach instead of a sheriff. Be firm when it comes to lease compliance, but be fair and give positive reinforcement whenever you have the opportunity. Treat your tenants with respect and empower them to make limited decisions about maintaining your house and yard so that it can become their home and not just a place to sleep at night. If you implement these ideas, you will find your expenses, as well as your rental turnover, will decrease dramatically.
Copyright © 2020 David Tilney http://www.DavidTilney.com
About David Tilney
David Tilney has a unique philosophy of property management. He works hard to foster a team approach among his tenants, vendors and owners and believes his tenants are his greatest assets (not his properties). “Our tenants are the ‘on-site’ managers,” says Tilney. He tries hard to treat people the way they would like to be treated. This approach has worked well for David, who believes that his properties and his relationships with tenants generally improve over time.
David is a life-long learner and has taken myriad real estate courses and read and listened to hundreds of books and tapes related to all aspects of real estate. He has a passion for teaching and has shared his unique management system in his Hassle-Free Property Management seminars for over 25 years.
