You're thinking about buying an investment property - you're sold on the investment, but you're not sold on investing in tenants. You've heard the nightmare stories about the world's worst tenants. You know, the ones who never paid the rent, who had late night parties and police frequenting the property, the ones who call daily with a new complaint, the ones who ruined the wood floors, the ones whose dogs destroyed the landscaping... The list goes on.
How can you ensure that you're making a good bet when it comes to your renters? Well start by ensuring you property is the type of place that's going to attract good tenants. If you're renting a dive, you're going to attract a less sophisticated crowd of people.
Cheryl, a new investor says, "I bought my house planning to rent out the basement suite, but before I started looking for tenants I spent about $5000 fixing it up. The place was a dump and I wanted to make it into a place that I would be willing to live, because I knew that if I wanted people who would look after the place it would have to look like I looked after it." So she redid the floors, repainted the entire suite, replaced the appliances and added new cabinetry. "The result was a brighter, fresher, modern looking suite," says Cheryl, "and I was able to find great tenants."
When you're looking for tenants start by putting the word out to family and friends - you might get a good referral. If you need to post an ad, think about choosing a targeted post. A local paper or Internet site might garner a lot of interest, which is great if you want a lot of prospective renters to choose from. However, if you have a specific type of tenant in mind, you may want to direct your ad to particular local organizations or professional associations. For instance, many universities have housing listings available for staff, or perhaps you'd find the ideal tenant by sharing your details with a seniors' group. Remember to be up front with what limitations you are putting on the suite - if you don't want pets or smoking, saying that in the ad will cut down on the number of unsuitable replies.
A good application and screening process is very important when choosing your tenant. You will want to run a credit check, talk to references (preferably past landlords) and even Google search the perspective tenant's name before you make any decisions.
It's also worth considering a lease as this will give you a set time period to test out your tenant. If they cause trouble you can choose not to renew - it's like an added insurance policy. If your tenant breaks the lease you've got reason to evict. When writing the lease be specific: if you don't allow smoking or if you only allow pets of a certain kind, state it. When you first write your lease, you may want to have it reviewed by a lawyer to make sure everything is kosher - then you can use it as a template for future tenants.
By putting some work in before letting someone move in, you have a better chance of finding the right tenant - and hopefully they'll stay for a while. If your new tenant doesn't work out, don't be discouraged: learn from your mistakes and make the next choice even better.
