By using a non-recourse loan from your IRA, you can begin investing in rental properties. This is a process that takes a lot of time, effort, and emotional energy. Of course, once you purchase the rental property, that time, energy, and effort doesn’t end there. You need to find renters and tenants that show the same respect for your investment that you do. This isn’t always an easy task, and finding less-than-ideal renters can lead to issues like evictions, damage to the property, and non-payment.
To help separate the wheat from the chaff of the renters market, here are a few things you should look for when finding tenants for your rental property.
They’re Good Communicators
It’s very likely that your first interaction with the potential renter will be through text message, email, or phone call. Good renters will be clear about why they’re contacting you and will have detailed questions ready to ask you from the very beginning of your communication. Not only will they clearly outline what they want from you and why they’re interested in your property, but they will also be polite in asking these questions. After all, respect is a two-way street and if your renter shows that they are respectful of your time and your energy early on in the rental process, this is a good sign that they will continue this pattern of respect throughout their term of occupancy in your rental property.
They Can Provide a Rental History
A rental history is essentially a resume for your potential tenant. When you ask for rental history, it allows you to look at how the potential renter has treated properties in the past. When you ask an applicant for rental history, ask for information about why they’re relocating and where they’re moving from. Be sure you also ask for contact information for at least the last two places they lived or two previous landlords. Asking for the contact information for two landlords is like a small insurance policy. If the applicant has been difficult to work with in the past, the most recent landlord may lie and make them sound better than they are in order to get them to move out more quickly. Calling another landlord is a great way to get a more honest opinion of the renter.
During your conversations with both landlords, ask about things like the renter’s timeliness with rent, how well they maintained the property while they stayed there, and how frequently they communicated with the landlord. The answers to these questions can inform how your experience might pass out should you choose to work with these renters.
They Have the Right Income Level
The common line of thinking is that your potential renter should make at least three times the cost of rent every month. You can confirm this by asking for pay stubs from your rental applicants.
But income isn’t the only financial factor to consider. While some applicants may make three times the rent each month, other dents may prevent them from using those funds as they need. If you’re worried about an applicant’s ability to pay rent on time, it might be worth pulling a credit report. Large amounts of debt could mean that your applicant will struggle to make rent a part of their monthly budget.
A Clean Criminal Record
Many landlords have made a background check a regular part of their responsibilities before approving a rental application. The lack of a Criminal Record is usually a good sign the applicant will not cause you any problems. However, if the applicant volunteers their criminal history, this may be a sign that they’re making an effort to improve their standing and situation. As we mentioned above, this is a sign they have good communication skills.
They Have Long Term Plans to Lease the Unit
A year-long lease is a flexible option for a lot of renters, but isn’t always the best for you. It can be difficult to find new renters in an unoccupied space means no revenue for that period. If possible, ask the applicant how long they plan on staying in the unit or if they have plans to stay in the area for a long period of time. Asking a potential tenant about their willingness to renew their lease even before they signed the agreement may not be a natural part of your conversation, but if the tenant expresses an interest in staying in the area for a while, you might make a point of asking them. Generally, applicants who are interested in staying in the property for multiple years are more invested in taking care of the property. After all, they want a comfortable place to live and you want a well-maintained rental property.
They’re Prompt about Filing and Returning Paperwork
Once you find an ideal candidate, you can start the application process. Candidates who are quick to return applications, provide the information necessary for background checks, and can provide pay stubs and references are the kinds of tenants you want for your rental property. It shows that they’re serious about the rental process, and will be responsive to your requests and needs in the future. It’s also a good sign that they will be prompt with rent and will not be a hassle in the future.
Of course, they can only be prompt in the responses if you provide them suitable time frames. Offer realistic expectations and clear dates on when you need paperwork, checks, and more from them and make sure you follow up on your end as well.
Start Investing in a Rental Property Today
When you work with First Western Federal Savings Bank, you’ll enjoy the benefits of our more than 40 years of experience. As a non-recourse loan lender, we take pride in our honest approach toward buying and investing in real estate.
To find out more about our IRA non-recourse loans that can help you achieve your retirement financial goals, explore resources. When you’re ready to start the lending process, connect with us today and fill out your application.