How to Find Good Tenants (And Be a Good Landlord)

There are two kinds of landlords:

Landlord 1 is on a beach, sipping on his piña colada. He woke up late that day, around 10 am. He had breakfast and then headed straight for the sand at the private beach of a 5-star resort. He hasn’t heard anything from his tenants in weeks, maybe even months. In fact, he has been on this same beach for the last several weeks. All the while money continuously flows into his account every month. He’s thinking about what he’ll do with all the money he gets from his rental properties. He’s planning his vacation. He’s thinking about buying a shiny new sports car.

Landlord 2 is just getting home for the day after working his full-time job. He didn’t sleep so well last night. His tenant called in the middle of the night complaining about a leak, and because he doesn’t have a property manager, he had to go and take care of it himself. The day prior, one of his tenants called him to complain about the noise from one of his other tenants upstairs. Rent payments are usually late. The last time he went to the rental property to collect his check, he’d found that drywall had been destroyed, bedsheets had been hung over the windows, and garbage was piled on the lawn. The last repair he paid for wiped out his monthly cash flow.

The differences between these two landlords are quite obvious. And if you’re like me and value your mental health, you’d probably want to be more like Landlord 1.

These two landlords are both investors. They probably approach investing in the same way: They both bought a property. Both financed it. They both renovated the home. And they both put tenants in.

The biggest difference? Landlord 1 took the time to screen his tenants carefully, while Landlord 2 most likely did not.

Screening your tenants properly is one of the most important things you can do. Being diligent during this stage will mean avoiding getting constant complaints, late payments, damages, or worse.

I have rented to many people over the years. I can humbly say I have yet to evict a tenant. I have had no major issues with a tenant. The properties have always been returned to me at the end of the lease agreement in as good of shape as they were when the tenant entered. Payments have rarely been late, or if they had been late, the payments had only been late by a few days and with constant communication by the tenant. I have luckily never had a call in the middle of the night because something needed repairs.

So what can you do to be more like Landlord 1 and less like Landlord 2?

Here are a few ideas to make your experience as a landlord go smoothly:

1. Don’t pick the first tenant that comes up—Let’s face it, we want to just get it over with. You spent months finding the property, another month or 2 getting it financed, several months to renovate, and finally, you just want to throw somebody in the unit and start collecting payments. Just spend a little more time, and be patient. Get several applications in before you make the final decision. Screen as many people as possible. Depending on your market, give yourself a couple of weeks or even a full month, if you can, so that you can screen multiple tenants and make your final decision once you have the bigger picture.
2. Do a background check—This should be a given, but it still shocks me how many people don’t actually do them. There are a number of online websites that you can use that cost as little as $40 to screen potential tenants. Do a quick google search on the tenant’s name. If you can contact their previous landlord and or boss. Talk to them at length. Make your expectations firm. Go over the rental agreement with them and highlight what you feel are the most important bits. 
3. Consider fewer restrictions—The more restrictions you put on your tenants about what they can or cannot do, the more likely you will be to have a high turnover, an unhappy tenant, and the more likely you will be to not attract the best tenant you can possibly attract. My rules for tenants are simple—keep the place clean, no loud noise at inappropriate times, and pay your rent on time. I generally let my tenants live in the home as if they owned the home. At the end of the day, they’re paying rent. And as long as that is happening, it’s as much their place as it is yours. This gives the tenant pride of ownership, and it’s more likely they will take care of your home.
4. Write up a detailed contract/lease agreement—No need to reinvent the wheel here. You can find a template online. Make sure the lease agreement caters to your specific city/state. Highlight all the clauses you feel are absolutely non-negotiable. Detail everything. Keep a written note of everything. If they paid their rent in cash, send them an invoice that says “Paid In Full” along with the dollar amount. Make sure both parties sign and date next to their signatures. Put the renters identification in the lease in case there would be a legal dispute. Then, go over the lease agreement with them, line by line, have them initial every page, and make sure to consider everything so that nothing is left out. It will save you later on, give the tenant the feeling that you are a serious landlord, and will make them less likely to break the rules.
5. Take care of the property, take care of your tenant—If you want your tenants to be good to you, then you have to be good to your tenants. Make sure everything in the house is working. Light switches, water fixtures, lights, door knobs, locks, appliances, etc. The better experience the tenant has the longer they will be willing to stay on your property, and the less likely they will be to become delinquent, worrying about losing a good place to live and a great landlord. Provide them with cleaning supplies and a vacuum to encourage keeping the place clean. Schedule regular maintenance on the property. Check in once a month with your tenant.
6. Do monthly or bi-monthly inspections—You will need to visit your property or have someone go inside the property every once in a while. Truth is, being a landlord is synonymous with being lied to. People will rarely tell you the truth. A friend of mine thought everything was all perfect, and that they had the perfect tenant, only to find out at the end of the lease that the inside of the home was trashed and had been abused since the beginning of the lease because he never took the time to stop by and look inside the house.
7. Get a property manager—You can get a property manager at any time. If you get tired of managing your properties, just hire someone to do it for you. Eventually, you will get so busy managing all your rentals that you will simply have no choice but to hire one. Set your expectations with your property manager. Speak to your tenants and ask them what they think about the property manager to get a clear picture of who they are and how they work. Tell the manager that if any repairs cost less than $100, just take care of it without bothering you. If it’s over $100, then instruct them to let you know. Property managers typically charge a small fee of around 10% of the monthly rent to manage your properties for you.

Having good tenants will make or break your career as an investor, as well as lower your morale. Tenants can turn a dream into a nightmare, and vice versa. It can make you love real estate or it can make you wish you had never invested in the first place.

Take care when choosing tenants, screen them properly, be patient, be selective, put all your expectations on the table, communicate regularly, and impose penalties for late payments or bad behavior. If you can manage this, then managing tenants will be easy. In fact, you won’t even have to manage them at all.