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Whether you’re a real estate investor or simply wanting to make some extra money by renting a small unit, what should you keep in mind when looking for tenants? Obviously, you want to find the right tenant and have a good experience, but how can you make sure that is the case?
Georgina Steward of US Business News caught up with investor, author, and tax attorney, Brian Boyd, to ask him a few questions. Boyd is the author of Replace Your Income: A Lawyer’s Guide to Finding, Funding, and Managing Real Estate Investments for his expert advice on how to make sure you get the right tenants.
Georgina: What are the top advantages of choosing good tenants right from the start?
Brian Boyd: Choosing the best tenants for your properties is just as important as choosing the right properties for your investment. Why do I say this? I say this because tenants are as much of an investment as the property. Choosing the right tenant is choosing someone who is invested in living in a good home. They are dedicated to taking care of the property for themselves and their family that lives with them. By being discerning about the tenant in your property, you will find someone who wants to be in the property. They want to take care of their new home. They want to pay the rent. They want a good relationship with the landlord. In turn, the property owner wants to keep the tenant happy.
Georgina: If you’re renting a newly acquired property, can good tenants improve a property’s financials?
Brian Boyd: Yes, a good tenant can increase the cash flow of a property through their maintenance of the property. Every property needs light bulbs changed, air filters changed, and good communication with the landlord. A tenant that is invested in the property as a home will make sure the property is well maintained by keeping the landlord apprised of any issues, treating the property as a valuable investment in their future, even if it is only for a short time. In turn, this treatment will keep the property maintained and in good working order. This helps maintain value and keep values rising, even in a down market.
Georgina: What, specifically, do you look for in a good tenant?
Brian Boyd: A good tenant will have a good credit score, above 600. They will have a steady work history, no prior property evictions, no collections, and no criminal record. In my experience, the credit score acts as a barometer to how well a tenant will act, communicate, and pay their rent. Those with spotty credit history, collections, or evictions in their background tend to stay that course as tenants.
Georgina: There must be some red flags that you look for when considering potential tenants. Will you share some of them with us?
Brian Boyd: Red flags for potential tenants would be evictions, collections on their record, bankruptcies, and criminal histories. These tenants tend to break rental agreements at will, violate laws, and usually end up in Landlord Tenant court for another eviction.
Georgina: Let’s say you have a number of potential tenants vying for the same property. How do you manage this? Who do you decide to accept as your renter?
Brian Boyd: Narrowing down a tenant in a multi-application situation will come down to credit score and history. As a barometer of their life, the credit history shows how those tenants treat other obligations in their day-to-day life. This translates directly to how they perceive their obligations as a tenant in your property. The higher the score, the better the tenant tends to perform as a tenant.
Georgina: How do you know when you’ve found the right tenants?
Brian Boyd: You have found the right tenant when you visit a property and find it in better shape than when you turned it over. When a tenant makes the property their home, by planting flowers, putting up curtains, or placing a welcome mat outside the front door, you will know that this tenant is as invested in your property as you are.
Georgina: Do you think it’s important to meet with a tenant in person before you choose to lease to them? If yes, why? If not, why not?
Brian Boyd: I do not think that meeting a tenant in person is important. I think talking with a tenant, screening that tenant and learning about that tenant’s goals is the most important. When face-to-face interactions take place prior to a lease being entered, certain prejudices and proclivities tend to emerge. For example, meeting a tenant with purple hair in a spiked mohawk and multiple piercings might sway a landlord to not rent to that tenant. However, we have a tenant just like that, and that tenant pays their rent 5 days ahead of the due date every month like clock-work. As a buttoned-down lawyer, I might not have rented to that person. But, by not meeting them in person, I took away that possibility and chose the right tenant regardless of appearance.
Georgina: What else should a new or inexperienced landlord consider when they’re leasing a unit to someone new?
Brian Boyd: I think a new or inexperienced landlord should consider a tenant’s employment and income when leasing to someone new. If a potential tenant does not have the income to rent your property- where the rent is about 25% of their monthly income, then they cannot afford to rent the property. You do not do yourself or your tenant any service by allowing someone to rent a property that they struggle to make rent each month. The stress is not worth it to you or the tenant.
Georgina: What about pets? Do you rent to people with pets? If yes, why? If not, why?
Brian Boyd: Pets are a case-by-case basis. However, certain insurance companies will not insure properties with dogs that tend to have aggressive tendencies. Moreover, we do not allow aquatic animals or birds. If there is a cat, we will require a non-refundable pet deposit and pet insurance.
More on Brian T. Boyd, Esq.
As a lawyer in Nashville, Tennessee, Brian Boyd helps clients with real estate, construction, and business matters. It is with that knowledge that he and his wife, Dawn, have grown their portfolio to a six-figure income. Brian earned his BA from the University of Tennessee—Chattanooga, a JD from Samford University’s Cumberland School of Law, and an LLM in Taxation from Georgetown University Law Center. When not practicing law or working with Dawn on their real estate ventures, Brian can be found on the Brazilian Jiu Jitsu mats at his local gym. His newest book is Replace Your Income: A Lawyer’s Guide to Finding, Funding, and Managing Real Estate Investments
