Selecting a resident can be one of the scariest parts of being an investor sometimes. Screening and leasing our rental properties is not something we do all the time. If you’re a self-managing landlord who is looking for a resident to occupy your vacant property, you might not be up to date on all the current laws and requirements. You may keep your residents for a long time, so you only go through the screening process every few years.
Filling your Reno rental property is certainly stressful. It’s a process that’s hard to control while you’re making money. When you buy an investment property or renovate a rental home, you’re controlling the whole process. But, when you’re picking someone from the general public to live in your asset, it can be difficult to do.
There are a lot of things you should consider when you’re choosing a resident, and in this blog, we’re focusing on the top three things to look at.
Reno Residents Need to Demonstrate Financial Stability
Financial stability is absolutely the most important thing to look for when you’re screening applications. You need to be sure the resident moving into your home has the means to afford your property. Make sure the resident has been employed by a stable company or has a traded that’s stable and in demand. You can use employment references to talk to employers and make sure the company won’t be shutting down or moving in a year.
Private landlords who manage their own rental homes don’t always take the time to investigate a potential resident’s finances. This is a mistake. Financial stability is important and can be a huge indicator of whether you’re going to have your rent paid on time every month. You don’t want to place a resident who you assumed was financially stable because they were able to come up with the security deposit and the first month’s rent, and then find that resident is coming up short three or four months later. Spend some time looking at credit and debt and income.
Check Rental Histories and References on Reno Residents
References are important. Just like when you call for employment references, you want to call for landlord references as well. On each application, we ask for prior rental references and maybe personal references as well. Almost every rental application asks for them, and it will only take you five minutes to make the phone call and ask for some information.
When you’re talking to a landlord about a current or former resident, consider asking that person for a second tier reference as well. Perhaps a neighbor or a vendor can speak to whether a particular resident was easy or difficult to work with. You really want to spend some time exploring who a prospective resident is.
Identify the Resident’s Current and Future Housing Goals
Identify the person’s short term and long term goals before you begin the screening process. You want to know how long they plan to stay. If they’re here for work, they might want to rent for only a few months while they work on a project. That’s not going to be a good fit for you if you’re seeking a long term tenant. Maybe a resident is looking to buy a home in a few years and wants to save some money and rent while they get to know the Reno area.
Knowing short term and long term plans will help you fill your vacancy with the right resident. Some investors prefer the stability of a long term tenant. Others like having the higher rents that come with short term tenants. Look for what you want and identify the types of residents who fit with your investment goals.
Follow Fair Housing Laws
Make sure you’re screening each application consistently and fairly. You need written policies, procedures, and standards that explain your screening process and qualifying criteria. Otherwise, you can get into some fair housing trouble.
Here’s an example. Perhaps you have a rental property that you expect will rent quickly, so you set very high screening standards and deny a tenant who applies because his income doesn’t match your requirements. After three weeks, you have not found a resident, and you’re starting to panic as your vacancy grows more expensive. So, when another applicant wants to rent your property and their income is too low, you approve them for your property anyway because you’re desperate to get the place rented.
Not only is it a bad idea to lower your standards; it’s also illegal from the perspective of the first applicant who had the same qualifications and was denied.
You don’t want to loosen your standards or become desperate. When you’re selecting a resident, make sure you have your qualifications in writing, and follow them consistently.
Putting the right or wrong resident into your property is the difference between a successful investment experience and a horrible one.
Standards protect you against litigation and they hold you accountable. If you have strict and reasonable criteria that you follow, it won’t be hard to find a well-qualified resident.
We want you to be smart about managing your Reno rental property. Please contact us at Mynd Property Management. We’re always happy to talk about real estate and answer any questions. Even if we’re not managing your home, this is something we’re passionate about, and we love talking to other investors.
You can also visit our Facebook group of investors, which is called Master Mynd. It’s a real estate investors’ club, where you can exchange ideas with other owners. Check out our weekly podcast as well, called The Myndful Investor. We invite leaders in real estate and property management to talk about their success and, more importantly, their failures. There’s a lot to learn from this relatable content.