Being a landlord can be a great experience, but it’s largely dependent upon finding and choosing the right tenant. If paying the mortgage on your rental property is dependent upon receiving the rent from your tenant, then finding the right tenant is crucial, and not an easy task. Once in a while a landlord will get lucky and find a great tenant just by chance, but there’s also a fifty fifty chance it will go the other way.
There are professional renters who know exactly what to say to a landlord to gain his or her trust and let them move in without paying the damage deposit or all of the damage deposit, or part of the first month’s rent or any rent with a promise that they’ll have it in a day, 2 days, a week, etc. Professional renters might never pay anything and live there until an eviction is filed. If they’re unable to convince the landlord as stated above, and they’re references are bad, which they probably are, they’ll give a friend’s name and phone number as their current landlord. This is a common practice and happens frequently. In the mean time they are most likely damaging your rental property.
Renting out your rental property is a business, and I highly recommend that you treat it as a business, or hire someone like me to manage it. There is some reading you need to do before you begin looking for a tenant. You should read the Minnesota Attorney General’s Landlord Tenant Rights and Responsibilities Handbook to understand your rights and tenants’ rights, as well as read my blog Revised Minnesota Landlord Tenant Statutes.
Please understand that finding a tenant is a very time consuming endeavor, and you need to be sure you have the time to devote to this. If a tenant wants to see your rental property during the day and your working, you could easily lose that tenant to someone who will show their rental property during the day. That’s another advantage to hiring someone like me to find you a quality tenant.
Before you even can start the process of finding a tenant, you need to decide on the proper amount of rent to charge for your rental. I do rental comparisons on Craigslist. Craigslist will show you what other landlords are charging versus what utilities they’re asking for. I suggest you pay the water bill and charge a bit extra on the rent equivalent to what you think your average water bill will be divided into 3 months. If a tenant doesn’t pay the water bill it gets charged to your property taxes.
The following is the process for finding the right tenant.
- Put a for rent sign in front of the rental property with a phone number that’s easily readable. You can buy a 2 sided red and white sign at Menards or Home Depot. You can also buy 2 or 3 inch numbers to use for the phone number. I think 3 inch might be too big.
- Advertise the rental property on www.Craigslist.org, www.Zillow.com, and www.Trulia.com. The ads you place are the first contact the tenant will have
with you, so it’s very important to know how to place the ad/what to say, and have good pictures to upload into your ads.
- When the tenant calls, I usually ask them a few qualifying questions such as are they employed. I require that their net monthly income be no less than 2.5 times the rent, that they’ve been at their current or their previous job for no less then 1 year to show job stability, and that they have at least one year of rental references non family and non friend that they pay their rent on the due date because family and friends will tell you what you want to hear. If he or she doesn’t meet this criteria, but I get a good feeling talking to him or her, I’ll ask if he or she has a credit score between 700 and 800. If they don’t know, they can find that out through the internet. People who have a high credit rating are normally responsible people.
- I don’t show a rental property without doing a preliminary background check on a prospective tenant on the Minnesota District Court Website Trial Courts. This site will show you evictions, judgments, and criminal offenses. However, the law requires that you tell someone your going to check their criminal record before you do it. I usually tell them I’m going to do a preliminary background check, the site I’m going to use and what I’ll be looking for.
- So you’ve shown your rental property and a prospective tenant filled out the rental application. It’s now time to find a reputable background check company and sign up with them. The most popular background check company is Tenant Check out of St. Paul.
- Okay, so you’ve checked them out and want to rent to them. You need to make sure that before signing the lease, they pay you the damage deposit which should be the equivalant of one month’s rent, and the first month’s rent either by cashiers check or depositing it into your bank account that you open specially for this purpose; you either verify this before the lease is signed or request they bring the deposit slip to show you. I recommend you use the Minnesota Multi Housing Lease.
- Last, but definitely not least, before giving the keys to a tenant, make sure the utilities have been put into the tenant’s name. I usually ask the tenant for an account number for each utility.
As I stated earlier, finding a tenant is a very time consuming endeavor and can be very stressful for someone who doesn’t have the time or the experience. If you work a lot or travel frequently, you might want to consider hiring a property manager. I charge a minimal fee of $100.00 per month for a single family home, and $150.00 per month for a side by side or a 2 unit duplex. The damage deposit and rent is deposited into the landlord’s bank account. I also have a list of references of happy landlords I email to prospective new customers.
If you have any questions, please feel free to give me a call at 651-245-4674.