How to Choose the Right Tenant for your Rental Property?
Buying a property is an intricate job. But if you want to put that property under tent, finding a good tenant is not a less cumbersome task either. But what makes the task of finding a tenant so complicated? Let’s plunge into the matter in detail.
If you are a landlord or a homeowner owning an extra residential property, which remains usually vacant or it is sparingly used as a vacation home, renting is always an amicable option to earn some viable returns out of this asset. Some of these advantages are,
01. Enjoying return on investment
02. Arranging financial resource to pay the EMI
03. Earning an additional income
If you have more than one property, you may earn a large chunk of money in the renting account, which you can consider as your additional income.
List Down Qualities You Desire:
Whenever you put a residential property on rent, make sure that the tenant (who have rented), will take care and maintain your property pretty well. You have to select a good tenant, hence you should consider some important factors while choosing the tenant for your property. Let’s make a step-by-step checklist.
The first step of selection is to create a list of qualities you wish to have in the tenant, which can reduce the risk of non-payments, costly evictions, and the hazard of potential damage to your property apart from the problem of creating nuisance. A few points are suggested here about which you should inquire while selecting the tenant for your property.
Points to Choose the Right Tenant
The set of selection criteria for tenant will depend on whether you are a real estate company renting a series of houses at one location or you are an individual renting your additional house for one or other reason. Our intention here is to help the individual as the companies have their organized set up to look after the same to find the best tenant for their rental property.
Further, if you are an individual, the most important thing you have to keep in mind that if you are a neighbour of your property, you have to check few extra points, which we will discuss later.
As an individual you must look into the following factors:
01. Check Credit Score of the shortlisted tenants
02. Income stability of the tenant
03. Background checking of the tenant
04. Possibility for staying a longer/ indefinite time
05. Number of people in the tenant’s family
06. Cleanliness and Maintenance
07. You should not practice discrimination in terms of race, community, and religion, etc.
Let’s discuss the above points one-by-one in detail.
01. Check the Credit Score of the Shortlisted Tenants
- The first & foremost important thing is to check the credit score of the shortlisted tenant at the initial stage of selection.
- A good credit score is an indication that he is financially responsible, so most probably he will pay the rent of your property in time.
- Also, run a credit check during the selection process to assess whether the history of bill payments by your tenant is on time or it is regularly delayed.
- For instance, if the tenant is a student, he may not have a regular income as compared to a working professional, and there is a high probability that he will vacate the place shortly.
Further, it can be checked during one to one conversation, whether there is an inflow of regular income or availability of funding every month.
02. Income Stability of the Tenant
- It is important for your tenant to have a steady income so that he/she can pay the rent in time.
- Ideally, the monthly income of the tenant should be at least three times than the amount of the monthly rent.
- Even if the tenant gets the salary of three times of the monthly rent, there are some factors you need to consider like the debt of the tenant, i.e. whether he has other liabilities, etc.
- If the tenant has a high debts, it may worry him about other costly bills to be paid every month and making it difficult to pay your full-and on-time payment of rent.
- Alternatively, even if the debt of renter is low and, even do not have three times income; still there is a greater possibility of making full- and on-time regular rental payments to you if his credit score is good.
03. Background Check of Rental Tenant
- Background check and police verification are important while choosing a good tenant.
- Check whether the information provided by the tenant is accurate or not. It should be checked with the potential tenant’s ID.
- So, it is better to ask and keep a copy of government-issued ID proof documents of the tenant.
However, in most countries in the world, it has become compulsory, to check the ID proof of tenant, as the landlord has to also inform local police in a given time all the details of the tenant. This is important because the criminals generally create a false ID and stay for a short time for fulfilling their illegal objectives. They might also entice you with proportionately higher rent. So be vigilant.
04. Possibility to Reside for a Longer Time
- It is preferable and better to have a tenant that would stay in your rental house for a certain minimum period of time though not permanent.
- The tenant which you want to rent should have stable life as well as income.
- It can be found out by having a look at his last rental history and also by checking his job history.
- Relocating several times or being irregular with employment in a short period of time always raises a red flag. Stay alert!
- The duration of staying of a tenant also depends upon you as the property owner.
- It is advisable to avoid tenants wanting to stay for a short time. This is because you have to undergo all the formalities off & on and in the process, you may not get rent of all 12 months during the year.
- The time duration of the tenancy is very important i.e., you might want to put your property for a short-term rent like 2 years and the tenant might be looking for long term stay suppose for 5 years. This can be reverse, So check and see if both of your timeline matches.
05. Number and Type of Tenant
- As an owner, you may prefer different categories of the tenant. Some prefer a family while others are fine with the working individuals and/ or students/ bachelors. Ultimately the choice will be personal. As an elder, you may not like students or youngsters as they are usually prone to make noise etc. or you may like them as they can help you in your day to day needs or in case of emergency. This is very important in India where socialization is normally in practice.
- It is important to consider how many people you will allow to live in your premises.
- This will depend upon the size of the rental property and the type of tenant you are considering.
- The small family of 4-5 members may comfortably fit in a 2-BHK flat or even in a larger flat while working individuals, students, bachelors may easily fit in 1 BHK or 1 RK flats.
06. Cleanliness and Maintenance
- Maintenance of your rental property is important as you have invested your valuable money in your property.
- Your tenant is supposed to take care of your property if he likes and is going to stay for a long time.
- It will be a real trouble to deal with the mess done when your tenant moves out of your property if he does not have such habits.
- One way to check whether the tenant maintains cleanliness or not is to arrive at the property unexpectedly when he is at home (current home) or you can simply call his current landlord for reference, if possible and permissible.
- If he has any previous rental history, it can be verified by contacting the previous landowners about the property condition during and after the tenant’s rental.
07. Don’t Discriminate the Tenant
- Do not judge and discriminate on the basis of caste, creed, race, colour or religion.
- Treat every tenant equally and consider selecting the potential tenant on the basis of all the above parameters.
- This is legal and ideal, however the reality on the ground may be different, you may have strong choices for culture, lifestyle, pets, etc. You might not want a non-vegetarian tenant if you are vegetarian or vegan. But remember that while doing all these, you must not violate any law, nor should you hurt sentiments of the tenant in terms of sentiment, etc.
If you are one of the neighbours with your tenant, look for few additional points:
- Check the lifestyle
- Prefer a small family
- Select a tenant with pet if you love pets
- You may ask for character reference in case your tenant is a single person
You may ask for ECS of your rental amount if the rent is paid by the employer company of your tenant, or you may set a date for paying the rent. Follow the rental payment track at least for first 3-4 months to get the hang of the regularity of the tenant you have selected.
Before allowing him to enter your premise get the tenancy agreement duly signed by him and take the copy of his/her ID proof. A reliable tenant will not show any objection to these agreements.
While searching tenant, always refer to the laws and regulations regarding the landlords and tenants. It is equally important to find a good tenant, but it should be done in a non-discriminatory manner. Draft a set of criteria for the potential tenants for allowing him/her for residing in your valuable property and select them on the basis of these parameters. Adhering yourself to the criteria suggested by authority will help you to select a good tenant easily in an easy and non-discriminatory manner. If you want to share anything on this topic, please feel free to share with us in the comment box given below.
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