10 Secrets To Managing Your Rental Property Without Losing Your Shirt Or Your Cool

As a real estate professional, I have successfully managed rental property in Denver, Phoenix, and St. George, Utah. Over time, I have noticed that many real estate investors and property managers, regardless of experience, fail to take some simple steps to protect themselves from renting to poor-quality tenants. Therefore, I created a system for screening potential tenants that results in successful landlord/tenant relationships. My tenants almost always pay their rent early, they are usually easy to deal with, and they often return the property to me in better condition than it was in when they took possession of it. My system is based on the multitude of property management books I have read and my experience with tenants. If you use this system, I think you will enjoy the same success I have experienced.

Try using these 10 rules the next time you deal with potential renters:

1. Make your showings of the rental property your first line of defense against bad tenants. Save time by only showing your rentals three times per week. Schedule your potential renters for a group appointment, and make the appointment very short. For example, tell potential tenants, “I will be at the property from 5:00 to 5:15 on Tuesday.” Some people will show up late. Eliminate them from the pool of potential tenants. If they can’t keep a simple appointment, how can you know they will pay their rent on time?

2. List the qualifications you are looking for in a tenant. Include job history, required income, credit history, and any other criteria that fit your property. Give potential tenants a copy of these qualifications when they fill out the rental application. By providing this list of qualifications, you can reduce the possibility of someone accusing you of discrimination.

3. Use the filled-out rental application as the next step in separating the good tenants from the bad. After the potential tenants have filled out the application, look it over. Is the writing legible? Are all blanks filled in? Did they include the application fee? If the answer to any of these questions is no, consider moving on to the other prospective tenants.

4. Run credit and eviction checks on every potential tenant. These checks are inexpensive and easy to do (e.g., you can use an online landlord credit reporting agency). You can usually tell by a renter’s credit history whether that renter will be desirable or undesirable as a tenant.

5. Contact the potential tenant’s previous two landlords. Your rental application should have a space for the last two landlord’s contact information. The most important contact is the landlord before the current one. That landlord is likely to tell you much more about the tenant than the current landlord because the current landlord may have good reason to want the tenant to move out and may withhold important information from you.

6. Give yourself plenty of time to collect rental applications. Aim to get at least 10 applications. This will give you enough potential tenants to find one that you will be comfortable renting to. This also eliminates the overly anxious applicants who might be desperate to rent from you because they have just been evicted from their last place.

7. Give your tenants an “on-time rent rebate.” I consistently receive my rents early due to this practice. If renters pay on time, I mail them a check for up to $100, depending on their monthly rental rate. This practice also allows you to advertise rental rates that are lower than rates for similar units. Lower rents equals more potential renters to chose from. More potential renters to choose from gives you a better chance of finding a high-quality tenant.

8. Check out your applicants’ current residence or car. Most rental books suggest going to a renter’s current home to see what it looks like, because your rental is likely to look like that property after the applicant moves in. However, you may not need to go to so much trouble. If applicants arrive to view the rental property in their own car, go out with them to the car to write down the vehicle make, model, license plate number, and vehicle identification number. While doing this, check the inside of the car. If it is fairly clean, great! If it’s a pigsty, expect your rental property to look like the inside of the car after you rent to these applicants.

9. Do a “dinner date check” on the potential renters. Would you feel comfortable going out to dinner with them? If not, you probably shouldn’t rent to them. Also, do a “rent collection” check on them. Would you be afraid of them if you had to stand face to face with them and demand your rent? If so, don’t rent to them.

10. Offer cash for keys as a last resort to get rid of bad tenants. If a deadbeat has managed to slip by your radar and is now living in your property “rent-free,” don’t evict. Instead, consider doing what banks do to get rid of “unwanted guests” living in foreclosed properties. Get a handle on your pride and offer the bad tenants cash for keys. “Cash for keys” is a concept whereby you offer the renters a lump-sum payment of cash for moving out of the property quickly. For example, I have offered $800 to $1,500 to occupants as an incentive to move out within 10 days. If the tenants accept, I get to inspect the property right away. The tenants must return the property to me in its current condition and have all their personal belongings and trash removed from the property before receiving their check from me. I have the locksmith meet me at the property at the time I give the deadbeats their check. The locksmith changes the locks and secures the property while I meet with the deadbeat tenants. Using cash for keys vs. eviction will save you money in lost rent and minimize potential damage to the property.

Taking these precautions when renting your property can save you headache, heartache, and pocketbook ache.

To further your education as a landlord, you might want to read the following books:

• Landlording by Leigh Robinson (Express, 1992).

• Secrets of a Millionaire Landlord by Robert Shemin (Dearborn Financial Publishing, Inc, 2002).

• Landlording on Auto-pilot by Mike Butler (John Wiley & Sons, Inc., 2006).