Landlording is a valuable and potentially profitable way to invest in real estate today. How profitable it really is will depend a lot on your ability to source great tenants. How do you do that?
As a landlord, your cash flow and total returns will rely a lot on your tenants. Specifically, your ability to fill your properties, do it fast, maintain high occupancy rates, and keep great tenants. However, there is a lot of confusion in this space, and on how to find renters, smart screening practices, and getting the process right. Check out these tips to help you excel in this vital area of your investments.
- Generate Referrals
Referrals are one of the best ways to source good tenants. They can come from existing renters, professional partners like attorneys, insurance agents, and contractors, and even your peers. Ask for them. Be someone people will eagerly want to refer their friends, family, and clients to. Create a good system for asking for, handling, and showing appreciation for referrals.
- Use Real Estate Agents
No ignore the value that Realtors can offer when it comes to finding renters. They can pick up a lot of the work load, including spending on the marketing, fielding phone calls, screening prospects, showing units, supervising move-ins, and handling initial customer service. Some may even through property management into the mix, for the same commission rate. The more visibility you can get the better.
- Know Your Competition
One of the biggest mistakes made in landlording by new investors is not researching the competition. You’ve got to know what you are up against if you are going to attract the renters, and remain competitive. Look at competing ads and offers, as well as what local renters are really paying. You may find a big gap here. Just because others are marketing 2 bedroom apartments for $1,400 per month, doesn’t mean they are getting that. Units which are being rented may actually be going for $800.
- Know Your Prospects
Don’t assume to know who the renters are in your area. Do some research. There is no sense in demanding renters with 700 credit scores, and first, last, and security, or background checks free and clear of criminal charges, if the average local renter has at least 1 misdemeanor, a low 600 credit score, and is used to putting up first and security only. Know what they do, what types of devices they use, what they are really looking for in a rental, and what they want in a landlord.
- Balance Data and Common Sense
When evaluating prospective tenant applications it is important to balance weighing the data and common sense. Too many new landlords are getting advice from other equally new landlords or back seat drivers, or are following what they see giant hedge funds doing in their apartment complexes. Firstly, it is important to remember that you really have no idea if those practices are really working out, and are really profitable. Second, you have to get that there are quirks in the data, and that there can be a lot more to whether a tenant performs or not than what is on an application. Some terrible paper candidates may be amazing assets in your properties. Some of those that look perfect on paper may be nightmares waiting to happen.
- Creating Appealing Rental Ads
For most rental property owners success will rest heavily on the ability to create effective ads. You’ve got a second or two to stand out and grab their attention, and get them to check you out. That’s it. In that time you have to overcome their fear of scams and wasting their time, display the value you have, and give them the confidence that you are the one they want to risk their credit and time on applying with.
- Real Estate Websites & Branding
If you are doing a significant amount of business, and are actively buying, renting, and managing income properties you’ll probably want a good-looking website too. Give some serious thought to your branding, who you’ll establish credibility, and convert lookers into paying customers.
- Small Improvements for Big Returns
Keep an eye on small and affordable improvements you can make for big returns. That could be landscaping, fast internet service, smart locks, or green touches. Know those little touches that will really seal the deal and get renters to take action.
- Start Marketing Early
Some investors swear by waiting until the place is 110% polished and staged before marketing for renters. Others believe in getting a head start, even before they close on the property, or finish a new construction deal. The early you start the more renters you can reach.
- Build Waiting Lists
Smart landlords will even get ahead by building waiting lists of qualified renters. That way you can place them immediately and get cash coming in even before the property is ready to move in. You get zero vacancy time, and maximize overall returns.