Is Buying a Rental Property the Right Choice for You – Part 2
Last week we started a two-part article to help you discover if buying a rental property is the right choice for you. If this has been on your mind for some time, it’s likely because you want to establish a secure financial future for yourself. This is a very worthy goal and of course real estate can be a viable long term investment option.
Last week talked about key starting points like having a down payment and an emergency fund saved, being able to perform repairs (or having someone else readily available to help). We discussed the value of having strong intuition with people so you know if or when a potential tenant is trying to take advantage of you. We also talked about what it means to be a good landlord by respecting your tenant and caring for the property.
We want to go a little deeper today offering you tips on how to find the right tenant for your property. We know landlords who’ve been too quick to secure a tenant, just to have them perform a midnight move (literally disappearing overnight) or move in with no intention of paying a dime. These are nightmare situations you want to avoid at all costs. Even if it means allowing your property to sit vacant for a month or two, you will be better off than filling it with the wrong tenant who causes personal havoc and possible property damage.
Here are a few tips to help.
- Know their motivation. A highly motivated tenant does not equal a high quality one. In fact, the opposite may be true. If a tenant needs to move in tomorrow, it may be due to an eviction. If they’re being pushy to sign a rental agreement that day, this is red flag. You do not want to sign agreements until all of the background checks are complete.
- Ask about their current landlord. If you want to know what the prospective tenant has to say about their landlord, just ask. If they grumble and complain about all the wrong things their landlord did or didn’t do, this could be another red flag. Sometimes the argument is valid. Often when you ask enough questions you can discern if the tenant is telling the truth or not.
- Do your reference checks. You want employment checks, current and past landlord checks completed. But, don’t be naïve to believe they’ve given you the right contact info. For all you know they just gave you their brother’s contact who will tell you the most incredible things you want to hear. Ask lots of questions, repeat questions in a different way to ensure the same answer is provided.
- Check out Social Media pages. If you want a solid judge of character look up your prospective tenant on Social Media. Scroll through photos and comments from the past 20 posts or so. This will give you a clearer indication of who they are on a day to day basis verses how well they may be trying to impress you.
- Get a credit check. Often tenants have lower credit than homeowners so don’t let that alarm you. If they could own a home already, chances are many would. If there is one bill to be paid, it typically is rent, which unfortunately you cannot track unless former landlords share payment history with you. What you want to see is if payments were delayed, how many days were they late and how often. If it was a few here or there, it likely isn’t a big deal. If missed payments are a repeat pattern for three years or more, then it may be reason for concern. Again intuition is of utmost importance. A credit check can be obtained from Equifax.ca and will cost the tenant $25. If this is a concern for the tenant, you could deduct this fee from their first month’s rent. If the prospective tenant disappears, this is a good sign they weren’t going to be a good fit for you anyway.
If this is your first time looking at a rental property, it can be overwhelming with such a quick learning curve. We’d be happy to help in any way we can. If you’d like more information about buying an investment property, give us a call! We’re happy to answer any questions you have. And if you’re considering selling your home, it’d be our pleasure to meet with you, get an understanding of your goals and see how we can help.
Jason Rustand with RE/MAX Real Estate serves with the highest level of integrity and excellence every time. For more info on this topic or others follow Jason Rustand Team on Facebook and Instagram, call Jason direct at 780.919.0004, email firstname.lastname@example.org or visit WeSellLeduc.com