In an ever-fluctuating US housing market, more and more people are looking to rent a luxury home instead of buying one. As a property investor, capitalizing on this growing industry trend in the United States is a great opportunity to gain positive cash flow with ever rising rental returns, however it can also be increasingly challenging to get quality tenants. Unfortunately, finding a good tenant can be harder than it should be. Even when a seemingly perfect tenant shows up, background screening is a must. Tenants can be the differentiating factor between a good property investment and a bad one when not properly managed.
Here are some important factors to consider when selecting rental tenants for your property investment.
Good credit is a must
Even though a potential tenant seems affable, responsible, and trustworthy, you never know what could be revealed during a tenant screening. This is the most essential part of the renting process, because it ensures your tenant has a reliable salary, a clean history (including criminal records), and, most important, good credit. Credit is established when tenants pays their bills on time. A series of missed payments, defaulted loans, and accumulating debt can damage credit scores considerably. If tenants have poor credit, it implies that there is a possibility that they may have difficulty paying their rent on time. A good rule of thumb for excellent prospects is to ensure your tenant’s monthly income is three times greater than the cost of the monthly rent.
Follow the local laws
If you think renting out your property is as simple as posting a few ads online, you’re sorely mistaken. Landlords must give any potential applicant a chance, regardless of race, national origin, sex, ability, familial status, or religion. On top of that, a renter must follow the rules of renting at the federal and state levels. Refresh yourself on the Fair Housing Act to assure that you’re in accordance with the law in your state. You can find more information on the US Department of Housing and Development’s website.
Draw out a comprehensive lease
All landlords should draw out an in-depth lease stating all the rules, limitations, and acceptable activities for their rental property. Stating your expectations from the start keeps a tenant from having any misunderstanding that could result in trouble down the road. age of your living space. It also serves as a legally binding contract should your tenant perform any of the activities barred from the premises. For example, many landlords are not pet-friendly. Should you discover a dog or cat on the property after you stipulated this rule in your lease, you have the right to take legal action against your tenant. Such contract details not only cover your legal rights as a landlord, but also ensure that you and your potential tenant are on the same page from the beginning.
Use a rental agency
Simply posting a free ad on Craigslist might make sense for most people but is not ideal for high-end rentals or luxury home leasing. Using the services of a reputable rental agency in your local market enables you to tap into their rental pool of past clients and gives you access to their advertising program. They can also advise you on how to establish a good price for your property with sound financial and market data backing the rate. They often utilize countless tools, including an inspection, a reverse mortgage amortization calculator, and more to ensure your property is rented for a fair price. Rental agencies also have highly skilled staff that can guide you through the rental process and place qualified tenants into your property.