Owning and managing rental properties can be very profitable. As a rental property investor/owner, you may find yourself dealing one-on-one with tenants. Make sure you handle these encounters as business transactions, and don’t let your emotions, or your desire to fill a unit, prevent you from making sound business choices. As you begin your hunt for the right renter for your home, use these 10 tips to ensure you end up with upstanding tenants instead of deadbeats that end up being evicted!
- Understand the Laws
Research federal and state laws that cover tenants and landlords. The Fair Housing Act specifically outlines what constitutes illegal discrimination against qualified tenants. For example, you could base your decision on credit or criminal history but not on race, religion, national origin, gender, age, disability or family status.
To ensure you conform to state and federal laws, go to the U.S. Department of Housing and Urban Development website or consult a local attorney or legal information sites. NOLO.com and landlord organizations, such as LandlordAssociation.org or the National Association of Independent Landlords, could be useful resources.
- Know Where to Advertise
Start online! At a fee of $50 to $100 for each listing (apartment or single family rental), you can advertise property on sites like rentals.com or rentalhomesplus.com. Beware when using free sites like Craigslist. These sites have become notorious for scammers who change the contact information on rental listings, take the rent money of potential tenants and then disappear.
To expand your advertising approach:
- Take out ads in the online and printed classified sections of local newspapers.
- Put fliers in area grocery stores and Laundromats.
- Contact human resource directors at local businesses to post ads in employee lunchrooms and new-employee information kits.
- Broadcast your rental to your friends on social networking sites, like Facebook and Twitter.
- Get referrals from family and friends.
Screen everyone the same no matter where you find them, even those from family and friends. In your listings and fliers, include a photo of your property and basic details, such as:
- Neighborhood such as where it’s located and description of area, including any top-ranked schools, family-friendly parks, bike paths or shopping centers within walking distance
- Number of rooms and bathrooms
- Garage size
- Special features like a swimming pool, fireplace or basement
- Rent amount
- Clean Your House
Even before putting the word out or advertising, make sure your house is clean and ready to show. Remove clutter and take care of repairs. Because many potential tenants in need of housing already have been looking, they could respond within hours of an ad posting. A well-maintained house increases your chances of securing a responsible tenant.
- Use a Rental Application
The rental application is the document used to collect personal information about the applicant and co-applicants so that you can perform background checks.
Rental applications could request:
- Applicants’ names
- Social Security numbers
- Previous addresses
- Driver’s license numbers
- Income sources and amounts
- Children’s names and ages
- Number of pets and their breeds
- Employer contacts and job title
- References (not family)
Depending on your state’s laws, you may be able to charge a nonrefundable application fee of $25 to $40 to cover the cost of background checks. If someone refuses to pay this fee, there’s your first screening tool.
In addition to the application, provide a rental policy sheet that clearly spells out the terms and conditions of the lease, such as pets, co-signers and renter’s insurance requirements.
For examples of rental applications, lease agreements and policy sheets, check your state’s bar associations or realtor associations for free lease forms. Rental agreements have to follow state and federal laws and requirements, so these two state associations usually have free forms available for residential rentals.
- Require Renters Insurance
During the application process before a lease is signed, let your potential tenants know you will request that they show proof of renters insurance on the move-in date. Renters insurance will help cover the cost of the tenants’ belongings as well as damage they could cause to your house. Consider purchasing rental property insurance to provide the coverage you need to help protect your rental property.
- Avoid Interviews
It may seem like common sense to conduct interviews as part of the screening process. That alone is opening you up for Fair Housing lawsuits. Also, the way people dress or act in person doesn’t tell you how they could perform in a lease agreement.
- Do Background Checks
The only way you can determine whether they will be good tenants is based on their past history.
A good background check will look at tenants’ employment, credit history, bankruptcies, evictions and criminal records. Make sure you or the company you hire calls the applicant’s employer to verify their income.
- Wait for the Check to Clear
To avoid problems with a personal check clearing the bank, ask for a deposit in the form of a cashier’s check or money order. If you accept a personal check, don’t stop marketing the house and taking backup applications until the check clears and a lease agreement is signed.
- Use a Lease Agreement
A strong lease sets the terms and conditions for tenants living in the house. These include facts like who will live there, when rent is due, penalties for late rent, who is responsible for pest control and so on. A good lease spells out the policies and basis for eviction.
- Don’t Settle
Be picky. Have high standards; don’t settle out of desperation. You’ll end up with a lower-quality tenant who could cost you in the long run.
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