As a landlord, the quality of your renters determines the quality of your returns.

Good, stable tenants mean good, stable returns. Frequent turnovers, evictions, and constant repairs all push your returns in one direction down.

The next time you screen your rental applications, look for the following traits of a top-tier tenant.

Not litigious

Yes, landlords can and should minimize the odds of getting sued by being model landlords. But landlords can also avoid lawsuits by screening out litigious tenants.

Some people love the idea of scoring easy money from a lawsuit. Even if a tenant doesn’t come from that mindset, if they’ve sued their landlord once, they may be more likely to sue another landlord in the future, depending on the reason for the lawsuit.

How to screen for it

First, contact both their current and former landlords to ask about the applicant. Ask them point-blank if the tenant ever threatened a lawsuit.

You can also run the applicant’s name through local public records searches to see if they’ve been a party to any lawsuits in the past. Just be aware that these records tend to only include the local jurisdiction.

Low maintenance

Ever had a tenant who contacted you every month to make demands?

They want better shower pressure. They want the unit repainted. They want new carpets. They want you to install top-of-the-line smart home gadgets throughout the entire house.

You probably don’t want this tenant in your rental unit.

If you don’t give them what they want, they keep bringing it up. If you do give them what they want, you reward their nagging and they find something new to demand. It’s a no-win situation, and it leaves you wondering if it’s worth incurring the costs of a turnover in order to get rid of them.

This of course does not apply to standard repairs or wear and tear. It is still part of your obligations as a landlord to keep your units up to date and in good condition.

How to screen for it

Once again, ask the applicants’ current and former landlords.

Don’t beat around the bush—just ask them if the tenant is needy and demanding.

Note that you also want to contact the prior landlord, not just the tenant’s current landlord, when screening tenants. The current landlord may simply want to get rid of a terrible tenant at any cost. Prior landlords don’t have anything to gain or lose.

Conscientious

Conscientious people do the right thing because it’s the right thing. They inherently want to be responsible people simply for the sake of being responsible.

For these people, paying all their bills on time when they can is the only conscionable way to live. It would never occur to them to blow off paying their bills if they had the money to pay them.

How to screen for it

Always, always run a credit report on all rental applications.

In the lending world, they say that a person’s income tells if they can pay, and a person’s credit history tells you if they will pay. Look beyond the simplistic FICO score, and actually learn how to read a credit report. Start by looking at their payment history: Do they consistently pay every bill on time, or do you see a pattern of late payments?

If they haven’t had a chance to build credit history yet, require a cosigner.

Accountable

Sometimes a tenant’s payment history reveals all on-time payments—except for one isolated period when they fell dramatically behind. How should landlords handle these applicants?

We all run into personal crises sooner or later. It could come from a divorce, or a job loss followed by a lengthy period of unemployment, or a business collapsing. Bad things happen to good, conscientious people all the time.

The difference lies in how people think of these hiccups. For some people, nothing is ever their fault. It’s always someone else’s fault, always the circumstances, always bad luck.

Accountable people don’t play the blame game. They say “I messed up, I paid the price for it, I learned my lesson, and I moved on.”

How to screen for it

If you find a singular gap in good payment history on an applicant’s credit report, ask them about it. For that matter, if you see any red flags or have any questions at all about an otherwise promising applicant, get very specific in asking about them.

The difference doesn’t lie so much in what happened, but in how the applicant describes what happened. And it’s sometimes subtle—you have to listen closely.

Applicant A might say, “I lost my job. It wasn’t my fault, my boss had it out for me. Because she badmouthed me to every prospective employer, I couldn’t get a job for six months.”

Applicant B might say, “I lost my job. It took me six months to find a replacement job that fit my skill set, and it was a difficult six months, I don’t mind telling you. But the fact is I should have kept a deeper emergency fund, and I didn’t. I now keep six months’ worth of expenses in my cash emergency fund.”

They probably won’t phrase it exactly like this, but listen for cues about where they lay blame and whether they’ve taken any actions to avoid a repeat in the future.

As a final thought on the subject, try to speak with applicants’ direct supervisors, not just their employer’s HR department. Direct supervisors can tell you what kind of person the applicant is, how responsible they are, and how accountable they are.

Clean

You don’t want a filthy slob moving into your rental unit. Even if they pay the rent like clockwork every month.

Avoid dirty tenants if for no other reason than to avoid pest control problems in your rental property. But dirty people also tend to cause more wear and tear, both on the flooring and on the walls—wear and tear that you can’t deduct from their security deposit.

How to screen for it

After showing a vacant unit, walk the prospect to their car and look at the inside. How people keep their car usually reflects how they keep their home.

Even better, find an excuse to drop by their current home as a final screening measure before signing a lease agreement. You can even just come out and say, “I need to inspect your current home.” Just don’t give them advance notice to clean it up.

Not a partier

Likewise, a tenant can be good about paying their rent but still love to party. When I was 23, I paid my rent on time every month—and had friends over partying every weekend.

Which, again, causes far more wear and tear on your unit and creates a higher risk of extensive property damage beyond what their security deposit can cover.

How to screen for it

If you rent to college students or young adults in their 20s, the risk of heavy partiers jumps sky high. That doesn’t mean you should discriminate by age, but it does mean you need to pay more attention to this particular risk.

Start by asking current and former landlords about whether the applicant likes to party. But many landlords simply don’t know the answer.

Consider screening their social media accounts to look for repetitive party photos and references.

Stable, with long-term intentions

Turnovers are where most of the costs and labor lie for landlords. The simplest way to reduce your costs—and thereby increase your returns—is to minimize turnovers and aim to retain good tenants.

This means you don’t want someone who’s going to move out in a year or two and force you to repaint and advertise the unit all over again.

How to screen for it

Start by simply asking applicants about their long-term plans. Leave it open-ended at first, let them fill in the gaps for themselves.

If they don’t mention how long they plan to stick around in the unit, ask them directly.

But don’t just take their word for it. Look at their housing history, and how long they’ve lived at each of their homes in the last ten years. Have they lived in two homes, or eight? If it’s a high number, have their circumstances changed since then? Much as I love The Professional Hobo’s blog, I wouldn’t want to rent to her.

Rent to someone who wants to stick around for the long term.

Stable income (or excellent budgeting)

While obvious, it still bears mentioning that you want renters with stable, reliable income.

Self-employed people, or those paid on tips or commissions, tend to have more irregular income. Employees with a W2 paycheck, in contrast, tend to earn the same amount every month.

This doesn’t mean you shouldn’t accept self-employed renters or those paid on tips or commissions. But it does mean you need to dig deeper before renting to them.

How to screen for it

Ask for four months’ pay stubs, plus two years’ tax returns. How stable is the applicant’s income?

If it’s unstable, ask about their budgeting practices and what kind of emergency fund they keep. I myself earn vastly fluctuating income—and I compensate by keeping a larger emergency fund than most.

Don’t compromise

Top-tier tenants come with all of the traits above, not just a few.

Do not compromise on your tenant standards. Keep screening rental applications until you find the perfect fit.

It’s better to leave the unit vacant for a few extra weeks and land the perfect tenant than to bring in a weak tenant who you’ll have to chase for rent, or who will cause extensive property damage.

The quality of your renters determines the quality of your returns.

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CTTO Article Source: www.biggerpockets.com