Finding, Screening, and Leasing Great Tenants

The Step-by-Step Guide to
Finding, Screening, and Leasing Great Tenants
Finding Tenants
When it comes to attracting tenants to rent your house, marketing is key. You will want to
reach as many potential tenants as possible so you have the largest pool to choose from. The
following are three easy ways for marketing a property:
Craigslist: This is one of the internet’s largest resources and easiest places to find tenants.
Perhaps the best part? Craigslist is free—unless you are in a few select cities. (Pro tip: Don’t
list the address here, though. Just give a general vicinity for safety purposes.) You can also
place your ad in other online rental submission sites, like Trulia, Zillow, or PadMapper.
Yard signs: One of the oldest but most successful ways to market your rental is with a
simple “For Rent” sign in the yard. The biggest drawback to a sign, however, is instant
notification of a vacant house to anyone driving by.
Prescreening
When you receive a call or message from a prospective rental tenant, always pre-screen
before meeting in person. The easiest way to do this is by setting rental criteria and explaining
that criteria over the phone. My criteria prior to a typical rental application process looks like
this:
Gross monthly income must equal approximately three times or more the monthly rent
Favorable credit score
Employment—with acceptable proof (i.e., pay stubs) of the required monthly income
Good references from all previous landlords
Agree to the total number of occupants allowed (e.g., two per bedroom per state law).
You can read this list over the phone to the prospective rental tenant and ask them if they
meet these qualifications. If they don’t, don’t rent the property to them, waste your time
screening them further, or even book a showing.
The Multiifamily Millionaire | BiggerPockets.com

The Step-by-Step Guide to Finding, Screening, and Leasing Great Tenants
Should You Use a Property Manager?

Should you manage the property yourself or hire a property manager to look after it?
Generally, a property manager will charge roughly 10 percent of the monthly rent plus 50
percent of the first month’s rent when a new tenant moves in.
In exchange for this fee, a property manager will typically:
Advertise for finding new tenants

Process rental applications
Sign the rental lease
Collect the monthly rent
Keep track of the financials
Schedule maintenance repairs
Issue legal notices
Enforce rental policies
Understand and navigate landlord-tenant laws
File evictions.
How Much Should You Charge for Rent?

You can’t arbitrarily decide what rent you want to charge—the market makes that decision.
Your job is to determine the fair market rent for your house by doing research. Generally, your
house will rent for about the same amount as other rental properties with a similar location,
size, and condition. Start by searching for similar properties on Craigslist and Zillow.
For the most detailed information about a property’s fair market rent, input the address into
BP Insight’s Rent Estimator. We’ll provide data for that property and properties like it. This tool
looks for the most similar properties in your area and estimates the rent for your property
based on those comps.
Also consider:
Driving around and looking for “For Rent” signs

Calling property management companies
Asking other local landlords
Browsing local newspapers.

What About The Security Deposit?

A security deposit is a sum of money paid by a tenant to ensure they fulfill the terms of their
lease. Remember, though—this is a deposit, not a fee. This money should be held in a
separate bank account and returned to the rental tenant when they move out, less any
damages that need to be repaired.
Many states restrict the amount you can charge, so make sure to check to find any local
limitations. I typically charge the equivalent of the monthly rent for a security deposit, though I
may charge more than that if the rental tenant has anything in their background that worries
me (more on this in a while).
Rental Application Process

Always give an application to each prospective renter who is interested in your rental home,
even if you are not interested. After all, you don’t want to be seen as discriminatory. The actual
rental application should include a variety of information—at a minimum:
Names of all potential renters

Date of birth
Social security number
Phone number
Alternate phone number
Previous addresses (last five years)
Current employer (name, hire date, income, contact info)
Past employers (name, hire date, income, contact info)
Emergency contact information
Release of information statement
Signature for all rental tenants.
Always—I repeat, always—require an application fee. This should cover the cost of the
background check. However, before bothering with the components of screening that cost you
money, first scan the rental application to ensure candidates meet your initial criteria.
Conducting Background and Credit Checks

There are various tenant screening sources you can use to run a background or credit check
on a rental tenant. Many property management apps offer built-in screening tools, too.

Before digging into the screening data, you need to decide what kind of background or credit
score you’ll allow. That’s largely dependent on your location and the strength of your real
estate market. The things to look closely are:
Felonies
Prior evictions filed
Prior evictions carried out
Bankruptcy
Judgments
Other criminal or bad financial history.
Verifying Income and Checking Credit History

Your rental application should include a “release of information” signature, which allows you to
check up on their claims. Start with their job. The rental application should include the name
and phone number of their current employer, so call and speak with the manager, owner, or
human resources manager. (Many times, you will be required to fax over the release-of-
information signature.)
Then, the important questions to ask are:
How much do the renters currently earn?

How long have the renters worked there?
Is this job considered temporary?
Next, call their previous landlords for at least the past five years. Be sure to do the renters’
pre-screening (i.e., background check and credit check) to see if any other addresses appear
that might indicate they conveniently “forgot” to include a landlord that they rented from.
When talking with previous landlords, consider asking the following questions:
How long did the rental tenant rent from you?

What was their monthly rent?
Did the rental tenant give proper notice when vacating?
Was the rental tenant refunded their security deposit?
Would you rent to this rental tenant again?

Accepting or Denying a Rental Applicant

To avoid discrimination complaints, always process rental applications on a first-come, first-
served basis. Process each rental application until you discover the applicant does not qualify.
When you deny a rental applicant, it is important that you clearly document your reasons for
why you are denying the renter to avoid discrimination complaints. Always inform the rental
tenant with written notice.
When you find a rental applicant who meets all your requirements, you can verbally let your
future tenant know that they are approved.
Rental Lease Agreements

You can get a state-specific lease agreement from BiggerPockets’ lawyer-reviewed lease library,
which includes forms for all 50 states.
Most landlords choose a one-year lease in an effort to keep their tenants in the rental home
as long as possible, minimizing turnover. While rental agreements generally vary in length and
content, most leases contain the following information:
Names of rental tenants

Address of the rental property
Lease agreement term length
Monthly rent amount
Security deposit amount
Late fee definition, penalties, and fees
Landlord-tenant laws
A move-in condition report
Rental policies
Provisions for or against pets, utilities, smoking, and more
Signing the Lease Agreement

Go through the lease agreement ahead of time and mark all the areas that require a signature
or initials with Post-It Notes or a highlighter. That way, nothing will be forgotten or missed.
When you meet with the rental tenant, walk them through each provision in the lease, step-by-
step, and ask them to sign as you go. This may be time-consuming, but it will help protect you
months down the road when the tenant says, “I didn’t know that.”

Inspecting the Property Before Move-In

By this time, the monthly rent and security deposit have been paid and the lease agreement
has been signed. It’s now important to do one final thing before handing over the keys to the
renter: the move-in condition report. This is simply a paper that the tenant signs that
documents, in detail, the condition of the rental property upon taking possession.
Allow the renter to take some time walking through the rental property and inspecting it.
Encourage them to take notes of the condition of each room. Also consider taking photos or a
video of the property before handing over the keys. This will be further evidence in the future
when the rental tenant moves out.
In addition, consider requiring that renters carry renters insurance. Renters insurance is akin
to homeowners insurance, but it will protect the renter’s stuff should the unfortunate happen,
such as fire and theft.
The paperwork may be done, but your journey is just beginning. As a landlord, it is your
responsibility to ensure monthly rent is paid on time, late fees are charged when needed,
repairs are performed when required, and bookkeeping is kept up to date.

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The Step-by-Step Guide to

Finding, Screening, and Leasing Great Tenants

The Multiifamily Millionaire | BiggerPockets.com

Should You Use a Property Manager?

In exchange for this fee, a property manager will typically:

Advertise for finding new tenants

How Much Should You Charge for Rent?

Driving around and looking for “For Rent” signs

The Multiifamily Millionaire | BiggerPockets.com

What About The Security Deposit?

Rental Application Process

Names of all potential renters

Conducting Background and Credit Checks

The Multiifamily Millionaire | BiggerPockets.com

Verifying Income and Checking Credit History

Then, the important questions to ask are:

How much do the renters currently earn?

How long did the rental tenant rent from you?

The Multiifamily Millionaire | BiggerPockets.com

Accepting or Denying a Rental Applicant

Rental Lease Agreements

Names of rental tenants

Signing the Lease Agreement

The Multiifamily Millionaire | BiggerPockets.com

Inspecting the Property Before Move-In

The Multiifamily Millionaire | BiggerPockets.com

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