Owning an investment property in high-rent areas like Manhattan doesn’t always guarantee a healthy cash flow. In most cases, the financial health of your assets is determined by tenant quality. This is determined not just by their squeaky-clean police record but also by their ability to pay on time.
A major headache property investors face is delinquency. Your property manager (if you have one) provides a manageable due date but a tenant still needs to comply. This sets back your income, delays much-needed maintenance work, and causes you to spend on upkeep out of your pocket. Fortunately, you can avoid these scenarios by simply avoiding problematic tenants from the get-go. Here are a few ways to show you how:
- Always request for proof of income
Asking for proper documentation of a tenant’s financial status is crucial in making sure you’re letting the right one in. When you screen tenants, always request that they provide you with as many proofs of income as they can. A single pay stub won’t be enough, so consider asking for tax returns, bank statements, and a worker’s comp letter.
If the individual gets government support via unemployment benefits and SNAP, have them show you a certified statement proving that they are not employed. By looking at these documents closely, you will have a better idea if you’re approving fiscally responsible tenants.
- Review their credit reports
Documents showing proof of income are substantial, but when it comes to knowing if a tenant is going to stay in the long term, check their credit report. This outlines how likely they are to default on their rent payments and how long they can afford to stay in the property.
However, bear in mind that a low credit score isn’t always a red flag. Responsible tenants could get around your credit requirements by checking out a Tradeline Supply company review and thinking if it’s worth buying a tradeline. In any case, it’s for you to decide whether to accept their application or not based on what’s stated on their credit report.
- Contact previous landlords
You can demonstrate compassion to tenants who have low scores but are showing real effort in raising their financial standing. In the case of tenants with a long history of moving, you will need to dig deeper by reaching out to the tenant’s past landlords. Always request character references; you can send out emails and make calls asking previous landlords the reasons why they left. If you see a pattern of rent defaults, then you may have to think twice before letting them in.
- Work with a tenant screening company
Verifying a person’s behavior as a potential tenant takes a great deal of time which you can’t get back considering that you need to lower your vacancy rate. You can lighten the load by contracting your tenant screening and background-checking activities to a capable and reliable screening company. That way, you will have access to the tools and resources you need to bring in tenants who are willing enough to pay on time.
Endnote
As a landlord, you don’t know the life story of each tenant application you come across. However, it pays to take a second look and make sure your property generates constant revenues.
