Mastering the Landlord-Tenant Relationship

One of the most important duties of a Landlord is to find and keep good tenants. After all, they provide the flow of lifeblood for developed properties - rent, income, filled units. A no-vacancy building might not always be a profitable one, but it's a good start. So how do you keep a steady stream of eager and reliable tenants, ready to beat a path to your front door?

There are three main points to remember:

First - Take the time to find the best tenants. Don't let the first person in line walk away witht the keys without doing some homework.

Second - Be cooperative and helpful to promote a good relationship with your tenant. One good long-term tenant is worth two transitory ones.

Third - Be specific and stringent about the requirements for tenancy in your building.

Justin Ford has a lot of good ideas about finding and developing good relationships with tenants.
"I've dealt a lot with tenants," he says. "I've found that there are two categories: Those you 'inherit' when you buy the building, and those you lease yourself. Your hands are tied a little bit with the tenants you inherit. They may or may not be responsible people. But when you buy property under market value, you know that's a possibility. As in all businesses, rain is going to come. You don't freak out about it ... you plan for it."

That's why Justin has a 10 percent vacancy allowance in his budget for every property he buys. By the time the bad apples leave or get edged out, he is never at more than 10 percent vacancy for the year. In fact, overall, he averages less than five percent vacancy a year.

The best way to make sure you get good tenants is to choose them yourself. As Justin says, "Choose your tenants as carefully as you choose your properties." And he has a few tricks of the trade:

-Get as much as your market allows in prepaid rent and security. If your market permits first, last, and a full month's security deposit, get that. But don't just settle for the first warm body with a month's rent and a few hundred dollars deposit. Be choosy about your tenants. At the very least, you want people who are responsible enough to have some savings.

-Make sure your property is very clean and all is in working order. Then put rebates in your lease so it might come out a few dollars cheaper than the competition for timely payers. If you're asking for more in security than the competition upfront, it's OK to net a few dollars less than comps on a monthly basis if your tenants are paying on time. The idea is to have responsible potential tenants competing for your property ... people who will take care of the property, pay on time, and won't constantly be taking up your time. These are things that can be far more valuable than an extra $10 or $20 a month.

-Get a full application upfront and check references. If your would-be tenant has been evicted in the past, you'll almost certainly want to pass (unless there was an extraordinary reason for it, like a legitimate illness).

-Run a legal background check for all prospective tenants. (That will tell you if, for example, they have a criminal record.) You can find out a lot for free on your county's website. And companies like LexisNexis have inexpensive services for background checks.

"Once you've qualified them financially and checked refs and you have a good feeling about them," Justin says, "you can go ahead and lease to them. If things come apart, it will likely be due to extenuating circumstances, and you should be able to work things out - a payment plan or a gradual exit that doesn't leave you with too many out-of-pocket expenses."

Portions of this article were written by Michael Masterson of Early to Rise.

[Early to Rise Copyright ETR, LLC, 2004]

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