The place is finally ready. You’ve painted, re-carpeted, repaired, mowed and spit-shined. Your investment rental property in Prescott is now ready to rent. You’ve taken a host of professional-looking photographs, put them in various ads, and are excited to find a good tenant to start the cash flowing. And, in the current landlord’s market, the phone start’s ringing almost immediately. A sizeable share of the callers are “really in a bind” and need to get into a place “yesterday.” They pressure you to see it as soon as possible. In fact, they are willing to fill out an application and move forward as quickly as you’ll allow, without even seeing the place at all. They’ve “driven by it” and “really want it.”
Hmm… OK. Far West Realty in Prescott takes a look at these prospects. You overcome the temptation to just get ‘em in there and start the money flowing, and you do some digging. Based on comparables, the rent on your unit should be $1000 per month. This couple earns a total gross monthly income of $3200. Their collective credit score is 605, and together, they have 14 collection accounts, and total monthly car and credit card payments of $1063. What do you think? Still tempted? Well, maybe they’ve been good tenants for someone else. Let’s call and find out.
You call their current and previous landlords and find out that over the last 3 years, they’ve been late with their rent 8 times and didn’t get any of their security deposit back from either landlord. Disappointed, you reluctantly inform the prospects that you won’t be able to rent to them. They’re offended and freak out on you a bit, but you shake it off and move on. You’ve had a dozen calls and are anxious to find an acceptable tenant start the return on your sizeable investment of time, sweat and money. So, you show the home to all of them and get three more prospects that put in applications.
You screen all three and the very best of them is still marginal (and that’s generously stated). She has a 612 credit score, has only been with any given employer for a maximum of 7 months in her life and, since she’s been living with her parents from high school up to the present date, she has no real rental history. But, by now you’re getting anxious about the lack of cash flow. Should you take a risk? You can. Do you really want to?
You decide to hold the line a while longer. Two weeks later, you’ve shown the unit to umpteen different prospects and screened several of them. Still nothing from any of them that just knocks your socks off. You’re now officially stressed, and thoroughly bummed. You really need that money coming in. Should you have taken an earlier candidate? How long will it take to find the right one? Can you afford to wait any longer? You ask, “What am I doing wrong?”
Very likely, you’ve done nothing wrong to this point. The truth is that, while this sort of thing can happen, it’s unlikely in the current market. While, probably the majority of applicants will not rise to your standards, there will nearly always be someone who does. The reason for the rehearsal of this scenario is, not only to highlight the possibility, but to get you in the right mindset in advance of such a situation. The fact is, most landlords faced with this dilemma, would simply settle for the best prospect they find, whether or not that prospect is actually qualified for their property.
It’s really important to establish a set of standards in advance, based on what you want to accomplish with your investment, (and on what landlord nightmares you want to avoid). For example, what’s the minimum income someone would need in order to comfortably make the rent payments? What’s the highest debt-to-income ratio that would safely allow that? Will you require a solid rental history? If so, how long? If rental history is not an absolute requirement, what criteria will you use to measure how trustworthy and responsible they are? What sort of other references might you require? Will you accept someone with a criminal record? Will you accept pets? (Remember, under the law, service animals are not pets.)
You wouldn’t want your son or daughter to just settle for the first suitor that comes along. You’ve taught them to have a set of standards commensurate with their life’s goals, and to then stand firmly by those standards. It’s no different with a rental investment into which you pour your hard-earned money and sweat. Decide what standards will provide the level of protection and peace of mind that you want, and then stand by them. Don’t be intimidated by circumstances, into settling for less than the standards you have already set. The cost of doing that can be, and often is, far higher than losing a month’s rent – or even two if necessary – while you firmly and patiently wait for someone who truly rises to, or even above your predetermined bar.
And, as always, if you decide, anywhere along the way, that you just don’t want, or feel equal to the responsibilities of a do-it-yourself landlord, you can always call Dave at Far West Realty, and we’ll be happy to show you what we can do for you in managing and preserving your rental property. Contact Far West Realty in Pescott at (928) 772-9400.