33 Tips to Attract the Best Tenants and Get Them to Pay You More
By Tai A. DeSa, Significa Corporation
Good tenants come to you not by accident, but by design. There are good tenants in every price range and in every neighborhood. A professional landlord will attract quality tenants. An unprofessional landlord will attract troublesome tenants. If you are investing in property, then you should likewise invest time in learning how to attract the best tenants.
Below are some tips that may help you increase your investment rental property income by $600 or more a year, while also saving you time and aggravation.
Tip #1: The landlord's appearance matters. Many landlords focus on the attitude and appearance of prospective tenants, but some landlords forget about their own attitude and appearance. Quality tenants observe the behavior and dress of the landlord and their staff. The tenants assume that if the landlord is a professional who takes care of every detail, then every detail in the apartment will be covered as well. Good tenants feel comfortable around a landlord who is organized. Landlords who show up late, do not use checklists or applications, and generally fumble about will repel good tenants while attracting problematic renters. Remember to be professional in your emails, telephone conversations, and text messages too. Set the tone with your prospects from the very first interaction.
Tip #2: Figure out who you want as a tenant. What is your target market? Who would be your ideal tenant? Many landlords are unfocused in their advertising because they don't know who they really want to have as a renter. Before running your first advertisement, figure out whom you want to attract. Is it a working professional with an office downtown? Are you looking for college students? Or trying to avoid them? Do you want a large family? Or a single man or woman? Will you consider someone with pets? If you don't know what kind of tenant you want, you may end up getting a tenant you don't want.
Tip #3: Figure out how to find your model tenant. Once you've decided what kind of renter you're looking for, write down some ideas on how to reach that segment of the market. If you want college students (because you generally can charge a higher rent and place their parents/guardians on the lease), then advertise with the college's off-campus housing office or with flyers strategically placed around campus. I have a duplex near a major university, and my target market is female college students in the nursing school (because it is a five-year program, which means they need to rent for an additional year). With that university, I went with 15 flyers in hand to the woman who runs their off-campus housing office. When I stated that I didn't want to place my flyers in unsightly places around her employer's campus, she gave my flyers to her two interns and instructed them to place the flyers in popular areas around the campus. I received calls from multiple qualified applicants, and I currently rent my duplex to seven female nursing students (who have lived there for almost three years now). Now remember, per federal law, you cannot be discriminatory in the wording of your advertising. However, where you place your ads will determine who responds. Know who you're looking for, and then you'll find them.
Tip #4: Don't show an unfinished apartment. Show your rental property when the renovation is complete. Most people cannot envision what an apartment will look like once you're done with painting, cleaning, and fixing. If you have tools lying around, garbage piled high, and holes in the wall, the prospects will think you're a slumlord. When I first started in the business, I had a two-bedroom apartment that was undergoing a major renovation (new flooring, new paint, new light fixtures, new furnace, new water heater, etc.). Trying to speed up the process, I advertised the apartment for rent weeks before the renovation was to be completed. I spent about $200 on advertising and showed the place to 17 prospects via separate appointments. I did not receive a single call back. Given that I had to drive 50 minutes one-way to the house, that was a complete waste of time and money. Show your beautiful apartment when it is move-in ready. Your conversion ratio of showings to placed tenants will be very high.
Tip #5: Advertise online. The overwhelming majority of apartment hunters look online prior to calling you to schedule a showing. However, many landlords fail to advertise online in any capacity. If you advertise online, you will receive multiple inquiries. The more competition you have for your rentals, the better. We suggest you post your apartment listings on www.craigslist.org. We have found numerous tenants (and buyers) through that website alone. Another website that works well is www.apartments.com. When you advertise online, include as many photos as possible.
Tip #6: Check out your competition. Most landlords do not check out what other area landlords are offering. You do not want to grossly underestimate or overestimate the amount of rent you could charge for your unit. The best property managers constantly monitor the trends in the local rental market. Top coaches and athletes review tape of their competitors. Top restaurateurs are often found dining in other eateries. Top manufacturers know all about the features of the other products on the market. Top landlords keep an eye on the other apartments out there. You can monitor your particular market in several ways:
1.) Call the number listed in other ads and find out what incentives the landlords are offering. Gauge the rent they're charging versus your asking price.
2.) Go online and view the websites or postings generated by other landlords in the area. Most postings on www.craigslist.org are unpolished and amateurish. It will be easy to make your posting stand out above the rest.
3.) Call a local property manager or real estate agent to pick their brain on the market.
4.) Go to your local real estate landlord or investor club and ask the other landlords what they charge and what perks they give out.
5.) If you have the time, pose as a prospective tenant and check out an apartment. There are professional management companies out there that periodically send their staff around town to observe the condition of the other rentals on the market!
6.) Ask area renters what they consider to be the fair market rent.
Tip #7: Advertise the proximity of physical fitness centers, shopping malls, art museums, or other popular attractions. Good tenants choose their residence carefully, and they want to be located near facilities that support or enhance their lifestyle. A tenant who prides herself on physical fitness will want to hear that there is a jogging trail or gym nearby. A person who prides himself on being part of the local art scene may want to live near a museum or gallery. If you read the ads placed by other landlords, you'll notice that few mention the proximity to local attractions.
Tip #8: Let the prospects know that you check references on everyone and pull credit reports. Landlords who mention in their ads that they conduct credit/criminal background checks and verify employment will receive fewer calls from marginal prospects. Good tenants are proud of their clean record. They have many quality references and want you to call those people. Undesirable renters gravitate toward landlords who are sloppy or do not check credit. When you show your apartment to prospects, remind them that you will pull their credit and criminal record along with verifying their employment. I once had a prospect ask me if I could pull his sister's credit and criminal report instead of his. Needless to say, I never called that prospect back.
Tip #9: Charge an application fee. As a landlord, you should not have to pay the cost of the credit or criminal background check. Let your applicant pay a fair fee (such as $20-30) for the privilege of applying to rent your wonderful apartment. Marginal prospects will scoff at the notion of paying an application fee, which instantly weeds them out from consideration. Also, if the check for the application fee bounces, you know right away what decision to make (we've had this happen before!). Good tenants will not object to paying a reasonable application fee. The fact that you're conducting a thorough check comforts them because they know that the other renters in the building had to go through the same process. In other words, they trust that you carefully selected their neighbors too.
Tip #10: Hold an Open House instead of showing by appointment. About half of all prospects who schedule a showing with you will not show up. I know this from hard experience. I've had prospects promise me over the phone that they would show up or call me in advance to cancel, and they've failed to show up or call. Shrewd landlords hold an Open House. If a prospect is really interested in renting your place, they'll rearrange their schedule to see it at the time of your choosing. An Open House allows you to schedule multiple showings, which saves you time and creates competition. For the Open House, make sure you're prepared. Ensure that there is toilet paper and hand soap in the bathroom. Light a votive candle or place potpourri around the apartment. Bring information sheets and applications. Have a portable radio playing in the background. Ensure that you have more than enough business cards on hand. Place placards in the apartment, which state things like "New Carpet" or "Eat-In Kitchen."
Tip #11: Return all phone calls within three hours. A common complaint among tenants is that their landlord does not respond to their requests. Many landlords are sloppy and won't return phone calls in a timely manner, if at all. If a tenant feels that you respond as quickly as possible to their needs, no matter how insignificant, then they too will respond quickly to your needs (such as payment of the rent!). If you ever fail to return a call in a timely manner, your tenant may bring that up in a later situation where they use it as an excuse not to return your call in a timely manner. Don't give your tenants any ammunition. Be prompt!
Tip #12: Take a look at the inside of an applicant's vehicle or better yet, the inside of their current apartment. Some of the worst possible tenants alive are the most well-spoken, well-dressed individuals when they first meet you. Terrible tenants will try to fool prospective landlords by exaggerating their income or presenting themselves as more qualified than they really are. A shrewd landlord, when evaluating a prospect, will walk the prospect to their car after showing the apartment. The shrewd landlord will observe the interior of the car to see if it is unkempt or neat. Most prospects who try to fool a landlord with their personal appearance will not take the time to clean up their vehicle. I once walked a well-dressed applicant to his car, only to see drug paraphernalia in the back seat! The shrewdest landlords out there will find a way to visit the applicant at their current apartment to see how they live. One way to do this is to stop by almost unexpectedly. For example, you could call a prospect right before you stop by their current residence to say that you're in the neighborhood and need to drop off some paperwork. Observe the condition of the applicant's residence. Take note of the other people in the apartment. The people hanging out in (or living in) your applicant's current apartment will shift their hangout to your building. How a person treats their present apartment is how they will treat your property.
Tip #13: Explain the basic lease terms up front. When you explain the basic lease terms to prospects, note how they respond. A potentially troublesome tenant may complain about the late fee. Why? Because they plan on being late with their payments! If an applicant argues over your attorneys fees being charged to them in the event of an eviction proceeding, that's a red flag. The same applies for any arguments about the potential charging of a move-out cleaning fee. Good residents will thoroughly clean your apartment before moving out, whereas troublesome tenants plan on leaving your place a mess.
Tip #14: Don't just talk to the applicant's current landlord. Talk to their prior landlord. The current landlord of a lousy tenant may say the most wonderful things about them just to get them out of their building and into yours! Be wary of what the current landlord says. The most truthful response you may receive is from the prior landlord. A marginal applicant will conveniently forget the contact information for their prior landlord, but you should insist upon receiving that information.
Tip #15: Let the tenant you selected know that they stood out above the rest. When you choose a particular applicant, congratulate them ceremoniously. Let them know that they were the best choice out of multiple applicants. Name a quality that you observed in them that other applicants have not demonstrated. By so doing, you are complimenting and validating that person for their good behavior. Furthermore, you are establishing your high expectations for them. People tend to rise to the level of expectations that you hold of them. They will want to uphold the high standards you have demonstrated.
Tip #16: Charge more for pets. If a tenant wants certain pets that you'll permit, charge a higher rent. For example, if a prospect asks if you'll allow a cat, you can reply, "Yes, the pet rent is $10 more per month, per cat." Some landlords will take an additional pet deposit, but the problem with deposits is that they don't make you more money. Additional rent increases your cash flow and raises the value of your property. It may also deter your tenant from taking on more pets.
Tip #17: Don't hand over the keys until the check has cleared. Do noallow a tenant to move in until their initial check has cleared. There are diabolical tenants out there who will find some excuse not to give you the first month's rent and security deposit check until the moment they have to move in. Imagine how unsettling it would be for a landlord to have a tenant who hasn't paid any money at all. If a tenant states that they have to move in right away, then demand that you be paid with cash, a cashier's check, or a money order. Personally, I don't like cash as a form of payment because of the lack of a money trail. But that's your decision.
Tip #18: Offer other payment options, such as credit cards and direct deposit. Good tenants often like to use their debit or credit cards to pay rent, or they may want to use an automated clearinghouse (ACH) transaction via their bank. They may receive frequent flyer miles or cash back from their credit card issuer. Accepting credit cards online is easier than you think. You can set up a Pay PalTM account fairly quickly online. Some apartment hunters will select one landlord over another because of the alternative payment options.
Tip #19: Don't collect rent by banging on doors. Many old-school landlords make the rounds on the 1st of the month and bang on doors looking for envelopes full of cash. This is an inefficient, intrusive, and crude means of collecting rent. Troublesome tenants will conveniently not be home when they know the landlord is stopping by. Or they may try to pay by cash, which inhibits the creation of the all-important money trail. Besides, carrying around large amounts of cash can be dangerous, especially at certain times of the night or in particular neighborhoods. Active or hard-working tenants may not be home, or if they are home, may be asleep in preparation for the night shift when the landlord cometh. People who make great tenants plan on mailing the rent payment to their landlord by the due date. Or they'll go online and pay by credit card. Do not allow a tenant to dictate to you how they'll pay you; conversely, you explain to them how you expect to get paid. And it's not by banging on doors.
Tip #20: Be firm, fair, friendly, but not a friend. Some landlords become friends with their tenants, and invariably a problem arises whereby the tenant wants his friend the landlord to accept a late payment or a non-payment of the rent. I've had tenants offer me a beer, and I've declined their offer. Do not go out on the town with your tenants. Do not drink alcohol or party with your tenants. Do not hang out in your tenant's apartment. Conduct business. Be cordial. Ask your tenants how they're doing. Compliment them on an accomplishment. But don't be their friend (unless, of course, you want to ensure that you'll have a rent problem down the road). This is a business.
Tip #21: Offer a free gift for consecutive on-time payments. A great incentive we offer many tenants is what we call the Resident Rewards Program. Any tenant who pays their rent on time for 12 consecutive months receives a free gift, which may be a 20-inch color television, a DVD player, an air conditioner, or a microwave. If the tenant is late with their rent payment, then the counter goes back to zero. If you offer an incentive for on-time payments, you'll notice that some tenants will do whatever it takes to win that prize. The tenants will also tell all their friends and colleagues about how great a property manager you are. After all, how many tenants can say that their landlord gave them a new gizmo?
Tip #22: Take photos of the apartment when the tenant moves in. Take numerous photos of the apartment as the tenant moves in. Ideally, a landlord should take these pictures when the tenant is present, so the tenant knows that the landlord has photos. If the tenant knows you have pictures of the apartment, they won't try to dispute damages later. An attorney once suggested to me that I take photos instead of video because photos are more easily presented in court.
Tip #23: Give away random gifts, particularly right before rent is due. This is a way to validate your best tenants. A few days before rent is due, leave a simple gift by the tenant's door with a thank-you note. Keep it informal and simple. There are plenty of gifts under $10 that tenants will appreciate. Examples include a box of chocolates, a potted plant, a gift mug with a bag of coffee inserted, or a six-pack of the tenant's favorite sports drink. Always include a note so your renter knows it came from you. Do this randomly, but always a few days before the rent is due. That way the tenant, out of gratitude, will ensure that your rent is delivered on time.
Tip #24: Send a birthday, holiday, or anniversary card. The simple act of sending a card for an important day will mean the world to your tenant. Few landlords ever do such a thing. To figure out your tenant's birthday, just look on their application. A greeting card may cost you $2 but the goodwill it generates is worth much more.
Tip #25: Don't get emotional. Don't allow yourself to get into shouting matches with a troublesome tenant. State the facts. Every tenant will end up having some sort of dispute or disagreement with their landlord. The shrewd landlords recognize such a situation as a way to build a deeper level of trust with their tenant. When two people work together in a collaborative fashion to resolve a disagreement, they develop a deeper level of respect for each other. When a dispute arises, respond quickly and unemotionally. If your tenant knows that you mean business, they will not play emotional games with you. If they sense that your emotions have gotten the better of you, they will use it against you.
Tip #26: Install an alarm system. The most important desire of a tenant is to feel safe in their residence. If a renter does not feel safe, they will leave at the first available opportunity. If a tenant feels secure, they might end up staying for years. Many alarm system providers will install a system inexpensively because their primary revenue is derived from monthly monitoring subscriptions. However, if you offer an alarm system, you can charge a higher rent that more than compensates for the monthly fee. Furthermore, you'll attract a higher-caliber renter when you offer an alarm system as part of the rent.
Tip #27: Provide high-speed internet with the rent. I do this with some of my units. I pay for a high-speed internet service and offer it to the tenants "for free." If you offer internet service, you will likely attract a more educated, professional tenant. Remember, most prospective tenants today scour the internet first before calling a landlord on the phone. If you choose to pay for internet service, you can certainly charge more in rent. Think about it this way: if the tenant is going to pay for internet service anyway, then they mentally do the math and agree to pay you more in rent. Furthermore, the resident is spared the inconvenience of having to set up a new service.
Tip #28: Provide a television subscription with the rent. We likewise do this with some of my units. We pay for cable TV service and advertise it as included with the rent. This works especially well with college students and young professionals who may be transient in nature. College students in particular want to move in without the hassle of opening up new subscriptions. If their internet and/or television service is included, they'll not only pay more in rent but also brag to their friends how they get all the perks at their apartment.
Tip #29: Refer to your tenants as "residents." A wise person once taught us to refer to tenants as residents in my conversations with them. Every other landlord refers to them as a tenant. To some people, tenant has a negative connotation. However, the term resident has a neutral connotation.
Tip #30: Refer to yourself as "we," not "I." Whenever you communicate with prospects and tenants, refer to yourself as "we" or "us." For example, if a prospect emails you to inquire about an apartment for rent, respond by writing, "We are grateful that you are interested in renting our wonderful apartment. Let us tell you more..." If a tenant has not paid the rent, say something along the lines of, "We need the rent. If you get us the rent by the 6th, then we will not start the eviction process." By using terms such as we and us, you are sending a message to your tenants that it is not just you speaking for yourself. There is strength in numbers, and tenants will recognize that they are not just dealing with an individual.
Tip #31: Have a backup phone number that your tenants can call. In the event of an urgent need, tenants become very frustrated if they cannot reach their landlord. Some landlords make the mistake of giving only one phone number to their tenants. Inevitably something comes up whereby the tenant's message to their landlord goes unnoticed or unheeded for some time. Give your tenants a backup number to call if the first number doesn't work.
Tip #32: Include the rent increase for next year in this year's lease. Raise the rent every year. Many landlords are so nervous about receiving a negative reaction from their tenants that they don't raise the rent for years. The cost of inflation and rising expenses needs to be passed on to the tenants. A great way to deal with rent increases is to make them automatic. In other words, a tenant should expect the rent to increase every year. A good way to make your tenants expect a rent increase next year is to publish it in the lease this year. Type in a phrase which states when the rent will increase, and by how much.
Tip #33: Compensate your residents for referring a new tenant. One of the most inexpensive but effective means for finding quality tenants is to approach your existing tenants for referrals. Word of mouth is the way many quality apartments are rented. If you're known as a responsible landlord with a respectable product, then prospective tenants will flock to you. An important point is that you must instruct your existing tenants on how to refer you. You may want to offer a finder's fee to an existing tenant if they refer a person who you accept. You can pay that finder's fee out of the first month's rent paid by the new renter. Think about it mathematically. Let's say you were to spend $200 on advertising, take 20 calls, and show the apartment 10 times to strangers in order to find a (hopefully) good tenant. Conversely, your existing tenant could refer you one responsible person, so you would only have to show the apartment once. If you were to pay your existing tenant $100 for the referral, wouldn't it be worth it?
Thank you for taking the time to read our article on how to increase the value of your properties. We at Significa are grateful to be aligned with people like you.
About the Author: Tai A. DeSa is Chief Executive Officer of Significa Corporation, a professional real estate investment company based in Pennsylvania (www.significacorp.com and www.significadeals.com). DeSa is a graduate of The Wharton School at the University of Pennsylvania. Prior to entering the real estate business, he served as an officer in the U.S. Navy. He is the oldest in a family of 11 children and was valedictorian of his high school class. DeSa is also an Associate Broker with Keller Williams Real Estate (www.thetaidesateam). He is an organizer of the Lehigh Valley Real Estate Investors Group (www.lvrig.com) and an Area Director with Business Network International (www.bnidvr.com).