Search This Blog

Sunday, November 6, 2022

7 TYPES OF TENANTS Every Landlord Should Want

 There are some tenant prospects who will never have an issue getting placed in

a rental property. They have great rental history, low debt-to-income ratios, clean

background checks, long-term stable employment, and better-than-average credit

scores. Then, there are other tenant prospects who have the potential to be great

renters, but it may not be immediately obvious based on their rental application.

Perhaps they have limited credit history, high medical debt, or have never rented a

property before.

Making a quality decision around tenant placement

is critical for the long-term performance and value

of an investment property. The greater the net

operating income (NOI), the more valuable (and

attractive) a rental property will become and the

largest source of income contributing to the NOI is

actual rents collected from tenants.

That’s why tenant turnover can be costly for

investors and negatively impact the NOI. When

a tenant vacates a property, there will be costs

associated such as move-out inspections,

preparing/rehabbing the property, marketing

the property, and leasing commissions. Tenant From a property value perspective, the NOI

influences the capitalization rate (CAP rate = Net

operating income / Cost of the property) of a rental

property.

For example, consider an investment property

purchased for $100,000. Assume that property

rents for $800/month ($9,600/year) and has

$2,000/year in maintenance, tax, and insurance

expenses. The NOI for that property would be

$7,600/year. The CAP rate for that property would

be 7.6%.

If that same investment property experienced

a tenant turnover, there would be an additional

expense of approximately $2,500. Assuming 30

days to turn and re-lease the property, there would

also be a rental income loss of $800. The NOI

for this property would then be $4,300/year. The

CAP rate would decrease from 7.6% to 4.3%. This

reduction in CAP rate could make the property a

riskier investment and could reduce the value of

the property.

Average residential tenancy ranges from 2.5 to

3 years (Source: Tenant Planet, Inc.(. Placing the

right tenant in a property can increase the duration

of tenancy and decrease tenant turnover events.

This can also lead to a much more rewarding

tenant-landlord relationship.

Great tenants take pride in the rental property

and do their part to make it a great home for their

family and a stable asset for landlords. Over

time, these things increase the value of the rental

property by maximizing income and minimizing

unplanned expenses.

So, how can landlords spot those not-so-easily

identified exceptional tenants? What sort of

people make great tenants?

THE CLEAR COMMUNICATOR

Good communication is essential to keeping things running smoothly between

landlords and tenants. A clear communicator is consistent and adaptable. They

share information in order to be clearly undevrstood and receive information in

order to understand. Tenant prospects who communicate in a way which builds

mutual trust are more likely to become tenants who communicate clearly around

issues that may arise during their tenancy.

THE TRUTH TELLER

A person who values honesty is likely to be honest, even if the truth may not work

in their favor. Tenant prospects who don’t hesitate to be honest about their rental

history, career status, financial capabilities, etc. are able to communicate both

favorable and unfavorable information. They also exercise respect for guidelines

and decision criteria that landlords put in place. These prospects could become

solid tenants who respect the terms of a lease, appreciate a landlord’s candor and

transparency, and respond maturely when there are disagreements.

THE TOMORROW THINKER

The ability to understand how today’s decisions impact tomorrow is an admirable

trait for anyone. This mentality allows one to constantly evaluate beyond the

present moment. This means thinking critically in complex and confusing

situations, focusing more on quality of decisions and less on feelings. Tenant

prospects who display this sort of forward thinking will connect the dots between

what they see and what potential outcomes could be.

As tenants, these individuals are inclined to proactively respond to a variety of

situations. Maintenance requests will be submitted long before an issue leads to

expensive repair and correction. Changes in their life situation may lead them to

proactively seek payment arrangements for rent before they become delinquent

or are in danger of eviction. Their decisions will be thoughtful and in turn, could

pay off largely for the landlord.

THE PUNCTUAL PLANNER

People who plan ahead are meticulous. They set realistic expectations and are

quick to highlight when something cannot be done on time. They do what they

say they will do when they say they will do it, because they planned it that way.

Prospective tenants who demonstrate this are highly likely to become tenants

who pay rent on time, respond to notices promptly, and seek to proactively renew

their lease. They care greatly about meeting deadlines and manage life with an

awareness of the need to handle business in a timely manner.

THE NUMBERS NAVIGATOR

A person who understands numbers (especially when it comes to financial

literacy) knows the importance of having an emergency savings fund, building

margin within their monthly budget, and prioritizing expenses. Tenant prospects

who have (or are developing) financial acumen are well-positioned to become

tenants who are prepared to pay rent, utility bills, tenant-caused damage fees,

and more. These tenants are crucial for ensuring the rental property stays on

track with income/expense management.

THE CONSIDERATE CONSUMER

A prospective tenant who demonstrates patience with the application process

and respect for the landlord’s team, has a strong potential to be easy to work

with as a tenant. Their ability to consider the needs and workloads of others will

translate well if they become a tenant. They will demonstrate these tendencies

with the landlord, property management team, vendors, and neighbors.

These tenants will give consideration and be more likely to receive it from others.

This person becomes the sort of tenant who can rationally address issues. Even

when they don’t get their desired outcome, they will appreciate the fact that they

were treated with respect. In turn, they will continue to offer that respect to the

landlord.

THE INSIGHTFUL IMPROVER

While no one loves getting constant unsolicited feedback (i.e., complaints), there is

a great amount of value in thoughtful critique accompanied by recommendations

for improvement. A prospective tenant who offers insight into their journey

through the rental process could help the landlord make strategic improvements

in marketing and the tenant onboarding experience. These prospects believe in

being a part of solutions instead of just complaining about a problem.

As tenants, these individuals will work with the landlord or property management

company to make processes such as rent payment, maintenance requests, lease

signing, and lease renewals easier and more efficient. They will find ways to help

the landlord save money while enhancing the level of service - which is a win-win

for all involved.

https://learn.american-apartment-owners-association.org/link/120173/90/

No comments:

Post a Comment