When investing in rental real estate we can focus on price and location all we want, and though we must get those right, it will not matter if we cannot procure and retain quality tenants.
Your Most Import Asset in Rental Real Estate
Hands down this is your tenants. The rental income that comes from your tenants is what provides your cash flow and pays down the principal of the mortgage if you carry one.
The rental income is what builds your wealth in rental real estate. Sure, you can have appreciation or buy something at a great discount, but those are not steady income and wealth producing factors the way rental income is.
The importance of quality tenants was further exacerbated in 2020 with the pandemic and all of the housing moratoriums. Many renters were affected unfortunately and needed help, while sadly a portion existed that were not impacted but saw it as an opportunity for a free ride.
Tenant Turnover Costs Money
The ideal situation is finding a quality tenant that turns your property into their home. People tend to stay long periods in their home and this means you keep more money in your pocket, thus boosting your return on investment (ROI).
You should know exactly why this boosts your ROI. If not, then you may not be using a property calculator to run numbers on a property. Use the scaredy cat rental calculator to be sure you run the numbers correctly and are factoring in vacancy as party of the calculation.
Screening and Communication
Initially the screening of a tenant is the most important step. You want to ensure they make enough income to support the rent and have a relatively clean rental history.
I dedicated a chapter to this in my book called “The Five Key Points of Tenants Screening.”
Once you have a good tenant in place, the next important factor is creating an environment that encourages them to stay.
The best way I have found to do this is through communication. This does not mean you need to talk to your tenant all the time. On average I communicate with my tenants, maybe once a month, probably less.
However the thing I do ensure is that they feel heard. Most people just want to be heard and know if their is an issue they won’t be left hanging.
This doesn’t mean you cater to their every whim. The lease exists for a reason, it sets the rules and expectations of both parties. Just fulfill your end and keep communication open and the odds are in your favor.
Organize and Collect
Then you just organize and collect. I love that saying and use it as a mantra. In the end this is what you are basically doing with rental properties.