Are You Hiring the Right Tenants?

Posted on November 1, 2012 by

I have a friend in Colorado Springs who owns a bank. Many years ago I complimented him on the caliber of his employees as well as the longevity of their employment. My banker and I both understood that his most important assets walked out of the bank each night to go to their respective homes and his job was to motivate them to come back each morning. His key for hiring great employees was to screen for proper job skills, attitude and moral code. His key to retaining these employees was to empower them to be the best they could be and to treat them with respect and appreciation. 

A light bulb went on in my brain when I realized that this could be the same key needed for my success as a landlord. When I accepted tenants to rent a property, I had certain expectations of them – to maintain and improve the property and grounds, to pay the rent on time, to get along with the neighbors and to reside in the property for a relatively long period of time. I also expected my tenants to be problem solvers who should call on me only when they needed additional support. This, in effect, was the tenant “job description,” but was I sharing my expectations and screening for the proper skills, attitude and moral code? I realized that screening applicants for rental properties was very much like hiring employees for a job. 

If landlords use this model, we must first understand what the job description is and then screen for the qualifications necessary to do the job. We must share expectations with the applicants and once they are accepted we must empower them to be the best they can be. And finally, as landlords, we must remember to thank and encourage our tenants when they do a superior job.

If I were running an employment ad for tenants it would read something like this – “WANTED: Tenants with the skills, ability and willingness to maintain and improve properties, pay rent on time, get along with the neighbors and who will stay for at least 5 years.” I want tenants who have integrity and who are self-starters. When I find these types of tenants I work hard to retain them, by showing appreciation for their efforts and always trying to treat them the way they would like to be treated. These tenants are my “valued employees” and they are worth their weight in gold. They improve my properties over time and make my job infinitely more enjoyable.

Over the years I have come to recognize that empowering tenants to take responsibility for the properties they are living in is not giving up control. In effect, I have more control because I have created a team approach with my tenants. What is usually seen as an adversarial relationship (between landlord and tenant) is now a win-win situation where we work together to solve problems. 

In today’s market, proper tenant screening is more important than ever; however, it seems that many landlords are accepting the first people who apply, as long as they can pay one month’s rent and hopefully some portion of a security deposit. This happens in part because landlords are strapped financially and cannot afford vacancies and/or they don’t have the time to show their properties. I find it also happens because landlords are paranoid that they may be accused of violating Federal, state or local Fair Housing laws if they don’t accept the first person that applies to rent their property. 

Landlords are afraid to screen for the best applicant and instead set a minimum standard, accepting the first applicant who meets that standard. Can you imagine my banker friend hiring employees based upon a minimum standard? If he did, his bank would not be the profitable bank that it is today. There is nothing in the Fair Housing law that prevents us from accepting the best tenant we can find. As landlords, we must not discriminate illegally against a protected class and it makes no business sense to do so. 

We must treat all applicants fairly and consistently in accordance with the screening procedures we have set up, and it makes good sense to have these procedures in writing. 

Finally, as landlords we need to take responsibility when a tenant doesn’t live up to our expectations. We need to understand that it is our fault and not the tenant’s. We hired the wrong person for the job. He or she either didn’t have the necessary skills, didn’t have the correct moral code or the job description was not communicated effectively. 

We need to recognize when it is our fault, solve the problem, move forward and resolve to do better the next time. 

Effective property management is a necessary skill if we want to survive and be successful real estate investors over the long haul. Fortunately, it is a skill that can be learned if we are willing to put in the time and effort. Once we set up systems and procedures, we will have more time to work on our business, as opposed to in our business (too often in crisis mode). We will have the time to hone our people skills and work at retaining those “golden” tenants, and maybe we’ll even have time for a vacation!

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