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0:00 what’s going on bigger pockets so today 0:02 we’re going to talk about finding the 0:03 best tenants for your rental properties 0:04 so what is a great tenant right that’s 0:06 the first question before we even talk 0:07 about the three steps to finding great 0:09 tenants we’re going to talk about what 0:10 is a great tenant okay 0:11 a great tenant is someone who pays our 0:13 rent on time okay takes good care of the 0:16 property meaning it keeps it clean 0:18 they’re not hoarding a bunch of stuff 0:19 and the property they just take good 0:21 care of it maybe they’ve got a little 0:23 garden going on they just treat it like 0:24 a home and the next thing a great tenant 0:27 does is they are good neighbors to those 0:29 around them if you’ve got a small 0:30 multi-family you don’t want if a great 0:32 tenant is not someone who’s having 0:34 parties every Friday night or has lots 0:36 of friends come over that are making 0:37 lots of noise and are disrupting the 0:39 quiet enjoyment of their neighbors so a 0:40 great tenant is someone who does those 0:43 three things pay the rent pays their 0:45 rent on time treats the property like a 0:47 home and respects their neighbors those 0:49 are great tenants and had the question 0:51 today is how do you find more of those 0:52 people so I’m gonna give you guys three 0:54 steps we’ve been landlording for over 14 0:56 years I’ve done a lot of it myself 0:58 and we also have third party property 0:59 managers that manage our properties as 1:01 well and these are the three steps that 1:03 I’ve seen to be super successful in 1:05 finding not good 1:06 great tenants step one you’ve got to 1:08 make sure they earn enough to afford to 1:10 live in your property now a lot of what 1:12 I’m going to talk about for this does 1:14 not apply to folks that are on any type 1:16 of subsidies or anything like that 1:17 because we’re gonna talk about how much 1:19 money they earn if they’re on subsidies 1:21 which is fine I have lots of cry of 1:22 several great tenants that are on some 1:25 sort of subsidy program so I’m not 1:26 discounting those things I’m just saying 1:28 what I’m going to talk about in this and 1:29 this step one doesn’t work for those 1:31 things you can’t apply this so yeah if 1:33 the disc you have to disregard this if 1:34 you’re looking for folks that are if you 1:35 have a tenant that’s on some sort of a 1:37 subsidy program move on to the other two 1:39 steps for step one if you’re if you’ve 1:41 got a market rate unit that has no 1:42 subsidies attached to it then this is 1:44 what you want to do you want to look at 1:47 how much money they earn and it sounds Qualify their Income 1:49 simple but you need to verify it and 1:51 don’t overlook it and don’t change your 1:53 term on this you want to look to see 1:55 their earned income in a monthly period 1:58 by checking their pay stubs don’t just 2:00 let them tell you how much they make 2:01 confirm it with a pay stub there are 2:04 some folks that don’t get paced up so 2:06 get a letter from their boss and then 2:07 call their boss and confirm it okay 2:10 and confirm their income what I found 2:12 the best tenants for us earn three times 2:15 the rent okay now it’s up to you if you 2:18 want to be super stringent on this but 2:20 you could say three times the rent 2:21 before they that is their their net 2:24 income after they pay their income tax 2:25 or their gross income before they pay 2:28 their income tax we use gross income and 2:31 so that means that if the rent is a 2:32 thousand dollars a month that means 2:34 you’re bringing home before taxes three 2:36 thousand dollars one thousand times 2:38 three three thousand dollars in gross 2:41 earned income before they pay their 2:44 taxes or more hopefully more and there’s 2:47 a reason for this okay it’s just there’s 2:50 other expenses outside of rent that it 2:52 takes to live okay you also have to pay 2:54 your groceries you got to make your car 2:55 payment you got to have to put yet 2:57 afford to put gas in that car 2:59 you’ve got afford to do other things buy 3:01 Christmas presents for your friends and 3:03 your kids and just accelerate expenses 3:05 all those things come up and if 3:07 somebody’s earning just above what your 3:09 rent is or earning only two times the 3:11 rent or two and a half times the rent 3:12 there any hiccup in those other things 3:15 their car breaks down they you know 3:18 there was a kid’s birthday or some 3:21 unnecessary scene expense shows up like 3:24 a trip to the ER whatever it is it will 3:27 burn out there it’ll it will eat into 3:29 their ability to pay your rent so you 3:31 want to make sure they’ve got enough 3:33 earned income coming in that they can 3:35 afford several times we go for three or 3:38 more times of the rent payment and we do 3:40 not flex on that standard step two is 3:42 you want to gauge how well how good they 3:44 are paying there are other financial 3:45 obligations there utility company they 3:48 pay the utility bill on time are they 3:49 paying their capability they pay their 3:51 cell phone bill are they making their 3:53 car payment on time the way it’s real 3:55 easy to determine if there are some if 3:56 they’re making those payments on a 3:58 timely manner is to not just get a copy 4:00 of their credit score but to get a 4:02 full-on copy of the credit report and 4:04 review it okay so look at the credit 4:06 report and say we typically see if 4:08 tenants have a problem paying your 4:10 utility bills on time or lots of liens 4:12 from utility companies we see that as a 4:15 red flag because that is a living 4:16 expense and that means that they are 4:18 willing to forego their living expenses 4:20 in exchange for other things that 4:21 so what what else is a living expense 4:23 rent the people tend to lump their 4:27 living expenses together on their head 4:29 so the utility bill and the rent those 4:32 things tend to go together 4:33 psychologically okay other things like 4:35 cables cellphone those are other cost of 4:37 living expenses we pay attention to as 4:39 well look for a look for maybe a car 4:42 repossession or something like that 4:43 because that means they weren’t able to 4:44 make a car payment on time you can look 4:46 at the credit score and you can should 4:48 have a standard like a threshold for a 4:49 credit score 4:50 it depends for us it depends on the 4:51 market we’re in so some markets we are 4:53 in our credit score limit is 650 for 4:57 other markets it’s 580 depends on the 4:59 market and so you need to determine what 5:00 the actual crest credit score threshold 5:03 is for your market but I’ve seen a lot 5:05 of landlords stop at that credit score 5:06 threshold you want to go beyond that and 5:08 review an actual credit report and go 5:10 line by line through there and see well 5:12 what’s pulling their credit score down 5:13 is because they had medical concern that 5:17 came up years and years ago that’s 5:18 behind them now is it because they 5:20 missed a couple of payments on a student 5:22 loan that they’ve now paid off or is it 5:24 because that they owe several thousand 5:27 dollars of the local utility company you 5:29 know that’s a concern and the last item 5:31 for their ability to pay their bills on 5:32 time is you want to look back to see if 5:35 they have any landlord claims aka Check for Prior Evictions 5:38 evictions or landlord tenant claims 5:40 against them because if they have that 5:42 that means that if landlord has taken 5:44 them to court for not paying their rent 5:45 before and you may have a standard as we 5:47 do that if they have evictions our 5:49 standard is in the last three years so 5:52 if they have any evictions that are that 5:54 have been filed on them in the last 5:55 three years now we know people grow I’m 5:57 that’s the same person I was several 5:59 years ago that maybe they grow and 6:01 become more financially sound over the 6:03 last couple of years but if they’ve got 6:04 a pending eviction we’ve had people 6:06 apply for our properties and they’re 6:07 being evicted currently at the time that 6:09 they were applying they all they had a 6:11 pending eviction going on so obviously 6:13 can’t accept that because you’re in the 6:15 middle of something that they’re working 6:16 their way through which we don’t want to 6:17 be a part of but if they’ve had it way 6:20 way way along in the past some landlords 6:22 are super stringent about that and say 0 6:24 evictions ever we like to say within the 6:26 last say 3 to 5 years if we don’t see 6:29 them then then we’ll we’ll consider that 6:30 to be ok because that’s all I could 6:32 engage and how 6:33 they are at taking care of their 6:34 financial matters that is a big factor 6:37 on step number two which is gauging 6:39 their ability to take care of their 6:40 financials of their financial 6:42 obligations step number three and this 6:44 goes back to how determining how good of 6:48 a neighbor they’re going to be how good 6:50 if they’re going to be neighborly and 6:52 how if they’re going to respect the 6:53 property and respect their neighbors and 6:55 treat the property like a home you know 6:58 there’s an adage out there you are the 6:59 average of the five people you hang out 7:02 with or you are the average of your 7:04 entire network and with that that’s 7:06 that’s a personal notation to take for 7:08 yourself meaning all the people that you 7:09 spend time with they kind of rub off on 7:12 you it’s it’s can you know personalities 7:14 and habits are contagious so they tend 7:16 to put some of the personalities and 7:18 habits on you you do the favor of 7:20 transposing those things on them as well 7:22 so if your tenant is running around with 7:25 people that are not the best folks in 7:27 the world that have bad financial habits 7:29 or that are not living in standard 7:32 situations that you would be open to 7:33 having in your property they are likely 7:35 going to be bringing that stuff to your 7:38 property to live there that said people 7:41 that have good habits people that are 7:43 going to a few properties like a home 7:45 probably hang out with other peoples 7:47 that tree property like a home because 7:48 of that just life rule that habits are 7:51 contagious and if you if your friends 7:53 are doing a certain thing they’re likely 7:54 going to rub off on you and you might 7:56 start doing the same thing if you look 7:58 up to and respect your friends so the 8:00 way that you gauge someone’s network is 8:03 by getting references from them okay and 8:05 this is another thing that a lot of Get References 8:07 landlords overlook but we don’t and we 8:08 think it’s important to ask for 8:10 reference for a couple of character 8:12 references ask for you know I want to 8:13 call someone in your network call their 8:15 employer and get a rundown from them or 8:18 ask your property manager to to a do a 8:20 quick reference check and another great 8:22 reference check is if someone comes to 8:24 us as you referral from one of our 8:26 tenants I check to see is that tenant 8:28 somebody I want more of do I want if my 8:31 tenant that has a garden out front and 8:32 has and keeps their property super clean 8:35 and is a phenomenal tenant for our 8:37 property if they give us a referral then 8:40 yeah and that’s a big plus because it’s 8:42 likely going to be someone who maybe has 8:44 a lot of the same habits 8:45 they do if they came from them they’re 8:47 kind of vouching for them in that so go 8:49 off for referrals if I’ve got a referral 8:51 from the tenant that is a big-time 8:53 hoarder that pays their rent late all 8:54 the time and has lots of loud crazy 8:57 parties all the time in the unit that I 8:58 have to constantly you know deal with 9:00 and reprimand them for then I might not 9:03 want to take that referral so to sum it 9:04 up guys the three steps to selecting the 9:07 best tenants are are these it is you’ve 9:10 got to gauge their financial ability to 9:12 pay the rent so three times or more of 9:15 your rent and earned income gauge your 9:17 ability to pay their financial 9:18 obligations by doing a hardcore review Check Credit History 9:21 of their credit report not just their 9:22 credit score but actually reviewing 9:23 their actual credit report and the last 9:25 thing is you’ve got to make sure that 9:26 they’re going to be a good neighbor and 9:28 treat your property like a home and the 9:29 way you do that is by making sure 9:31 they’re by checking their network 9:34 through your tenants or other referrals 9:36 that they give you you do those three 9:38 things guys and you’re going to have a 9:40 property that people treat like a home 9:42 that they’re going to treat well 9:43 financially and they’re going to want to 9:46 treat their neighbors with respect all 9:47 also those are phenomenal tenants and 9:49 those will keep your property up long 9:52 term and you’ll be very happy as a 9:54 landlord or tenant with lots of tenants 9:56 like that it’s not going to happen 9:57 overnight but if you have those 9:58 standards and rules then over and over 10:00 and over again you’re going to slowly 10:02 increase the caliber of your tenant base 10:04 and increase the caliber of your 10:05 property financially so again if you 10:08 guys have bad tenant stories I want to 10:11 hear here’s the here’s something funny 10:12 okay I want to hear your worst tenant 10:14 story now okay now that we’ve went 10:15 through this whole video if you guys 10:17 watch this whole thing till now leave a 10:18 bad tenant story for if you broke one of 10:21 my three rules I got tons okay but leave 10:24 a bad tenant story because it’s not like 10:26 I’ve been doing this for the last 14 10:28 years I’ve been doing this I operate my 10:30 properties this way cuz I’ve learned 10:32 what happens if you don’t okay so some 10:34 of you guys might not have operated your 10:35 properties by these three standards so 10:37 tell me a really awful tenant story in 10:39 the comment section below for some for 10:42 attendant that you that you broke one of 10:43 these rules and it ended up badly okay I 10:45 tell it want to hear about it we can 10:47 share some laughs together thanks for 10:49 watching guys have a great profitable 10:50 week