March 2008
Community Paper
copyright ©2008 by Community Paper College Park, Inc. All rights reserved.


How (Not???) To Manage A Rental Property - Part 3
by Mike Derenthal, Derenthal Realty Group and College Park resident

You might recall that Mike’s 6 Step Program to Landlording Bliss is as follows:
1. Know two things: your numbers and your competition.
2. Undercut your competition.
3. Rent only to outstanding tenants, but first you have to…
4. Find outstanding tenants (see # 2).
5. Expect your outstanding tenants to be "not-so-outstanding" sometime within the first few months.
6. Be prepared to help them quickly become the outstanding tenants that you always expected them to be.

Finding outstanding tenants is the single-most important aspect of the landlording business. The easiest way to find them is a rent rate that is a slightly better deal than similar homes in the area (Steps 1 and 2). Once you do that, sit back and wait for the phone to start ringing off your belt clip. But then what????

Well for starters, don’t just sign a lease with the first folks who walk through the door and say they want it. I don’t care if the Dalai Lama and his roommate Pope Benedict show up and say they’d like to be your tenants – DO NOT LET THEM SIGN A LEASE. Not yet anyway. They need to be screened.

Being choosy about who you rent your property to is crucial. This sounds like a no-brainer, but it is amazing how many landlords feel an obligation to rent to the first person that comes along and says "I’ll take it." Not so fast my friend! My response to this is, "Great. Please fill out this application and submit it with your application fee of $35. If we determine that you meet our criteria we will contact you shortly."

What’s my criteria? Well it has nothing to do with their color, nationality, religion, or anything else that I can get sued over. Quite simply, it boils down to their ability to pay on time and the likelihood that they will take care of my property. Period.

How do you check their ability to pay on time? Run a credit check and call previous (not current) landlords. You’ll rarely find an applicant with a stellar credit score, but that’s okay. Late payments on student loans, medical bills, and credit cards aren’t deal killers in my opinion. But an applicant who has missed car payments, house payments, or who has a prior landlord who doesn’t give them a raving review, is someone I’d probably try to stay away from.

And they’re ability to take care of the place? Again, a conversation with a previous landlord can be priceless in this regard. Previous landlord contact info is one of the standard questions on my application*, and one of the first phone calls I make. If the applicant was a fantastic tenant for the previous landlord, most people will be very forthcoming. When you call the previous landlord and they seem tight lipped, chances are that your applicant is a dud and you’d be better off moving on to the next one. Be sensitive to the fact that some folks just won’t feel comfortable discussing previous tenants with a complete stranger, but again, my experience has been that great tenants typically get great recommendations from their previous landlords.

A note: try to reach a PREVIOUS landlord, not their CURRENT one. Sometimes a current landlord will do their best to give a glowing review to a troublesome tenant so that they can get them the heck out of their property.

But back to the Dalai Lama and Pope Benedict. Let’s say they, or some other divine applicant walks through your door? Or perhaps an applicant is someone you know or a friend of a friend? The application process should not be skipped. And here’s why: The application process serves two purposes. The first is obvious – it gives you the background information you need to make an informed decision whether or not to rent to someone. But the second reason is arguably more important – the application process sets the tone with the applicant, and this is critical.

It is important to establish an objective, business-like relationship with your tenants from the very beginning, and I’ve found that a simple, straightforward application process is the best way to do this. Let your applicants know that you have certain standards that you expect to be met (specifically – take care of the property and pay on time), that you will do your homework and confirm they are who they say they are, and that the lease you sign with a tenant is a business arrangement and will be treated as such moving forward.
But this takes us into our final two rules on landlording bliss that we’ll get into next month. Stay tuned…

* Feel free to drop me an email at mike@derenthalrealty.com if you’d like me to send you a copy of our standard application.

by: Mike Derenthal, Derenthal Realty, www.DerenthalRealty.com
1520 Edgewater Drive, Suite E, Orlando, FL 32804
407-965-1919

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