Live and Learn

I have started a list of things I plan on changing when it comes to (pre-)screening and managing future tenants. All of these ideas I got were from reading how other successful landlords operate, including Terry Sprouse who is the author of Fix 'em up, Rent 'em Out. Some of the things I'll do differently:

1. Tenant must have a bank account.

Neither of the previous two tenants I had had a checking account with a bank (as far as I could tell). They both paid me with money orders or cashier's checks. The former tenant was late one time and the latter was late three times. Both tenants wanted to move out before the lease was over. The tenant prior to those two had a checking even though they were moving from Houston, but was never late one day. Matter of fact, she always paid about 4-5 days AHEAD of the due date. I've also heard this from other landlords, so it seems like a pretty good litmus test to prescreen tenants. Maybe there is a responsibility factor involved with having a bank account, or something. Not sure. What I do know is that it looks to be a good guage on how well the tenant pays each month (and whether they want to leave early). The bank in question should have at least one branch in the area, too.

2. Give rental "rewards" to good tenants.

I first heard this when dealing with lease/options, whereby the the owner gives credits each month to a tenant/buyer who pays on time. If they don't, then there is no "reward". Basically, one sets the rent at a set amount each month for the duration of the lease as usual, however, if the tenant pays their lease on time, they are given a "credit" in the form of paying less rent. IOW, if the rent is $1,000 per month and the tenant pays their rent on time, they only have to pay $950 or $975. This implants a psychological memo in the tenants head each month to pay on or before the due date. If they miss the date, they have to pay the regular rent payment (plus late fees).

3. Better screening of tenants.

I've learned first hand the rule about screening the tenants thoroughly BEFORE they become tenants as it will save a lot of headache once they BECOME tenants. Not only will I do a more thorough job of looking at a prospective tenants criminal and financial background, but also demand they have AT LEAST three previous landlords I can call. I still believe I was tricked with this current tenant by having her use a friend to say he was her former landlord. By having at least three previous landlords, it will be harder to trick me (not impossible, but harder). I will also institute a means to make it harder for prospective tenants to trick me. If their previous domicile was a house they owned, I'll expect them to have proof of ownership, etc.

4. Month-to-Month vs. Standard Lease

When I first became a landlord, I held steadfast that leases were to be a standard 12 months - period. Since that time, I have always used the standard 12 month lease (which automatically rolls over into a month-to-month after 12 months). I'm contemplating now on just using a month-to-month lease right at the beginning. There are certainly pros and cons to each, but as Terry mentions in his book, if a tenant doesn't want to live in my rental anymore do I really want to keep them there? Still deciding on this one.