My latest search for a tenant was not easy. After hosting six open houses over a one month period I’ve finally found the one who will hopefully stay for longer than one year, pay on time and take good care of the place. It’s a darn small world because her boss is a fellow tennis club member I see literally every week. He enthusiastically gave her a thumbs up so here’s hoping for the best!
The average search duration during my previous three changeovers took half as long. I attribute two reasons for the duration difference: 1) Pricing and 2) Pickiness. Over the past 10 years I’ve seen my net worth grow just like most of you. As a result, I’ve become more picky in choosing “the ideal tenant” because my rental property is decreasing as a percentage of my overall net worth. With such a decline comes a reduction in time I want to spend tending to this asset. Meanwhile, I raised my asking price by $400, equivalent to a 12.5% increase.
My first tenants were French citizens with no credit or rental history. I was a first time landlord back in 2005 who based my decision on gut and paystubs. They fortunately turned out to be terrific tenants who stayed for four years until they got married and decided to buy a place of their own. Perhaps I was lucky, or perhaps most tenants are simply honest to goodness people and being so thorough isn’t necessary.
With each subsequent tenant I’ve scrutinized just a little more. A minimum of 40X monthly rent for annual income and credit scores of over 720 are non-negotiable criteria now. The average credit score for a rejected mortgage applicant is 729 so I’m not far off. The one thing landlords need to realize, however, is that you can’t always get what you want. After the fifth showing I almost gave in by lowering my price, but figured out a win-win pricing strategy just in time.