How To Select The Best Tenants For Maximum Prosperity And Peace Of Mind

Owning rental properties is one of the best ways to build wealth. Finding the best tenants is, therefore, crucial. This post will discuss how to select the best tenants for maximum prosperity and peace of mind.

If you don't put in the effort to find the best tenants, you may end up regretting your decision. Bad tenants can damage your property, not pay rent on time, nitpick at everything, disturb the neighbors, or even stop paying rent. Your faith in humanity could be tested with the wrong tenants.

It's worth putting in the extra effort to screen your tenants for at least more peace of mind.

Attributes Of The Best Tenants

The best tenants have the following attributes:

  • Always pays on time through auto electronic deposit.
  • Doesn't damage the property.
  • Spends their own money to paint and upgrade the property where desired.
  • Knows how to change lightbulbs, fix toilets, replace light switches, and maintain appliances.
  • Never bothers the neighbors.
  • Never throws parties.
  • Never has anybody not on the lease living in the property.
  • Never leaves despite rent hikes to cover the cost of rising property taxes, insurance fees, and HOA dues.
  • Never contacts the landlord.
  • Sends landlords gifts during the holidays.

Oh my! What a dream tenant! Too bad the real world of landlording doesn't work this way. Something always goes wrong. And it's your responsibility as a landlord to address the issues in as professional a manner possible.

I've always strived to be the “dream landlord” by quickly fixing anything that breaks and incentivizing tenants to stay long term with stable rents. I've also gifted great tenants bottles of wine during the holidays.

Luckily, I've never had a truly horrible tenant that required an eviction. The damages done to my rentals have been mostly cosmetic. Further, I was eventually paid all rent due.

To find the best tenants, you must gather the appropriate documents and analyze them with a fine tooth comb.

Required Rental Application Documents

A lot of landlords go with their gut feel about a tenant at the expense of requiring important documents during the application process. For example, landlords might get easily swayed by a charming or attractive person.

Instead, interview your potential tenants thoroughly. NEVER waive the documents you need to make an informed best choice.

Banks spend 1 – 4 months analyzing the financials of mortgage applicants. You should be as thorough as possible given your property takes up a larger percentage of your net worth.

Here are some documents and conditions you should consider asking for, starting with financials.

Financial Documents For Tenant Application

* Minimum last two paystubs. Your tenant should ideally be employed with a steady paycheck. Request the last two paystubs at a minimum. Consider asking for a paystub from the year prior as well.

* Minimum annual income. Shoot for a tenant who makes at least 40X the monthly rent e.g. $40,000 annual income for $1,000 a month in rent. This way, you won't have a tenant stretching to pay more than 40% of their after tax income on rent. $40,000 gross income equals $32,000 in net income after paying a 20% effective tax rate. $32,000 equals $2,667 a month. Paying $1,000 a month equals 37.5% of net monthly income.

* Financial assets. The more money in the bank, the better. Shoot for a minimum of six months of rent in savings so that in the event of a financial crisis or a job loss, the tenant will have a better ability to continue paying the rent. If the tenant is able bodied, it generally doesn't take more than six months to find a new job. It might not be the perfect job, but at least it'll be able to generate some income, especially with the gig economy allowing anybody with enough desire to make $22+/hour.

* Credit report and credit score: The higher the credit score, the better. Shoot for a minimum 720. Credit scores below 700 indicate late payments or past financial difficulties. You may encounter scenarios where a person has a poor credit score because of a recent graduation from university, high debt, or a short history of earnings. It will be up to you to decide what you are comfortable with. If you are willing to accept a lower score, ask for an explanation.

Employment Documents For Tenant Application

* Duration of employment: The longer a tenant is at the firm the better because it shows maturity and stability. Be wary of applicants who move around every year for a new job. It shows they are still finding themselves, don't know what they want, or like to pounce at every single new opportunity. All these attributes are not good for landlords who want less turnover.

Ideal tenants for peace of mind

* More proof of employment. You want to get a copy of the offer letter or a written statement from HR that the applicant is currently employed with the firm. Having HR write a letter is part of its job, so it's not a burden. If an applicant balks at this request, beware. It is also easy to forge employment documents, so request there is contact information for you to reach out and verify.

References For Tenant Application

* References. Make sure you speak to or get a written letter of reference from the tenant's previous landlord or boss. Beware of landlords who secretly want to get the tenants out and will say anything positive to get them to leave. If you suspect this type of trickery, you need to pick up the phone and have a heart-to-heart with the reference writer. Consider asking for the contact information of a second landlord as well. The second landlord maybe able to give you additional feedback.

* Resume or LinkedIn profile: Every working professional should either have an updated resume or LinkedIn profile that gives a snapshot of education and professional history. You'll also be able to learn about the applicant's interests, which may or may not sway your decision. Ask if they have their own website. If they have, that may demonstrate extra initiative because most people can't be bothered to establish their own platform online.

All these documents are voluntary. You cannot force an applicant to give you anything. At the same time, applicants cannot force a landlord to rent them their property either. Make it clear to the applicants that all requested information is voluntary and will be kept private. The more information you can get, the better.

The Prospective Tenant Interview

To get the best tenants, you must also inteview them like you would interview a candidate for a job.

It's important to look in the applicant's eyes and have a normal conversation about life. It's much harder for people to ruin your place or not pay your rent after they've met you face-to-face.

You're essentially trying to build some rapport before and after you receive all the requested information. It feels good from both sides to work with someone you like.

Here are some interview questions to ask:

  • Why are you moving?
  • How long were you at your previous place?
  • What did you like and dislike about your previous place?
  • What is your current role?
  • What do you think about the local economy?
  • How long are you hoping to live here and what are your plans for the future?
  • Ask about what their company is up to with the latest news e.g. what do you think about the $3.5B raised from the Saudi government by Uber?
  •  Ask them about the latest current events or local sports team e.g. how about them Warriors choking after being up 3-1?!

The best tenants will answer these questions candidly. Based on my experience interviewing over a thousand candidates during my time in finance and my experience interviewing tenants since 2005, I've found that people who can look you in the eye, naturally tell their story of why they're moving without hesitation, and share their thoughts about the future tend to be good tenants.

On the other hand, people who can't look you in the eye, have no opinion about the local economy, and can't intelligently discuss their interests might be more suspect.

If you want to make extra sure your tenants respect the lease, you can discuss your occupation if there is relevancy. For example, if you are a lawyer of any kind, your prospective tenants will probably think twice about screwing you over.

If you are a online media entrepreneur, journalist, or have a large social media following, your tenants probably won't want to upset you either. People tend to take advantage of others who are weak. Be nice, but show strength.

The Final Stage To Finding The Best Tenants

You should ask for a minimum one month rent as the rental deposit and the first month's rent up front. The rental deposit is there to cover for any damages. The rental deposit also encourages tenants to follow the lease terms, an example of which I've linked to below.

The largest rental deposit you can charge is usually 2-2.5X monthly rent. Please check with your local state/country.

Finally, before a tenant moves in you must write up a pre-move in checklist noting the condition of the property room-by-room. Both landlord and tenant must sign the document so that there will be less conflict during move out.

Often times you will not remember years later how your property was. Spend time taking pictures for documentation as well.

Money, Good Citizenship, And Duration Of Stay

Financial Samurai Condo Rental Property History Income Statement - I had the best tenants
Purchased in 2003 for $580,500. Started renting out in 2005. Paid off mortgage in 2015.

When I was a younger landlord, I focused mostly on money, then good citizenship, and then duration of stay. After all, I had a mortgage to pay.

Now that I'm older and no longer have a mortgage for this particular property, I focus on Duration Of Stay, Good Citizenship, and then Money. My time and peace of mind is more important now. I suspect the same shift is true for many landlords as they age.

Make sure you rank what's most important to you each time you search for the best tenant possible.

After 20 years of being a landlord, I've also introduced an incentive structure based on a schedule of rent increases. This way, a tenant has more visibility and transparency about future costs. Tenants might also be more incentivized to stay. Meanwhile, as a landlord, you get more visibility on costs and potentially a higher occupancy rate.

My latest tenant hunt involved renting my 2/2 condo in Pacific Heights, San Francisco. Previous rental arrangements included two roommates, a single woman, and multiple couples. 

The most recent tenants were two roommates paying $3,950 a month. The master tenant had three roommates during her three years there which was a larger than expected hassle.

After a month of searching, I was lucky enough to find a couple living separately who wanted to take the next step and live together. Every couple who has rented from me ended up getting married. 

This couple completed the application and submitted all documentation requested. I could tell they loved the place. The only problem was they weren't willing to move in for one month, leaving me with $4,200 in lost rent if I chose them.

Yes, I decided to raise my rent by $250, or 6.3%. I first tested the waters out at $4,400 and $4,300 for the first three weeks and couldn't find anybody interested. Therefore, I logically lowered the price to meet demand.

A Decision To Make On Finding The Right Tenants

Two days after the couple filled out the application, a couple 25 year old guys showed interest in my place. They were ready to move in within a week. The main problem was that one of the guys seemed a little strange.

They didn't send any documentation. They said their analyst programs ended in 1 and 1.5 years respectively. Finally, one of the guys brought his girlfriend, which may indicate there would really be three people living in my place instead of two.

In the end, I decided to go with the couple and forgo a month's worth of rent. I'd much rather have tenants who will stay for 2 – 4 years than tenants who will only stay for 1-1.5 years and potentially do more damage to the place.

The HOA makes the move-in/move-out process trying, and I truly believe they'll like staying at my place for the long term. I explicitly asked the couple how long they think they'd want to live in my place. He said at least two years because he was getting a promotion in four months. His new role would require him to be in San Francisco for at least two years.

No matter who you choose as tenants, before you sign the lease, make sure you get all their documents and speak to them at least twice, once before and once after they apply.

You'll never truly know until they move in whether you've gotten great tenants. But if you follow my suggestions, I'm confident you'll have fewer headaches in the future.


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72 thoughts on “How To Select The Best Tenants For Maximum Prosperity And Peace Of Mind”

  1. I’m one of those ‘ideal tenants’ always looking for a decent landlord… single, professional engineer, stable job, high income to rent ratio, no pets, no kids, non-smoking, quiet, great references, neat freak, etc. etc. I’ve moved every 2-4 years (during rent, not home owner years) either based on work relo (which will make the landlord whole) or because the rent goes up ABOVE market rate. I pay early or on time, fix minor issues myself, leave my place *clean*, and have never lost a dime of a security deposit. I’m not an angel, but I was raised to treat other people’s property with respect. Ok, ok, I don’t give birthday presents to my landlord, but other than that…
    One area I will contest is that whilst I have a safety stash of cash, I don’t usually keep 6mo liquid vs invested, so I push back on that requirement.
    We need someone in the FI sphere to start a ‘dating app’ for matching landlords and tenants… I’ve had some very high maintenance landlords (!)

  2. Advice to landlords on how to get tenants that will stay for a long long time? Don’t charge rent! THAT will get a tenant to stay forever!

    Here’s a serious question for you and any commercial landlords on here though: What sort of screening process do you have or recommend for a commercial tenant?

    ARB–Angry Retail Banker

  3. Smartest Women on the Internet

    Any thoughts on having a rental applicant provide a (legitimate) copy of his credit report? I can quickly and easily get a free copy of my credit report and credit score as a feature of my Citi Bank Mastercard; and anyone get get their own credit report from

  4. Smartest Women on the Internet

    I plan to use TransUnion’s SmartMove feature to get a credit information when I next seek a tenant. The feature doesn’t give the applicant’s credit score, but gives a good summary and recommendation based on the applicant’s credit score. As I understand, it’s not possible for the individual small-time landlord to get access to credit scores, unless one is in the real estate or property management business with an established firm.

  5. Smartest Women on the Internet

    I purchased my first rental unit a year ago as a forclosure – a very nice waterfront Florida condo – for cash. I intended to advertise and recruit a tenant myself, but got busy at work and doing some small repairs on the unit getting it ready for rental. I even wrote an ad, posted it on Zillow, and quickly got half a dozen calls. But I decided to hire a well-established, local property management firm. As a real estate firm, the property manager can advertise on the MLS; as an individual landlord, I cannot. At least that’s how it is in my Florida county.

    Anyway, the property manager had three applicants w/i 48 hours, and I selected the recently retired couple, both collecting social security and government pensions. I had to pay the property manager 50% of the first month’s rent plus 10% each subsequent month.

    By choice, I ended up being a hands-on landlord, so the property manager never earned their 10%. The first few months, I had a few calls and repairs to do, but haven’t heard from my tenants in six months. The rent check gets auto-deposited on the 1st of each month w/o fail. I just cancelled my agreement with the property manager and just renewed my tenant’s lease w/ 0% increase.

    My tenant has expressed an interest in buying a similar waterfront condo in the area, and has even advised that he’d by mine if I ever thought about selling. Though, the market value is up 25% in one year!

  6. Hello Sam, I am also a property investor with a SFR and duplex in FL. I noticed your 2/2 Condo was purchased in 2005 and paid off in 2015. What was your reason for this?

    I debated if I should pay off my SFR early but my conventional loan is at 3.5% 30 year fixed and I figure I could earn more on the extra principle payments by investing in mutual funds. My PITI is $1200 and it can rent for $1800/mo.

    Thank you for sharing!

    1. I’m pretty bearish on the stock market. 3.5% interest is 2% higher than the current risk free rate. After Great Britain voted to leave the EU, global markets crashed by 4% to 12%. I’m happy to invest my money in a sure thing these next couple of years because I don’t think things will be good. I also have two other mortgages so I’m all about paying down debt.

      1. Thank you for the reply. This helps me focus on my investment properties and not worry too much about the market. I think it also depends on how old you are and how much longer until FIRE. For me, I’m 26, so I still have a long way to go. I diversify in the market through my Roth IRA and Roth TSP. I think for the extra cash I may pay down my SFR similar to you.

  7. Was in similar situation year back, where I had to choose between a below par tenant who was ready to move in within a week or loose 1 month rent and wait for a above average to move in after 1.5 Month. Being in Chicago in middle of winter we decided to not loose rent and accepted the below par tenant. We had a bad gut feeling but made a practical decision.

    Today those tenants have filed a case in court against us for co-mingling Security deposit. I deposited the check in my checking account and within 4 days moved it a savings account. They did not pay full deposit and even illegally sublet the property. They were always late on rent. When the left I paid them the deposit with interest back (in 2015)

    In April 2016 they still took me to courts, and now I am looking at a 15K + attorney fees in lawsuit. My attorney says my case is good but Chicago laws are so bad that Landlord never wins. And eventually attorney fees it what kills you, so settle. Even though I have done almost everything correct, just having that deposit in my checking account for 4 days is going to cost me.

    The worst part is these tenants will repeat the same thing with someone else and there is no way to flag them and inform my fellow landlords.

    1. Oh my, I’m very sorry for this. I do hope these tenants do good, but you just never know.

      What is the rule for co-minging the security deposit? As far as I know, if you pay them back based on the interest rate stated by the local government after you do the walk-through checklist and damage deductions, things are fine.

      How did they know where you deposited the money in your account? I don’t get it. Please elaborate.

      1. Even I had the same thought, how does all this matter if I paid them the interest. Chicago mandates giving SD receipt with bank account details. So their lawyer subpoenaed our bank account and figured it out. Their lawyer is just pushing the trial so he can rake up his hours and create a big potential bill for me.

        Tenant lawyers take the case for free and make money from % payout. Its just as bad as it gets. Landlord is so handicapped and all this leaves such a bad taste that one truly thinks is it worth being a landlord.

        Landlords are perceived as the evil rich guy who should pay for everything. Dont get the notion of why average american (in this capitalist country) always wants to penalize/tax the person trying to making more money. Isnt this opposite of capitalism.

  8. I have been a landlord for 5 properties (3 condos & 2 single family homes), for over 18 years and I used to interview and ask for all sorts of proof of income for the first few years. Then about 15 years ago I switched to a simple 1/2 page application and have them sign to authorize & pay ($29.95) for a Landlord credit check request that is sent directly to my email and I haven’t had a problem yet. First of all, if they agee to complete the application & authorize a credit check and pay for it, then I know they are serious about wanting to rent the property. Secondly, I really don’t care where they work, how long they worked, or how much they get paid. I care that they are responsible and pay off their bills on time. This is shown on their credit report to include their credit score, & how much they owe to all creditors (car payments, mortgages, student loans, i.e.). So many people have great jobs, make tons of money, and have great personalities (seem like the perfect tenant in person), but they are horrible with money and are truly self-centered, who make the worst tenant. So basically, I rely on the numbers and not the information that the applicant is giving me. People lie.

  9. Sam, love the blog, although I don’t post much, I recommend it to folks who want to learn more about personal finance but don’t know where to start. I have a couple questions that I would be curious to get your take on, have you ever used a real estate agent to rent out a property? I have a condo in West LA that I rented out myself about a year ago and it was pretty easy to do as the rental market is super tight right now, but I now think I am way undermarket, and maybe an agent could have targeted that better for me. Which brings me to my second question, which is, what is your approach on raising rents on your tenants? The guy I have in there right now hits all your points and is super low maintenance, but at the same time, I think he might be $300-500/mo. below market at this point. I don’t want him to leave obviously, because turning it over would cost several thousand dollars in lost rent alone and I honestly have other things to worry about.

    1. Hi Dean, we just have to run the numbers and assess percentages for various scenarios. If he truly is $300-$500 a month below market rate, and perhaps raise the rent by only $150-$250. He should appreciate that you haven’t jacked it up to full market. But if he is unaware of market rate then he may likely b he should appreciate that you haven’t jacked it up to full market. But if he is unaware of market rate then he may likely balk, but will alternately realize that your run increase is below market rate once he starts looking. so it is up to you to have conviction and what the real market rate is by doing your homework.

      I tested out the market for $450 higher for one week, then $350 higher for the second week and then settled on $250. If I had settled on $250 higher from the very beginning, I might’ve been able to get some tenants in sooner and not lose a month of rent. Therefore, I miss calculated the real market.

  10. Todd Guthrie

    What if the building you own is subject to rent control in such cities as San Francisco, New York, or DC? Then you would want a good tenant who meets all of the above criteria, but you don’t want them to stay there forever with only minimal annual increases. You’d want a tenant who is likely to leave voluntarily after maybe 2-5 years, so you can raise the rent back up to the prevailing rate?

    Although it’s usually illegal to discriminate based on things like age and family status, many landlords in such a situation will prefer to rent to young upwardly-mobile professionals who will move out as their career advances or as they start a family.

    In San Francisco, I believe rent control applies to multi-unit buildings built prior to 1979, which by one estimate is about 3/4 of the rental properties in the city.

    1. Yes, rent control has been very good to landlords because it restricts supply overall and increases pricing for those increasing amount of people who do not get to live in rent controlled units. There is much less turnover when you’re in a rent controlled apartment, therefore restricting the natural rate of vacancy.

      Given my rental properties are not under rent control, I basically tried to find the market rent whenever there’s turn over every 2 to 4 years. With this latest rental, the market rate is 6% higher than where I was previously renting my place for.

  11. Ms. Conviviality

    It was just last month that I tried to research for steps I should be taking to get the best tenants but didn’t come up with anything useful. It’s so great that FS has nurtured a community that shares sage advice. I’m heading into my fifth year renting out a condo so I’m still relatively new at being a landlord but this information should keep me out of trouble.

  12. I hope everything goes well with your new tenants! It’s gotta be tough whenever there’s turnover, then finding new tenants and developing trust with them. Although I don’t have kids I imagine that’s kinda what property feels like. You love your property like it’s a part of you and want the best for it and naturally worry that the people in its life, aka tenants, will respect and care for it as much as you do.

  13. In a cheaper market, you’ll be waiting for months looking for the perfect tenant, but they are out there. My best tenants were a retired couple (age 67+) who just sold their business and didn’t want to deal with home ownership. I imagine if you don’t have a mortgage it makes it much easier to hold out.

    Unfortunately, perfect tenants tend to become homeowners after a short while, leaving you with a vacant property again. Perhaps in limited or expensive markets that may not be the case since the barrier is so high.

    The ideal tenant for me (Texas) therefore is someone who earns a great W-2 income but insufficient credit to obtain a mortgage. As long as they understand rent comes first, these tenants can stay in your home for a very long time as they are trying to rebuild their credit to one day move on.

  14. Very comprehensive advice, not only in the post, but in the comments, as well. Like many other commenters, I think I was the perfect tenant back in the day. I painted the entire main floor of the condo, found a contractor to remodel the master bathroom for my landlord for a very low price, and discovered a gas dryer ventilation problem and alerted my landlord before it became a costly fix.

  15. As for application fees, I charge these to cover the cost of background and credit checks. I don’t try to make any money on the application process. (Long-time reader, first-time commenter). Love your blog!

  16. Finance Solver

    Will be bookmarking this post for future reference. Fantastic article (even though I don’t think Warriors chocked up but just that Lebron brought a better performance). I had no idea the documents requested by the landlord were voluntary.. I submitted a lot more information than was needed then!

  17. Sam,
    If you advertise your place I am sure you get multiple applications. How do you then select among the various applicants? Do you do credit and background checks for all applicants or only the finalist cause I assume that is critical information to decide.

  18. Hi Sam, great insight here! I suppose the first step would be effective marketing to get quality and promising tenants in the door to view your property. Can you share how and where you market your property?

  19. I read somewhere that landlords put too much emphasis on the financial wherewithal of the prospective tenant and not enough on their occupation. Some occupations are very volatile and if someone loses their job, all hell breaks loose. The example was renting out a place to a famous rock band. Yes, financially they can afford it – but occupationally, they will probably trash the place!

  20. Kate @ TaxOptimizedInvestment

    Some landlords here in the Bay Area also asks for your bank account balance information. That is too much to ask for in my opinion. Glad that you found a tenant and are able to raise the rent. Rent goes down way more slowly compared to the real estate sales price in a market downturn.

    From my observation, the Bay Area real estate has cooled down a bit, at least for the residential real estate market. The residential real property sales price has only experienced a single digit increase this year, compared to the double digits increase in the past few years. In my neighborhood (Oakland) there are a few rental properties that have been vacant for a few weeks. I am sure SF rental market is still going strong.

    1. I ask for proof of funds, and leave it up to the tenant to provide or not. I tell them everything I ask is voluntary.

      Everything is cooling. I’m experiencing it first hand when I tried to find tenants and half-heartedly tried to sell my condo for 30 days.

      Add this experience with what I see in terms of what people search for online (FS datapoints) along with observing corporate profits intently due to my public and private equity investment portfolios and there is NO DOUBT in my mind we are going to see a 2-3 year softening in real estate.

      Given my tenant was in my unit for 3 years, her rent was flat the 2nd year and only went up by 3% the third year. During this time, rents went up more like 5-8% a year for the two years after her first year lease was up, so I’m just playing catch up. Always a little tricky finding the market.

  21. I include a weekley cleaner priced in with the rent so I can get weekley updates on my tenants



  22. Dividend Family Guy

    This is great information Samurai. I have always considering real estate but was always unsure how to find good tenants.

  23. Great article on tenant screening Sam.

    We always do a background check and get as much documentation as possible. We also have a minimum criteria that a tenant has to meet and share it with the prospective tenants before they fill out the application for back ground check.

    I agree with you that length of tenancy and good Citizenship are very important. Our rentals are in a very good school district so most tenants move in because of school and tend to stay long. We have a couple of tenants who tell us they will be here until there kids are done with high school (both tenants have kids are in middle school now).

  24. A good trick I used when I was renting property was to call the prospective tenant’s landlord from not his current place, but the place before that – for the very reason you said. If he’s a crappy tenant, his current landlord might lie to foist him off on some other chump. But if you call his landlord from his residence before that, there’s no reason for that guy to lie.

  25. Sounds like I was the ideal tenant! We now own a single family house in which we currently live, and we are working to become landlords in next year or so, maybe even renting out our current home in case we move in a few years. I will bookmark this post!

  26. Nice article. I definitely prefer to keep lease rates just under market to attract the best tenant. My best rental right now is a single tenant commercial office space, where the lease terms specify that the tenant is responsible for literally everything, and the tenant has not called me in four years or missed a payment. It’s been such a good experience that I think my next acquisition will also be something commercial (but probably not retail) rather than residential. Still waiting on a birthday present, though!

  27. Great advice, nothing is more important than tenant screening. I am going through my first eviction right now due to a tenant that came with a building I purchased.

    They have been evicted multiple times before, and Chicago is extremely tenant friendly. We are 3 months in without rent, they have been given free legal aid who paid for them to request a Jury trial. All in, it will likely cost me close to $10k by the time they are out. My screening criteria has always been strict (which is why I have never had an eviction previously), but it is about to get a lot stricter.

  28. Jack Catchem

    I’m really happy to hear everything working out. I wish more people did a thorough vetting job. “An ounce of prevention is worth a pound of cure.”

    I regularly get summoned to landlord/tenant disputes where the relationship had soured and the property owner is in the hurt locker. With the saavier tenants too (the evil but smart ones looking to extort as much as possible) I have pulled the landlords aside, told them about the eviction process, and given some honest advice that even if they GIVE the tenant $250 to leave RIGHT NOW they would be better off than going through California’s 6 month eviction process while the tenant enjoyed the free ride. I hate telling property owners that information, but it can be a good cost/benefit business choice.

    I’m interested in your thoughts: I remember the post of not letting others walk over you, but in a worse case scenario (like an evil tenant that gave an Oscar’s performance during the interview) would it be worth it to sacrifice some ego and save versus the time, heartache, and frustration of eviction?

    1. To give them money to leave? Yes, there is a price for everything and I would run the numbers and pros and cons.

      But, if someone ever screwed me, I would simply chronicle it on this website for my own records, write articles to help others who may go through this process, and help protect future landlords from these tenants.

      You do not want to mess with a financially independent person who also owns online media properties. I have infinite tolerance for financial loss with this one property. I will fight you until the end to honor the contract. I also have an endless ability to write, so you don’t want to be a target for my online fury either.

      Be kind, but strong. Never let anybody walk all over you!

  29. Great guide. A good long term tenant is priceless. I’m getting better at tenant interview and I need to maximize the rent more. Last time I was too focused on turning the unit around so I think I left some rent on the table. Next time, I’ll take it slower.
    I’ve been pretty lucky so far with tenants.

  30. Fiscally Free

    I’m proud to say back when I was renting I was incredibly close to your “ideal tenant.”
    I never got my landlord a birthday present, but I think every apartment I’ve ever rented was nicer when I moved out than when I moved in due to maintenance and cleaning performed by me.

  31. Great post, Sam, with some great advice! I’m currently on the opposite end of your discussion here where I am applying to rent. I will take note of what the “perfect” tenant is and do my best to fulfill those. Going through your list, I hit all of the check marks so hopefully will have this done soon. As someone who plans on owning and renting out property in the future, this is very helpful and I appreciate the insights on your experiences with choosing tenants.

    As for my world in investing in common stock, I think this methodology can also be used as an outline for long-term investments. Although it’s a slightly different take, finding a very good company where you can park your capital for a long duration of stay, that better’s society (good citizenship) and that you can make a solid income (Money) through price appreciation and capital distributions is definitely a strong framework to begin with.

    Thanks again for the post!

    Chris @ Sleepy Capital

    1. I just rented a new place a couple of months ago, and I took some advice from Sam’s multiple posts on the subject. I can tell you that the one thing that worked was the “rental application”. The agent (I never met the landlord) told me that was amazing and she wished everybody would do that. I’m pretty sure that got me the condo (of course, I do check all the important marks, like having a gross annual income ~60x the rent, but I wasn’t the only one).

      So here’s what I gave her :

      * A rental application : all my info on one pretty page (*not* those awful standard templates, something I made myself that looks like a resume), including salary, credit score, history, references, pets, reason for leaving my current place, everything.
      * An 1/2 page letter describing who I am, what I’m looking for, talking about how wonderfully non-destructive my cats are, and addressing a couple of “negative” points on my application (short credit history as I’m not American, hence a score that’s not as good as it should be at my age, and one late payment on my credit history back when I forgot to setup auto payment on my brand new CC).
      * Credit report that I pulled a couple of weeks before (all 3 bureaus)
      * Last 3 paystubs, including the last one of previous year showing YTD income.
      * Copy of my driver’s license and green card
      * Employment letter from HR, dated a couple of weeks.
      * Extract from my bank showing all my rent payments (only) for the duration of my last lease
      * Offer to provide proof of liquidity (I have like 6 months of rent saved) and cats’ medical records.

      With all that, I didn’t even have to pay the application fee and provide my social security number – win.

      Good luck !

      1. Nice job! I love a nice tidy packet of information prepared. And really, all I want is to rent my place out to a tenant who loves the place as much as I do. When I see them smiling, pointing out the nice features, ignoring the less nice features, I just feel happy. But I have to counteract my happiness with minimum documentation and financial hurdles.

        I hope NOBODY ever pays an application fee. I truly believe that is not right. I guess it’s a way for the landlord or property manager to charge for their time, but unless the applicant gets accepted, it seems like a racket.

        1. Nuclear Real Estate

          Disagree on the application fee. I use an online service for application, background check, credit check, the fee associated is simply the cost to run the reports. I dont make anything from it.

          I used to use some free services, but what I’ve found is that people who have bad credit etc will still “throw their hat in the ring” if it is free, and will not proactively bring up the issue. So then I waste a lot of time showing the property to tenants who would ultimetly fail my screening criteria. The fee has served as aexcellent deterant of unqualified tenants. I vary rarely now will spend my time showing the property to a tenant who ends up failing the applications.

          1. Smartest Women on the Internet

            What on-line service do you use? I plan to use Transunion SMartMove when I next advertise for a tenant. I can’t find an on-line service that will give the applicant;s credit score, but TransUnion will give enough credit and credit score information to help make a decision.

  32. Stefan - The Millennial Budget

    My goal is to have a rental property within 5 years of graduation (Need to see if I get my work visa before I make the decision which country) but this list is one that I know I will refer too. It lays out almost everything I need to know for screening tenants to set me up for the best chance of success. I wonder, have you ever had a tenant give you a gift on your birthday? That would be pretty awesome from them and very lucky for you!

  33. My parents rented their duplex to a nice Puerto Rican couple a few years back. After three months or so of on time payments, they stopped sending checks. My mom would call and they would flat out lie and tell her that the money was on the way by a certain date of the month .

    After they stopped taking my mom’s calls, she started looking into eviction . she finally posted a notice on the door and they finally called back and told her how terrible she was for forcing their poor daughter to see that. The process took almost three months.

    We realize now that they were semi-professional tenant fraudsters. They moved to Florida and discovered we have some of the strongest eviction protections on the country thx to senior population here. They moved every six months or so and found places managed by mom and pop couples that didn’t do background checks. They knew how long it would take from the day of first eviction notice posting , so they used a sob story to delay my mom as long as possible to get free rent . that was the hardest situation they’ve had in 20 years of renting that place

    Never trust, always verify.

    1. Jack Catchem

      Couldn’t agree more Moola! From what I’ve seen in the rental field, there is nothing wrong with insisting on the contract and following up on a breach same day. A relationship is one thing, but with a three to six month eviction process, the tenant is actually well protected. I don’t believe the property owner is being a bad person by insisting on their own rights.

    2. Yikes. Sorry to hear about the situation for your parents. Yes, we are easily swayed in the beginning by people who know how to charm and cajole. Never skimp on the documents and financial hurdles. If you lose the prospective tenant, fine. There will be another.

  34. Excellent breakdown!

    For the past 13 years, I’ve always used a property management company. I know that I lose a percentage of my income every month, but I enjoy the separation I have from the tenants. I also think that the PM company would do a better job at screening than I would.

    I might be just hoping or dreaming, but my thinking is that they interview hundreds or thousands or renters for properties and would do a more thorough job and eliminating potential problems tenants. I would probably be a push-over and go “yeah, one felony never hurt anyone!” :-)

    — Jim

    1. I had a few property manager previously. I don’t think they interview much at all. They bet they just look at the paperwork and pick the best one they see out of a pile. I doubt they go into all the details like Sam did. The property managers are very busy too.

      1. Good points, Joe – it’s extremely difficult to find a good property manager. I took for granted just how good my first one was because I didn’t know better. Now that they’re gone, it’s been harder to “train” the new ones to do things the correct way.

        My current one is actually pretty good. We had some stumbling blocks at first, but when they call me to discuss potential tenants, they’re always people that I know they’ve at least met with which is a good sign.

        — Jim

        1. Nobody cares more about your property than you. I know I would be annoyed if I had to pay one month’s rent as a fee for a leasing agent or a property manager b/c I know I will be much more thorough and caring than them!

  35. As a former property manager, it is important to have your criteria written down. You must also hold everyone to the same criteria. Otherwise you are at risk for an equal housing suit and those involve treble damages if you are found at fault.

    Our properties were in much shadier, poorer neighborhoods. We had to be okay with someone with a tiny criminal history, but would not accept any one with a history including fraud or violence against people. It was much harder to find tenants, but we had fewer headaches once they were in.

  36. Wow, I wish I could have shared this guide with my father and aunt before they decided to sell the two-family home they inherited just outside of Boston. Both of them are older and they decided they didn’t want to headache of dealing with tenants. Especially trying to find someone they can trust! Based on everything you’ve outlined I can see how you’ve created your own good luck with tenants. Have you ever considered short-term rentals like Airbnb or VRBO?

    1. I have considered Airbnb and VRBO, but I haven’t gone through. Now that I’m older and no longer have a mortgage for this particular property, I focus on Duration Of Stay, Good Citizenship, and then Money because peace of mind is more important now. Airbnb and VRBO are the exact opposite of Duration of Stay.

      But I do have constant turnover w/ my vacation property in Tahoe.

      1. Kate @ TaxOptimizedInvestment

        I have friends who rented their property on Airbnb told me that the return is a bit higher if you rent on Airbnb compared to having a long term tenant. However, Airbnb is very labor intensive because you have to constantly reply to guest email and request.

  37. “Duration Of Stay, Good Citizenship, and then Money” – yep, our recipe too! And we do have you by over 10 years in age. We have had the tenant from hell (and still find the crack bags occasionally) because we didn’t want to leave a place vacant and didn’t make all the calls we should have. There are laws in our state about them being allowed to move people in though – they can do that and there isn’t much we can do about it. But picking the right folks out up front eliminates a lot of that too. One thing offer is “landlord references” too (about how we have treated former tenants)- to potential renters who we really want!

  38. Apathy Ends

    We had some shady landlords in college, late returning calls, no shows for appointments and when it came time to return the damage deposit we got screwed.

    Our landlord actually blamed is for a pump going out on the diesel heating tank in the basement…..

    I think you made the right choice in your most recent search – the 4,200 would be tough to pass up if you still had the mortgage, but you put yourself in a stress free position.

  39. The Green Swan

    You are very thorough! This is exactly what you need to be successful when renting out a place, but also to put your mind at ease. I’ve never been a landlord, but I will say when dealing with clients at work or even when meeting new people in my personal life I like to check them out on social media. You mentioned LinkedIn, but I also like Facebook for some good background research. I have found that some people are very professional on LinkedIn, but have a wild side on their personal Facebook account. Just something to take into consideration… especially since Fin Sam now has Facebook!

    The Green Swan

  40. Nuclear Real Estate

    Good advice. I’d tack on to document, document, document.

    Going by gut not only increases your risk of being duped into accepting a poor tenant that may damage your property, pay late, etc, it also increases your liability risk of being charged with discriminatory pracitices. By being analytical about things, and documenting your criteria, results from interviews, etc, you are building evidence of your objectivity and bolstering your defense if ever charged.

    HR documents like crazy both when hiring and firing an employee, so too should a landlord document like crazy when accepting or getting rid of a tenant.

  41. Sam, this is great advice. I am currently considering the role that an investment rental property or properties could plan in my financial independence plan and will keep these tips in mind. I particularly like your recommendation of “be nice, but show strength.” It applies to so many aspects of life and business…

  42. Believe Fire

    Congrats on finding new and seemingly good tenants for your condo Sam!

    We’ve never owned any real estate but will definitely reference articles of yours like this one someday when we do.

  43. Millionaire Confidential

    Note: I bring in >1M a year in rental income.

    I purposefully underprice my rentals to draw the greatest number of applicants. I then look for long work history, long tenancy and find out why they are moving. The best reasons have nothing with them wanting to move ie Landlord selling, Landlord moving back in or back in 2008-2012 era, home was being foreclosed.

    A good paying tenant who doesn’t bother you is Extreme Money in the long run.

    1. Now that is impressive! How did you build your $10M+ rental portfolio?

      When you underprice, do you then raise the price to market by telling the prospects demand is high? It’s funny how in finding tenants, the main way to go with pricing is DOWN, which is why I start high and find the market. But when buying property, it’s common culture, at least here in SF to bid UP the price if you want it. I wonder why this is.

      Perhaps it’s OK to bid up because you’re trying to own an asset.

      1. In my area, ~$1mm in rental income would be around ~$13-15 million in rental values, un-levered.

        I assume you ask for first and last month’s rent as well? This has helped me screen out 50% of people if they can’t afford that I know they are pushing their boundaries. Also, how do you typically handle pets? I charge a $300 non-refundable fee but my properties are worth a lot less ($100k-375k). All of my tenants have had pets surprisingly and no major issues so far.

      2. Millionaire Confidential

        By underprice, I purposely list my rental amount below what I believe I am able to get. I don’t try and get the highest rent. By being slightly off the optimal rental price, its amazing what the tenant will do to make sure they don’t lose the rental unit. The small constant discount is worth having the great tenant. There was one tenant who would bug me over the smallest repairs. I mentioned that if he kept bugging me, I would have to raise the rent to market rates. I don’t hear from him anymore.

        As for building my rental portfolio, I started in 2010 when real estate prices reached bottom and bought one home at a time. I just started blogging and will definitely write about my foray into real estate and how it built up my networth so quickly. Cap rates in southern California are in the 4-6% percent, so the real estate portfolio is a tad higher than 10M. Its been an incredible last few years.

        So impressed by what you have done in the financial blogging space. Would love to exchange knowledge. Sent you an email, hoping it will get through the masses/filters and we can share some ideas. I just turned 40 so relatively same age.

        1. It’s crazy how so many people bailed during the crisis and how much opportunity there was to grow wealth right?

          I hope folks can just buy and hold, and also take advantage of opportunity through some calculated risk taking.

          There are so many folks who are angry at landlords, especially here in SF. But what folks don’t realize is how much savings and sacrifice was necessary and risk was taken to jump in and work towards everything hopefully working out.

          There is more wealth out there than people realize. Thx for sharing!

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