Source your tenants carefully and treat them well, and they will help ensure your success.
When I look back at my first rental property purchase more than 10 years ago, I am amazed at my good fortune.
There were plenty of times, as a part-time real estate investor with a full-time career outside of real estate, I tried to talk myself out of that first purchase. And there were others who also tried to talk me out of it.
Obviously, I didn’t listen.
We made that purchase, and we still hold that property today. We have been purchasing rental properties ever since and have yet to sell a single one. Here I am, more than 10 years later, with a very profitable rental house portfolio.
I remember one thing in particular I worried about: “How in the world are you going to get a good tenant?”
We read and hear all the horror stories about certain tenants and what they do to properties: damages, leaving in the middle of the night, abusing the properties, not paying rent. “How in the world are you, a first-time, part-time real estate investor ever going to know how to find a great tenant?”
Finding Good Tenants is Not Hard
I speak from my personal experience, and I am here to tell you it can be done. It is done every day throughout the United States with real estate investors big and small. It’s not that hard if you do the right things.
That first rental property that we bought over 10 years ago is still a wonderful property for us. Believe it or not, we have had three sets of tenants in that property in that time, and the third is still there today.
In the two cases where tenants vacated the property, they were very positive exits. They completed their lease obligations.
The first was the perfect scenario. The tenants lived with us for several years, saved their money and ultimately went off to buy their own home. The second situation was not as fortunate; they went through some marital difficulties and exited the property. But it wasn’t because of the property that they left. It was because of other reasons.
The third set of tenants is there today, and they continually tell us they are never leaving, which is fine with us.
The point is not to brag but to share the key tactics that can also help you source—and keep—good-quality tenants.
The Power of the Yard Sign
That yard sign is incredibly powerful and incredibly cheap. It’s no more than the cost of running to your local home improvement store, purchasing that red-and-white sign, writing your phone number on it with a black marker and sticking it in the ground.
It’s about as cheap a form of advertising as you can get. And we’ve found it to be incredibly successful. We sourced the first two tenants for that first rental property of ours off the yard sign. And we’ve never used that yard sign again on that property.
The point is that you shouldn’t get overwhelmed and think that, “Gosh, in order to source tenants, I have to go through extraordinary efforts and significant investment in newspaper ads or online ads.” Those are all valid and effective, but don’t let them scare you from what it actually takes to staff a property with a good-quality tenant. It can be as simple as the yard sign.
The Power of the Neighbors
Our third tenant was actually the neighbor who lived two doors down from that first rental property.
As we have purchased properties, updated them, put tenants in them and then continued to manage and maintain them successfully, the word gets out.
It travels up and down the street over the course of time as people talk. A lot of the times when you buy rental property, it’s going to be in a rental market or a rental street or a rental block where there are multiple landlords.
Tenants will talk, obviously, as they are out in the front yard or at the mailbox or at a social gathering.
And word quickly travels as to who is happy with their landlord and who is not. If your tenants speak poorly of you, it’s going to be very difficult to find an occupant for that rental the next time it goes vacant.
Those tenants will talk to other potential tenants, and word travels fast that, “Hey, you might want to avoid that particular property due to the landlord.”
For us, the opposite was true, and we were able to leverage and take advantage of our good reputation. Our tenants talked among the other tenants around that particular property, and they talked positively. We took care of our tenants. We took care of the property, and we took care of the yard. We did the proper maintenance. We were responsive, we were ethical, and we were fair.
By the time the second tenants moved out due to that divorce situation, the neighbors two doors down were calling us before they even vacated saying, “Hey, we’ve been on this street for over 10 years in this current rental, and we would now like to relocate into yours. We heard it’s coming available, and we’re ready.”
The Power of Your Reputation Among Existing Tenants
Today we rarely advertise a property when it goes vacant. All we do is circulate among our existing tenants that we have a property coming available. We don’t need to do the yard sign any more. We simply send out an email or text describing the property we have, where it is, what it rents for and when it is becoming available.
We have seen over time our existing tenants are our best source for new tenants. They even approach us, unsolicited, almost on a regular basis saying, “Hey, if you have anything available or when you do, let us know, because I have a friend who is looking for a property and would like to occupy” one of our properties.
So the yard sign was working great when we were new. The neighbors worked great for tenants and sources as we started to build our portfolio. And now that we are established, our existing tenants are our No. 1 source for our new tenants.
This doesn’t mean you have to develop personal relationships with your tenants. Actually, I am suggesting the opposite. Just be deliberate, professional, unwavering and committed to your business principles. The way to create productive and effective business relationships with your tenants is to treat them fairly and ethically and be responsive and professional.
Make Customer Service A Priority
Because we take care of our existing tenants, they stick around. And in the event we do have an opening, they are quick to find us a new tenant to fill it.
There is a great point often missed, especially by part-time investors or landlords who are not yet fully vested in their business. They can become lackadaisical and ignore a critical component of your real estate investment business. And that is customer service. You are no different from the owner of the local parlor around the corner or the local dry cleaner or the local oil change facility.
Your reputation as a landlord, just like the reputation of any of those small business owners, is critical to getting new customers and maintaining customers—or tenants, in our case.
Don’t underestimate your role as a new or part-time real estate investor and how important your reputation is when it comes to occupying and successfully sourcing great tenants.
After all, these are your customers, and they are a key to your success.
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