Hey, BiggerPockets. It's Matt. Today, we're going to talk about the biggest money maker
for a rental property and how to make the most money out of a rental. It sounds pretty
silly. Because when you have a rental property, you're in the business providing housing to
your tenants. The question is: how do you attract and keep great tenants? Not good tenants.
Not okay tenants. Not mediocre tenants. Great tenants. That's the first question. Let's
talk about that first before we talk about how to attract and keep them. What is a great
tenant? Let's talk about that.
Here is what I think greatness is for a tenant. A great tenant ... obviously, this is real
simple. But it's not the only one for those of you that thinks it's the only one. They
should pay their rent on time. They should keep the property nice and clean. It should
be clean as well. They should abide by the law, meaning no sketchy dealings, no major
legal problems with them in the property, and everything like that. And they should
also have ... to provide, to carry this rent. I would say they should probably have a fairly
good and upstanding stable source of employment. That's kind of where this comes from. The
last thing is ... and this is more like a general feel, but you'll know when you see
it, is they treat the property like it's home versus a place that they're renting.
I'll give you some examples of people that treat their properties like it's home. If
a tenant asks you if they can repaint the place, let them do it because that makes them
home. There's all kinds of provisions you can put in the lease. You can say, "Yeah,
but you got to paint it back, or let me pick the paint." Whatever it is. But let them put
some of their own accents in the place because there's a higher probability of them staying
in the property for longer. That's the last thing the great tenants are and that they
do is they stay a long time. They stay in the property. They will stay. They'll pay
your rent increases. They'll remain in the property for years, and years, and years and
treat it as if it's home. I've got one tenant that's been in the property for nine years.
We had an apartment complex and we sold it, but the guy was there for 25 years.
Tenants like that will never move. They'll be great. They'll pay the rent on time. There'll
be wonderful. You'll never hear from them. This is what a great tenant is. I would love
to hear other ideas for great tenants you guys might have in the comment section down
below at the end of this video. This is a great tenant if it's defined, and I think
that great tenants like this will keep you profitable and will keep you stable in your
rental property.
Now, how do you find these folks? Let's talk about the conversation. Here's how you attract
great tenants. Now, by no means is this a way to ... what I'm about to say. Is it a
way to just pick out certain people, or to exclude anyone, or whatever it is? But I do
all my marketing from my properties online. Why is that? Well, I don't do ads in the paper
anymore. A lot of people still do that, but I do all my stuff online because if you're
going to find my online ad, you've got to have a certain amount of sophistication. You
got to have a certain amount of your wits about you to be able to know how to look on
... Everybody looks on Craigslist. You might say, "Oh, everybody looks on Craigslist."
Not everybody does look. So, put your stuff online. Consider Trulia, Zillow, all the other
online advertisement spots. Or they have softwares like AppFolio or Rent Manager that will post
your stuff to places like Trulia, and Zillow, and HotPads and all that for you, and you
still got to move it over to Craigslist.
I do all my marketing online. Some of it's paid marketing. Some of it is free marketing,
but I do it online so that I can catch people that are a little more sophisticated, a little
more having their act together. They own a computer, that whole thing, and they're a
little more stable and better propensity to greatness. I promise you there's nothing for
discrimination in there. There's no judgment. There's no nothing. Please don't slam me for
that, but I do all my stuff online because there's a certain caliber of person I'm trying
to attract from my rentals.
The next thing that I do is I ask for tenant referrals. I'll pay for those. We have several
apartment complexes. In those apartment complexes, I will go to my great tenants that meet these
criteria ... especially the law abiding citizen one, right? And I will say, "Hey, if you happen
to have a friend that's looking for a place to rent, and if they apply for the property,
and we accept their application, then they move in, we will pay you a fee." Call it $100,
$150, give him a gift card, whatever you want to do. I ask for referrals because good people
tend to know good people. Does that make sense? I will go to my great people that meet these
things, and I'll say, "Hey, do you know more great people just like you?" I'll ask for
referrals from those folks. That's another one that we'll do.
It doesn't have to be an apartment complex either. It could be down the street. It could
be across town. It could be someone who's happy with you if you are a great landlord,
which is a whole nother conversation we can have in another video ... what constitutes
a great landlord. But if you are a great landlord, they want to get you in touch with other great
people that they have to get them a great place to live that they're happy with. The
next thing that we do to ensure that we have great tenants is ...
Now, maybe just goes without saying to some of you folks. But there's other you folks
that are guilty of what I'm about to say is we screen the tenants. Now, some of you folks
watching or some other landlords out there ... but not any you guys, when a tenant pays
an application fee, you think that that's a bonus for you. You get to just put that
application fee in your pocket, and that's your lunch money for the week. No, that application
fee should actually pay for a credit report that you should go and pay for, and go and
do a credit history, a criminal background check, and a landlord eviction report. So,
you verify that these people are actually as great as they say they are, and they are
paying their rent, and they are good upstanding citizens, and have reasonable jobs, and that
they are law abiding citizens, and all of these types of things. Make sure that they
meet some or all of your criteria when you screen them.
Now, if you're going to screen tenants ... and I recommend that you guys do this. This is
a bit of an aside, but a good conversation is that this is a repeatable process. Your
terms for your screening are documented, meaning that you've got it written somewhere on ... Our
terms of exception are that you have to make X amount of dollars, X times the rent in earned
income. And that we want to see a credit score of X. Whatever it is. Keep that in writing
somewhere just in case you get challenged if you decline someone. But keep this in writing.
Because you all screen your tenants, of course, but put that in writing and keep it somewhere
safe in case you get challenged. Okay? Okay.
Other ways to attract great tenants, you could do signage, you could do referrals like I
said. You could offer a move-in specials. You can do all kinds ... A lot of people do
Facebook ads these days. You could consider all kinds of other marketing efforts to reach
out to people. But I would do the majority of those paid marketing efforts here online.
Facebook ads ... Online newspaper ads are actually a lot cheaper than print newspaper
ads, but consider that too.
SO, you've got your great tenant. You've screened them. They're in. You loved them. They meet
all your criteria for everything, and they are showing they're a great tenant. Okay,
here's the problem. How do you keep them? Because just as much as you've got a great
property, there's other landlords out there. And maybe their friends are coming to them
with a referral saying, "Hey, great tenet. My landlord, Johnny, over here wants you to
come and move in with them." How do you stop them from moving out? Because the biggest
thing that'll cause your property to go upside down or will cause a loss in your property
is vacancy. Vacancy and below market rent.
Some people say, "Oh, expenses and stuff like that." You're right. Expenses are a major
part of cashflow for a rental property, but there's no expense I can think of that'll
suck out 8% to 10% of your annual revenue in one blink. Maybe real estate taxes if you're
in New Jersey, but you want to keep good tenants so you can minimize vacancy. We would all
agree on that.
Here are a few ways that you can keep your good tenants. Again, it goes to that saying.
A lot of this seems obvious, but common sense is not common practice. So, the maintenance
response time. If you've got a tenant that's had a leaky sink for the last month, and they
keep asking you about it, and they keep bringing it up, and they got just some problem they've
learned to deal with ... It's just been a problem for a while, and they get a phone
call from one of their great tenant friends that says, "Hey, I'm going to get a referral
if you come and move in with me." You better believe they'll take it because it's like,
"Hey, you know what? I'm sick of dealing with the stained carpet that I keep asking my guy
to replace, or for the light that hasn't worked since I moved in here."
Whatever it is, take care of their maintenance requests. Even if it's kind of a minor thing.
You don't have to take care of it the next day, but take care of it inside of a week
or a month, even if it's something. But communicate with the tenants on when you're going to take
care of these things, and don't make them sit and wait around for just a simple request.
It's a major thing, be [inaudible 00:09:41] on the spot and take care of it.
Consider if you guys have more than, say, 20, 30 units consider having a 24 hour answering
service for your tenants. Because it'll make them feel like they're well taken care of.
Like they're safe. That if something happens on a Saturday night at two in the morning,
God forbid, that you will respond and have an emergency call number that they can get
ahold of somebody. Most landlords don't have that. There's services out there you can get
for not much money that will take care of your maintenance request for you.
The next thing you can do to keep your great tenants is to do preventative maintenance.
That's different than responding to, "Hey, my toilet doesn't flush," or, "My sink is
leaking," or, "My light doesn't work." Whatever. Okay. Preventative maintenance. And if you
guys are not managing yourself, if you're remote managing or managing a property manager,
make sure they do this.
Preventative maintenance is just every, say, six to nine months ... whatever it is, you're
going to walk through the property and just making sure things are safe and secure. You're
not trying to find reasons to ding the tenants for fees, or to come after him for little
stupid stuff that they did to the property. You just want to make sure it's safe by your
standards. Make sure it's in good condition. We do this, and our tenants are always grateful
for the walkthrough. By the way, it's a good way to get into the property if you've got
a tenant that's never calling you for anything. It's a good reason to get in, and just do
a quick inspection to make sure the place is in reasonable shape and they're not in
there trashing it.
The last thing that we do, and some people will scoff at me for this, and landlords don't
believe in it ... but I do giveaways. I would give stuff to my tenants. Every year and again,
I will give them a thank you for being a great tenant. We do a drawing once every quarter,
and we give the winner of that drawing a gift card. The only thing you got to do to be in
the drawing is pay your rent on time for those three months. If the tenants pay their rent
on time, their name goes into a drawing, we draw a name out, they get to get a gift card.
If they pay their rent on time for an entire year, we draw a name out of that pool, and
we give them a flat screen TV. One name. One person.
The cost that we have to do that versus the goodwill that we have with our tenants, and
the excitement that it creates ... We have tenants to call us to make sure that their
rent is in. They say, "Did you guys get my rent on time? Because I want to make sure
that I get in that drawing." Think about that. How many of your tenants are calling you to
make sure that they pay on time, just to make sure? So, do giveaways.
I call this something that's a bit intangible, but it's called tenant happiness. I try and
make sure my tenants are happy. And if they're not, what can I do? Some people in life just
you're never going to make happy with anything, but I try and do my best to at least make
things a little better for them. Just consider giveaways, consider other things to create
tenant happiness. Now, you don't have to go give away the farm for this, but find ways
that in your budget, you can create tenant happiness. That's a big one.
Again, to sum it all up, you want great tenants and you want great tenants to stay in your
properties and renew their leases so that you keep them long-term in your properties.
Because that was the best way, I think, to maintain an increased cashflow over time.
Here are the ways to do it. Definitions of great tenants. Ways that you attract them.
Consider doing online, and referrals, and keep the property in good condition, and do
what you can to keep them happy.
I've said a lot of my personal opinion in this video, so I'd love to have you guys give
me your opinion, especially if you disagree with me. I love that. I love it when people
disagree with me, because it's a good conversation. If you disagree, great. If you agree, great.
If you've learned something from this video, please write a comment. I'd love to hear from
you. As always, always, always I appreciate you guys watching the video. As I always say,
please have a great profitable week.