Minnesota Real Estate Blog

MN investment property

In today's entry, we wanted to continue along the same "vein" as our last entry on Wednesday this week. In that entry, we blogged on what "groups" of tenants rent out the various single family homes here in Minnesota. Today, we wanted to expand a little more on probably the biggest fear every investor goes through on their first property: "How can I purchase a nice property and get it rented? What if this property sits vacant?" In addition, we wanted to discuss how to screen tenants.

Believe me. I know the fears and anxieties that are going through your mind. I too had those fears when I started investing in real estate in 2001. As a team, we do not want any of our clients to purchase something that sits vacant for one month or longer. With that being said, every investor client our team has have ever worked with has rented the property within one month of closing. That's about 250 people the last few years alone. Every agent on our team works directly with the client to make sure the property gets rented.

Here are some things we have found to work. First of all, in the actual purchase agreement that we write up, you will have the ability to "show" the home to prospective tenants up to the day of closing. Let's say you get an offer accepted on August 1st, and you are closing the end of August: we will be able to show the home to prospective tenants the entire month of August. Then we can get it rented for August 1st, and your first mortgage payment is not due until September 1st! One month of rent coming in and no mortgage payment always is a happy day for any investor!

Here are three great sources we have found to get properties rented out:

1. Get your property on the internet! There are a number of effective sites where you can advertise. The internet will prove to be a great lead source, and an excellent way to find qualified candidates to rent your home.

2. Put out a "for rent" yard sign out. This too will generate a great amount of leads for you.

3. Get the property in the newspaper on Sundays. Depending upon your location, pick either of the "big" newspapers here in Minneapolis and St Paul.

Between these three sources, we have found clients will most assuredly get interest in their property.

Now that there is interest in your rental property however, how do you know if someone will be a good tenant? As a landlord, the four main items you want to check on the tenant's application are: rental history, work history, whether the tenant can give you money to hold the property, and whether they have an Unlawful Detainer. Let's discuss all four.

1. Rental history - Call their current landlord and also their previous landlord. You will probably have to fax over a one page sheet called the "Tenant Sheet to Current Landlord" along with the authorization form (our team can provide you both of these documents.) Have the landlord fill out the form and fax it back to you. We are creatures of habit. If someone has been a bad tenant before, they probably are going to continue. However, if their rental history is good, they are probably going to continue to be good tenants.

2. Work history - Again, check on their work status. Are they working right now? Talk to their boss; find out if they are reliable employees.

3. "Show me the Money!" - Ask the tenant how much they can give you to hold the property. They need to give you some money before they move in, at least one month's rent. This will really separate the good from the bad. The good tenants will be able to give you at least one month's rent to hold it. Get a cashier's check. I have however rented to someone if they could not give me the full deposit. For example, say the rent was $1500 a month, and deposit the same at $1500. I will rent to someone as long as I get $1500 for first month's rent to hold the property, and then I tell the tenant they can pay me the deposit over a 3-5 month period after they're in the house. They need to get you the money ASAP though. You snooze you lose. The only way you can hold the property for them is if they get you at least one month's rent.

4. Unlawful Detainer - An unlawful detainer is the cardinal sin a tenant can commit. If a prospective tenant has one, I wouldn't rent to them. A "UD" (as they are called), is when a tenant has not paid their rent, and they have been evicted. The landlord goes to the courthouse and files the UD onto their record. I personally would stay away from the tenant if they have a UD.

If you have interest in learning more about investment property here in the Twin Cities and our team's monthly free seminars, go to http://www.investmentpropertyguys.com/.

posted by Ryan O'Neill at Permanent Link