As a New Orleans multi-family homeowner, the potential benefits of renting out space in your house is enormous, but how do you determine that the tenant you approve is the right fit? Follow our suggestions to help you make your decision.
How the Tenant Screening Process Works
Most homebuyers don’t set out to be landlords, but if you purchase a multi-family property in New Orleans, this can open up some great possibilities. Sharing your home with a tenant can be a creative way to generate income, obtain better financing options, and enjoy some relief at tax time.
When choosing potential tenants, keep in mind that under the terms of the federal Fair Housing Act and the Louisiana Fair Housing Opportunity Act, it is illegal to discriminate against people on the basis of race, religion, national origin, familial status, mental or physical disability, or sex. You are allowed to select tenants using valid business reasons, such as income and references, as long as these standards apply to all potential tenants.
What Is Tenant Screening?
Tenant screening — analyzing a would-be tenant’s background more fully than what can be gleaned from a rental application — can help you judge what kind of a tenant they might be, although there is no sure way to make this determination.
The initial conversation you have with a potential tenant is your first screening opportunity. The types of questions they ask and how they respond to yours can be a very good indication of the kind of renter they might be. This conversation will not only alert you to potential problems but also let applicants know that you only rent to responsible people.
What Makes for a Great Tenant?
While there are no guarantees regarding who will make a good tenant, there are several qualities that can help you determine the type of tenant they might turn out to be. These include:
- Do they meet your minimum requirements? You’ll need to come up with a list of minimum requirements for your property and explain it clearly to potential tenants so that those who don’t qualify can be eliminated. Some reasonable standards could include favorable references from past landlords, no evictions, clean background, good credit, and sufficient income.
- Will they pay the rent promptly? Most tenants who consistently pay their rent late will eventually stop paying it altogether. To avoid the headaches associated with eviction, lost income, and other damages, make sure your potential tenant has a solid history of paying their rent on time.
- Can they afford your property? Many people believe that they can afford more than they actually can, but most landlords require that a tenant earn at least three times as much as the monthly rent, so you will need to verify their income before you agree to rent to them.
- How stable is their employment? Job situation directly affects your tenant’s ability to pay rent, so if your potential tenant changes jobs frequently or has had long periods of unemployment, he or she could be prone to late or missed rental payments.
- Are they involved in illegal activities? Tenants who engage in criminal activities will likely cause you nothing but trouble and stress, so steer clear of someone with a history of crime, drug use, or other illegal actions.
- Do they have pets? There are many benefits of allowing renters with pets including having access to a larger applicant pool, reducing tenant turnover, and charging higher
- How much drama might this person create? Some tenants (and people in general) are extremely high maintenance and a constant drain on your time and other resources. Unless you are having a hard time finding someone to rent your home, avoid people who seem to have a flair for the dramatic.
Learn more about the benefits of investing in an owner-occupied multi-family home in New Orleans, including easier property management. At Satsuma Realtors, we can help you balance the advantages of becoming a landlord against any concerns you may have, and help you find the best options our city has to offer. Contact us to discuss your real estate investment goals.