Finding and choosing tenants is the most critical decision any landlord makes, and to do it well you need a reliable system. Savvy landlords follow specific steps to maximize their chances of selecting tenants who will pay their rent on time, keep their rentals in good condition, and not cause any legal or practical problems later.
Your first step is to define all of the terms of the rental so that you can properly advertise the space.
Before you advertise your property for rent, make a number of basic decisions -- including how much rent to charge, whether to offer a fixed-term lease or a month-to-month tenancy, how many tenants can occupy the rental unit, how big a security deposit to require, and whether you'll allow pets. Making these important decisions should dovetail with creating your lease or rental agreement.
Amount of rent. There's only one rent you should charge for any rental -- the market rent, or slightly below. No matter what your carrying costs are for this property, or the return you'd like to see, you won't see any return unless you have a tenant. Tenants know the market and you'll simply waste time with an unoccupied unit if you set an above-market rent.
Lease or month to month? Decide whether you want a fixed-term lease (typically for a year), or a month-to-month rental agreement. If the market is soft, you may want the assurance of knowing your tenants will be tied in for a year. On the other hand, if you want the ability to raise the rent (with the right amount of notice, of course), you may want a month-to-month agreement.
How many tenants? Decide how many people may occupy your rental, taking into consideration the physical layout, such as the number of bedrooms. As a general rule of thumb, allow two persons per bedroom, but in some states, you may need to allow one more tenant.
The security deposit. Most landlords will require a deposit, which covers damage beyond normal wear and tear and any unpaid rent. Many states limit the amount you can collect, setting limits based on the monthly rent -- twice the monthly rent is common.
Pets. If you wish, you may prohibit pets, but not if the animal is a service or comfort animal needed by a disabled person. However, many landlords have found that allowing pets gives them a competitive edge in a tight market -- and pet owners may be extra conscientious when they know that there are limited rentals that will take them with their pets.
Write out the basic details you've decided on, including:
To stay out of legal hot water when you advertise, describe the rental unit accurately. Your ad should be easy to understand and scrupulously honest. And try to avoid abbreviations and real estate jargon.
Next you'll need to place the advertisement. For help, see Where Landlords Can Advertise Their Rental Property.
For detailed information that can help you find the right tenant for your rental property, get Every Landlord's Guide to Finding Great Tenants, by Janet Portman (Nolo).