You’ve had your open house for that available lease rental property and you’ve gotten 3 or 4 good applications from people interested in leasing that property. Now, how do you choose the right tenant for your property?
Know What Kind of Tenants You are Attracting
One thing to understand with lease purchases in real estate investment is that you are dealing with potential lessees who can’t quite get into a home mortgage. Many will have bad credit, lost jobs or even lost a house in the past. So, you’ll want to look out for people who have just turned a corner financially. They’ll have a good rental period for say the last 6 months. They have a regular job and even though they may have bad credit, you’ll be able to see that they are taking care of the important things like student loan payments and car payments.
It’s okay if they’ve had problems making mortgage payments in the past as long as it’s far enough in the past that you can see the potential lessee is making an effort to improve their financial position.
Are They Going to Buy?
You may also wish to inquire with each applicant to see how certain they feel about purchasing the property eventually. In leasing property, you can just lease out the property until it falls apart if that’s what the tenant wants to do, but every lease agreement includes the option for the tenant to buy the property whenever they wish. So, if you have a potential tenant who really wants to own the property they are leasing from you, you’ll have a higher chance of selling that property for a nice profit in a few years.
The Gut Check
Another thing to keep in mind is the simple gut feeling. You may just have a good feeling about a certain candidate for the lease property. This person may not have as good a looking application as the next potential lessee, but you feel fairly certain that he or she will work harder to make sure payments are consistent and on time with the property. Ask yourself if you want to risk the time and effort involved in working with each applicant for the lease rental. A good old-fashioned gut check works wonders when deciding between two equally good candidates.