Guidelines for Potential Renters in a Competitive Rental Landscape

Navigating the Rental Market: Insights from a Landlord’s Perspective

Having been a landlord since 2005, I strongly believe in fostering positive relationships with my tenants. I treat my tenants as valued customers, striving to provide them with the best possible living experience. This article offers valuable advice for prospective tenants in a competitive rental market.

For landlords seeking exceptional tenants, this article also offers insights to help you make informed decisions. The quality of tenants significantly impacts both peace of mind and the pursuit of reliable passive income.

This article is divided into two sections:

1. A real-life encounter with a prospective tenant and its unfolding. This interaction offers valuable lessons for both renters and landlords on effective lease negotiations. Drawing from my experience since attending business school, I find that using real-world case studies is the most effective method of teaching and learning.
2. Tips for securing the rental property you desire in a competitive market. These tips are derived from my extensive experience as a landlord of over 15 years and the insights gained from my recent tenant search.

The Rental Property Under Consideration

After purchasing a larger home and completing renovations, the time had come to move in and rent out my previous residence. I’ve undergone this process of purchasing, improving, and renting multiple times. It’s an effective way to enhance quality of life, wealth, and passive income.

Rather than renting out the entire house, I opted to lease only the upstairs section. This area encompasses two bedrooms, a bathroom, a kitchen, and stunning views of the Pacific Ocean. The total upstairs space is approximately 1,370 square feet.

The downstairs area comprises a bedroom, bathroom, and office across roughly 600 square feet. Additionally, there’s a 300 square foot deck overlooking the ocean.

I intended to utilize this space for the new Financial Samurai office and as accommodations for friends and family visiting. It could also serve as a suitable quarantine space in case any of us fell ill.

Seeking the Ideal Tenant

Listing a rental property for free is straightforward on Craigslist. I estimated the rent to fall between $4,000 – $4,300 per month, although I wasn’t entirely certain until I tested the market.

To provide context, over five weeks, I attempted to offer subsidized housing to two preschool teachers at $2,000 – $2,400 per month, without success. While a disappointing outcome, it turned out for the best, as one of the preschool teachers eventually resigned and relocated.

Initially, I listed the rent at $4,300 per month and received no inquiries. Lowering it to $4,200 per month generated some interest, and further reducing it to $4,100 per month resulted in significant demand. I had identified a price point that aligned well with the market.

Interest from a Prospective Tenant Family

I focused on a couple with a seven-month-old baby who were living in a one-bedroom apartment and seeking more space. Given that my wife and I had raised our child from infancy to 2.8 years in the same house, I believed this couple might be an ideal fit.

Upon receiving their application, I was surprised by their financial details. The mother earned $130,000 annually in marketing, while the father, a dentist, earned $170,000 annually.

I couldn’t help but wonder why a couple with a combined income of $300,000 per year was renting a small, one-bedroom apartment. Could their frugality have been influenced by reading my article on the income needed for a middle-class lifestyle?

While I suspected they might have read the article, I didn’t inquire further. If I were in their position, I would have sought a larger space before the arrival of the baby. Nevertheless, their financial capacity exceeded the rent of $4,100 per month, representing only 16.4% of their combined monthly income.

Despite my initial enthusiasm, some concerns began to arise.

Advice for Prospective Tenants in a Competitive Market

1. Punctuality and respect: When visiting a property, arrive on time and demonstrate respect for the landlord’s time. It’s a red flag if one party is late or doesn’t respect the agreed-upon schedule.
2. Boundaries: Respect the landlord’s boundaries and avoid requesting to view areas not included in the rental. Such requests can indicate potential issues in respecting privacy.
3. Communication: Clearly communicate your expectations, needs, and concerns. Avoid assuming that certain amenities will be readily available without discussing them.
4. Financial readiness: Arrive prepared with all necessary documentation, including pay stubs, credit reports, proof of employment, and a resume. This showcases your organizational skills and readiness to take on the property.
5. Positive demeanor: Smile, engage in small talk, and show enthusiasm during property visits. Landlords prefer tenants who exhibit positivity and enthusiasm.
6. Long-term plans: If possible, discuss your plans for residing in the property over the long term. Landlords value stability and seek tenants who plan to stay for an extended period.
7. Financial stability: Demonstrate that you have a monthly gross income that comfortably exceeds the monthly rent. Landlords want tenants who can afford the rent without straining their budget.
8. Savings: Show that you have sufficient liquid savings to cover unexpected expenses or rental payments. This demonstrates financial responsibility and stability.
9. Open house timing: Attend open houses during non-peak times to have more meaningful interactions with the landlord. Avoid arriving at the very beginning or end of the open house.
10. Professionalism: Avoid making jokes about money during negotiations. Maintain professionalism and showcase your financial capability.
11. Follow-up: Send a follow-up email after visiting a property to express your interest and reiterate why you are a suitable tenant.
12. Respectful behavior: Avoid being annoying or demanding. A courteous and considerate attitude goes a long way in forming a positive landlord-tenant relationship.
13. Renters insurance: Discuss your willingness to obtain renters insurance, which demonstrates responsibility and concern for property protection.

Building a Strong Relationship

A successful landlord-tenant relationship is essential for both parties’ satisfaction. A good landlord provides timely assistance and maintains the property, while a reliable tenant pays rent on time and cares for the property. Building and maintaining such a relationship is crucial for a harmonious living experience.

In my case, I eventually signed with another set of prospective tenants after declining the initial couple. So far, things have been progressing well, and I’m optimistic about the future.

As individuals mature and accumulate wealth, the appeal of being a landlord may diminish. Hiring a property manager might become more attractive, although managing property managers also presents its challenges. Ultimately, fostering a positive relationship with tenants is a valuable asset, and I’m willing to make concessions to ensure a positive experience.