You cannot avoid coming across less qualified tenants if you are a property manager or landlord in the San Fernando Valley. This thing happens every day. However, how you handle them matters a lot. You need experience when dealing with such tenants.
As one of the leading property management company in Los Angeles, we usually come across this type of tenants. When this happens, it is either we keep on looking or find a way to work with such applications. Of course, it is not every time that you should send less qualified tenants away. There are such tenants who have been able to pay their rent on time and have gone on to become a quality tenant.
You may classify a tenant who has not met your financial requirements a “less qualified tenant” but the truth is that such a tenant is still viable and may make a good tenant. You can use your wisdom and experience as a landlord or property manager to work with such a tenant. When considering less qualified tenants, you can check if they are responsive, available, and teachable. If they have these 3 qualities, you may be able to work with such a tenant. In this case, you should find a way to work with such a tenant.
Working with such a tenant means finding a way to transfer the bulk of the risk to the tenant. You should transfer the risk to the less qualified tenant or to a third-pray. This is very necessary in case something goes bad so it won’t affect your business.
In this article, you will learn about common steps you can take to ensure you can work with a less qualified tenant without much risk.
How To Work With Less Qualified Tenants
- Set Up an Auto-Deduct System
This is a system that allows you to receive the rent automatically from the tenant’s checking account at a specified date. You can work with a tenant to set up an auto-deduct system, this way, you ensure that you will receive your rent immediately the tenant gets his salary.
- Charge Higher Security Deposit
Depending on your state, you may be limited as to how much of a security you can charge. However, when you are working with a less qualified tenant, it is important that you collect a security deposit that is equal to two to three month’s worth of rent. While you charge other tenants just one month, you can go ahead and charge a less qualified tenant 2-3 months extra. This is to ensure you can cover your rent in case the tenant abandons the lease.
- Demand a Lump Sum Payment
If you can get a tenant to make all his rent payment up front, that would be awesome. When a tenant is less qualified, one way to ensure you minimize the risk and have a peace of mind is to ask the tenant to make some upfront payments. If you can get the tenant to pay all his rents upfront, he will automatically become financially qualified. This is an easy solution when you are working with short-term lease applicants. However, before embarking on this route, make sure that your state does not’ have a limit on the amount of “prepaid rent” you can collect.
- Ask the Tenant To Get a Co-Signer
For your own peace of mind and in the order to minimize the risk involved with working with less qualified tenants, you may ask the affected tenant to get a co-signer. A co-signer is someone that agrees to pay the rent in case the tenant defaults on his rent payment.
You can always hold the co-signer responsible for the rent when your main tenant is unable to pay his rent. You should ensure that the total income of both the co-signer and the applications is above your income requirement of 2-3x the monthly rent.
- Ask the Tenant To Keep on Searching
If you determine that the risk is too much and you won’t be able to work with such a tenant, it is absolutely Ok to send such a tenant away. Make sure you give a valid business reason when you deny a tenant that is less qualified. Before denying a tenant, make sure you are fair and consistent with your evaluation.
Working with less qualified tenants may be your only option when you really need to rent out your rental property fast. If you are not sure how it works, you can always make use of top Los Angeles Property Management Company.