How to Find Good Tenants for Your House Hack (Rent by the Room)

you've heard everyone on Bigger Pockets say it a thousand times house hacking is the best way to get involved in real estate if you're looking for a lowrisk and high reward way to invest but the biggest hurdle when investing in real estate and house hacking has to be finding good tenants that's right you're going to have roommates and you're going to have to manage them my name is Danielle and I am the senior account manager here at Bigger Pockets and I'm aerial house hacker so how can you make sure you end up with super stars and not squatters stay tuned to find out so I've been investing in real estate for about a year and a half and I've been living for free since September of 2022 I currently own two properties here in the Denver metro one in Arvada and one in North Glenn both houses are worth over half a million dollar anywhere from that $500,000 range to $575,000 out of both of those houses I have 10 rooms to fill so 10 different leases 10 different tenants and both houses are anywhere from 5 to six bedrooms my first deal back in September of 2022 is in Northland Colorado it's a five-bedroom two bath house and the purchase price was $494,000 I got a $5,000 seller credit so the actual price for me was $489 but we tacked that on to reduce that interest rate which I bought down to 5.1% the down payment was 3% or $15,000 on top of closing costs which were roughly $9,300 so all in I was at about $24,000 to close on the property the mortgage is around $3,100 and the utilities usually around $400 I also got solar to help reduce those expenses but that's a story for a different day overall I actually cash flow on this property anywhere from $500 to $1,000 depending on seasonality and how much I can get for rent as well as the changes in utilities my second property is narvada Colorado and it's super similar to my first property it is a six-bedroom two bath house and I rent out most of the rooms I do keep one open just to have a little bit of a luxury house hack interest rate on that one was 6.6% and the down payment was 5% on this property since it was my second property I was no longer able to put down that 3% closing costs were roughly $8,000 on top of that $228,000 down payment so Allin I was about $355,000 to purchase the property utilities are also around $400 a month on this property and current earnings are negative $500 rough but the way I think about this is between both properties I'm still having the ability to cash flow $500 and that's on top of living for free so you might be asking yourself what should I be looking for in a good tenant there's a couple things that I've found that I used to qualify good tenants that's a 600 credit score or higher I can be lenient sometimes there's students who like to do rent by the room I'm super lenient if they have a guarantor or they have an explanation but overall I like to stick with that 600 credit score I like to look for no past evictions and no criminal history and I like to ask people up front because I don't want any surprises when it comes to looking at the application and the background check I also look for only one person per room you would be surprised how many couples want to live in a house hack I unfortunately don't allow couples because squeezing seven people compared to six in one house is a little bit much for me I also look for cleanliness and responsibility and honestly you can find that out just by asking questions get in a phone call with a tenant before actually having them come view your property another thing I look for is positive feedback from references this is super important and underestimated I call every single reference just to make sure people have positive things to say whether it's past employers past co-workers or past roommates I like to hear that this tenant is someone that I feel comfortable living with based on those references the last thing I look for in a good tenant is 6 to 12 month leases I have done three it's possible but I like to look for that 6 to 12 month range in a house hack because the turnover if you have two properties or more is going to be high you could potentially be looking for a tenant every other month which we do not want all right so we've talked about what to look for in good tenants but how about where do I find tenants it totally Depends for me I've had a ton of success with Facebook Marketplace and when I say a ton I mean I found about 90% of my tenants from Facebook Marketplace I've also utilized roomies which is another platform for finding tenants it works but I hope you're good at sales because I feel like there's a lot more prospecting to roomies where you have to actually reach out to the tenants and basically kind of sell yourself in your property so that one's worked for me a little bit but not as good as Facebook Marketplace also Zillow now allows rent by the room rentals it did not when I started my house hacking Journey so I personally have not used Zillow and or hot pads but it is an option if you were looking for some more channels for you to post your listing another underestimated way to find a good tenant is social media I post a Snapchat Instagram and Facebook I put it on my stories and I actually have gotten a couple leads from that as well from friends of friends who just happen to know people who need a room the last but not least an Absolut Ely the most underestimated way to find a tenant is through word of mouth when I bought my first property back in September of 2022 I told every single person that I knew that I was buying a house and that I was looking for people to rent the rooms and lo and behold I found two tenants from my gym and not from knowing them I literally told a friend at the gym and he happened to know two girls who were moving from Fort Collins and just happened to need a room for rent so don't underestimate Word of Mouth in addition to finding the tenants what are some more green flags that I look for in tenants I look for complete profiles if you're looking on Facebook Marketplace the reason I say this is the last thing I want is someone to reach out who has no profile picture who has one friend and who has never posted on Facebook I'm trying to be safe I live in the property as well I want to make sure that these are tenants that I can kind of trust so I definitely look for a full profile another one is I look for on Facebook Marketplace when someone is reaching out to me something more than them commenting or messaging me and saying is this listing available the the listing is available the listing is active you responded to my listing so yes it is available so I definitely like someone saying a little bit more than that giving me a little bit more of a personal touch and that makes me more likely to respond another ten of green flag is responsiveness and good communication and again this is still talking about Facebook Marketplace for the most part but I definitely look for someone who responds in a timely manner and who's a good communicator those are telling signs that a tenant is going to be a good fit if they can communicate right off the bat last but not least is that they're willing to hop on a call before viewing a property I've gotten way too many messages of people saying hi when can I come see the property again this goes back to safety I like to be safe I like to feel like I'm not just reaching out to random people on the internet I definitely want to have a call with someone first just to make sure they are who they say they are so that's a green flag to me resolving conflict because conflict will happen there's a few ways that I would like to resolve conflict and number one is just setting expectations upfront tell people what are some potential issues that you've had in the past or what are your expectations with dishes how long should they stay in the sink what are expectations with laundry when should someone move their laundry from the dryer to the washer so it's not sitting there for a week straight those are just some examples but set expectations right up front and I think you'll be able to avoid a lot of issues I like to reach out to tenants directly via phone not text text is for small maintenance issues or small problems that arise with the house if it's an actual issue definitely hop on a phone call with them or even in person if you can last but not least I would say it's to set up a house meeting with all the tenants once you get everyone there you can assume that you have five to six different personalities living Under One Roof so I highly recommend having a house meeting and just talking about expectations and talking about what you want and need out of a living situation so that we don't have one person who randomly parties every night and shows up with five friends at 5:00 a.m. on a Tuesday right maybe setting that expectation up front with your tenants about who works and when could be a smart move so as far as an eviction when does it become an eviction I can only give you hearsay and I can give you potential examples here I have thank goodness not dealt with an eviction though I have dealt with three cancellations that's a story for another day as far as evictions I would say any form of violence any form of not paying rent harassing other tenants or even violating the lease in some way or another would basically be valid for me to consider evicting someone as far as vacancy everyone has heard I'm sure at one point or another if you did a Google search or watched another video that 10% is the standard vacancy rate I personally don't go by an exact percentage of my income to be able to put that away for savings vacancy I just focus on saving period I put every single dollar away that I possibly can out of every single paycheck and every time I get any sort of additional rental income or cash flow I put it away so I'm just a huge saver I don't focus on the number I just focus on literally saving everything I can so now you guys know my tips on managing and finding tenants when you're first starting out if you're looking to manage your own tenants and your own property check out BiggerPockets new book the self-managing landlord at biggerpockets.com managing book also please make sure to like And subscribe to this channel thanks so much for watching guys catch you soon [Music] [Music]

Channel: Real Estate Rookie

Views: 1,874

Keywords: how to find good tenants, how to find tenants, house hack, house hacking, best way to find tenants, how to find tenants for rental property, how to find a tenant, find renters, how to find renters, finding tenants, what is house hacking, how to house hack, rent by the room, real estate investing, investing, landlord, property management, real estate investor, landlording, renting out rooms, how to be a landlord, tenant screening, biggerpockets, real estate rookie, danielle daly

Id: mSEgaTTt0ik

Length: 9min 24sec (564 seconds)

Published: Thu May 02 2024