Tenants are a hard group to judge. There are too many variables to create a rigid scoring system. What if these people owned their own home for 25 years? They likely won’t have a previous landlord to use as a reference. What if this couple just got divorced and that’s why she’s moving out after only 6 months? How do you factor that in to your scoring system? You can’t.
How do I rank and judge tenants then? I place them on my Tenant Suitability Scale. The Tenant Suitability Scale is a subjective scale that uses your basic understanding of people and tenants to grade what quality tenant you expect them to be. Just remember there are more tenants in the middle of the scale than the outer edges.
I divide tenants into the following categories:
Perfect Tenants – These are the ideal tenants. You will never worry about them paying rent. You also know that there won’t be any damage to your unit – there’s a good chance they may even upgrade the unit for you. When they move out after 20 years there may be a new backsplash installed, or new carpets or drapes. You could develop a friendship with them over time. You want to do everything to get and keep these tenants because they make being a landlord and real estate investor exceedingly easy.
Excellent Tenants – You should be ecstatic when you find an Excellent Tenant. You know their rent will be there the first of the month. They will call about maintenance before it becomes a bigger problem, and they may just fix the little things they know how to do. Every interaction with them is pleasant and friendly. You enjoy getting calls from these tenants, and look forward to seeing them. When they move out, the apartment will be spotless and in the same condition as when they moved in.
Average Tenants – These will be most of the tenants you deal with throughout your career. You are confident their rent money will be there on the first of the month, but there is a chance they might be late. When they move out, the apartment is probably clean, but there is a bit more damage than you would like. You may or may not remember these tenants years later. Average tenants can be further subdivided into Above Average and Below Average tenants. The Above Average Tenants are almost Excellent Tenants, but something is holding them back. The Below Average tenants can make you feel like they are almost Unpleasant Tenants, but maybe they have a better payment history.
Unpleasant Tenants – You know you won’t get rent money from them on the first, you just hope that it will be on the third and not the tenth. Their apartment is a mess, and you’re certain that it will still be a mess when they move out. You consider yourself lucky if you only have to spend one day cleaning out the unit. They perceive any issue as a major catastrophe that is always someone else’s fault. They tend to take up way more time and headspace than necessary. Any time they call, your first reaction is, “Ugh. Not them.” They haven’t done anything that you can evict them over, but the thought of them moving out brings a sense of relief. They may annoy other tenants, but no one is going to move out because of them.
Note: A tenant may pay their rent on time, but is categorized as Unpleasant because they display a lot of other negative behaviours.
Awful Tenants – These people are business killers. These are the tenants that make you feel like selling everything and getting out of the business. They are horrendous to deal with. They have rented so many apartments that they know every loophole in standard lease agreements, and take advantage of them all. You are absolutely shocked and relieved when their rent cheques clear. You dread what the apartment will actually look like once you get them out. You hope it only costs you hundreds of dollars, not thousands, to repair and restore the unit. Other tenants will move out because of these people. You must do everything to avoid them, and once you find you have rented to an Awful Tenant you need to get them out of your apartment as quick as possible and minimize you damage.
This is how I’ve always grouped tenants. I will rent to Perfect, Excellent, Above-Average and Average Tenants. I’d like to avoid Below-Average tenants, but should always run from Unpleasant and Awful tenants.
What do you think? Do you have any other ways to describe the different categories of tenants? Let me know in the comments.