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# Picking the right tenant is the key
- URL: https://www.smdp.com/picking-the-right-tenant-is-the-key/
- Published: 2006-09-13T15:00:00.000Z
- Updated: 2026-10-25T01:00:30.000Z
- Author: Guest Author
- Tags: Opinion, Santa Monica, #archive-import

*Days on the market*

*By JODI SUMMERS*

Last week we discussed the tangibles of building your rental empire. This week, it’s all about the intangibles — tenants and repairs.

An excellent suggestion on how to deal with tenants comes from Mike Butler, author of “Landlording on Auto Pilot.” Butler suggests that the property owner never tells the tenant they are the landlord. Instead, refer to yourself as the “property manager.” It’s nice to have a black hat when it comes to property management. Instead of taking responsibility, you can say, “I’m just the property manager so I will have to check with the owner.” That gives you time to think and to pass the buck if the answer is ‘no.’”

Picking tenants may ultimately be the most important real estate decision you make. A bad tenant can make you lose all interest in landlording. There are many ways and suggestions for selecting tenants. Some go with the wisdom of experience. Older people tend to be easier tenants than college students, but whatever filters you put in place for finding your tenants, be advised of fair housing laws. According to “Barron’s Real Estate Handbook,” the Federal Fair Housing Law is “a federal law that forbids discrimination on the basis of race, color, sex, religion, handicap, familial status or national origin in the selling or renting of homes and apartments.”

Melanie and Gore own two small apartment buildings in the mid-cities area. They require potential tenants to provide Social Security numbers, ostensibly for criminal and credit background checks. She also believes in checking references with employers and prior landlords. “It’s more about renters proving that they have nothing to hide,” Melanie offers.

If prospects pass those tests, she and her husband always meet them in person.

“I need to get a vibe off of them,” she explains.

Another tenant tidbit — when checking references, don’t stop with the most recent landlord. Contact the second or third most recent landlords as well.

“The current landlord may just want the tenant out of the property,” said Jose, a local real estate investor. Marcia suggests making an unannounced visit to the prospect’s current residence. “Explain that your house is important to you, and that you want to get a sense for how they live.”

“Your tenants are your employees” is the novel approach Butler uses to manage his residents. Butler admits most of his tenant applicants have less-than-ideal credit reports, but as a retired cop, he has rented to ex-convicts who became some of his best tenants after he leveled with them that he knew their history but was willing to take a chance on them.

If you’re hurting for tenants, another option is to sign up with the Section 8 federal government rent subsidy program, which helps low-income renters afford decent housing. Usually Section 8 tenants pay 30 percent of their income for rent and the government pays the balance. There are city-by-city maximum rents.

“My best all-star 13-year tenant was on Section 8 subsidy. And my worst tenant, who only paid $10 per month rent (when she felt like paying), was on Section 8\. I’ve had other Section 8 tenants who were neither very good nor very bad,” offers noted real estate columnist Bob Bruss.

The concept of Section 8 is great, particular if you’re dealing with senior citizens. The downside is there is extensive paperwork for both tenant and landlord, and it’s hard to check a tenant’s credit. For more information go to www.hacla.org/section8/home.htm.

“My biggest complaint is the annual inspections by a local housing authority inspector,” notes Bruss about Section 8 tenants. “Some inspectors are very nice. Others are the meanest people you will ever meet.

“My best advice is, unless you have trouble filling your vacancies with good quality tenants, avoid the hassles of Section 8 tenants,” Bruss said. “Most Section 8 tenants are extremely appreciative, but dealing with the local housing authority bureaucrats can be very frustrating. HAVE A BUDGET FOR PROBLEMS Just when you think your buildings are running smoothly, inevitably something happens. Your best tenants up and leave on a month’s notice and minor leaks grow into expensive repair jobs. That’s why it’s so important to know what you’re buying and to have a budget for repairs. Experts suggest putting 15 to 25 percent of the annual rental income aside for maintenance, but you can never be sure.

Renee owns several rental properties around town. Recently, she bought a run-down duplex in Westchester. Her repair budget got blown through the roof.

“The last tenant had turned on the water on purpose and flooded the whole place,” she recalls.“The floor, ceiling and walls were all messed up.”

Once you own a lot of units, you might decide to hire a management company to tend to your property empire. On average, fees run 5 to 10 percent of rental income. Experienced landlords say it’s not worth it to be frugal with management companies. Good property managers often work harder to fill vacancies and to maximize rent when they make more money.

Butler’s property management style involves an annual Christmas party for his independent contractor suppliers, such as electrician, plumber, maintenance people, handy-men, roofer, tree trimmer and other vendors. His annual holiday party, which features dinner and an open bar, costs less than $1,000, but when his properties need fast service his vendors usually put him at the top of the list.

For information on Southern California investment properties there is a great Web site at www.SoCalInvestmentRealEstate.com. (Jodi Summers is director of the investment division at Boardwalk Realty. For your real estate needs, , or call (310) 309-4219, or visit her Web site at www.santamonicalandmarks.com.)

*Originally published in the Santa Monica Daily Press print edition on September 13, 2006.* [Read the original PDF.](https://s3.us-east-1.amazonaws.com/smdp%5Fbackissues/091306.pdf?ref=smdp.com)