The Art of Finding Ideal Tenants: Why It Matters More Than You Think

Real estate investing isn’t just about picking the right property or securing the best financing. One of the most critical elements to long-term success is finding the right tenants, and a lot of investors often overlook this step when considering an investment. At the end of the day, the tenants that live in your property can be the single most important decision impacting your cash flow, operational headaches, and overall investment performance.

The High Stakes of Tenant Selection

Your rental property is a business, and your tenants are essentially your customers. But unlike other businesses, once you’ve selected a customer (tenant), you’re locked into a legally binding relationship for months or even years. A poor decision here can wreak havoc on your bottom line.

Bad tenants can:
- Miss rent payments or pay late

- Consume your time with constant nuisance
- Cause excessive wear and tear or damage
- Violate lease terms, causing neighbor complaints or legal issues
- Increase turnover rates, leading to increased maintenance costs

Tenant Turnover: The Hidden Profit Killer

Tenant turnover is one of the largest expenses in real estate. Every time a unit turns over, you deal with:

- Lost rent during vacancy
- Make-ready repairs and cleaning
- Leasing commissions or advertising costs
- Time spent screening and onboarding a new tenant

- And if the tenants are really bad, a complete unit renovation

According to industry data, the average apartment turnover can cost anywhere from $1,500 to $4,000 depending on the unit and market. This is why retaining quality tenants should always be a top priority. In single family homes this number is easily 2-3x bigger per turnover. Do you understand now why tenant selection is so important. If you do the math, a 40 unit building filled with bad tenants can easily be $80k per year vs as low as $25k per year with quality tenants. $65k a year at a 7 Cap is also $900k in value, wow!

What Makes a “Good Tenant”?

A good tenant isn’t just someone who pays rent on time (although that’s crucial). Ideal tenants:
- Follow the lease terms and respect the property and the other tenants
- Communicate issues early and work with you
- Stay long-term, reducing turnover and vacancy
- Create a stable environment for other tenants, maintenance workers, and neighbors

At Legion Properties, we employ a thorough screening process that includes background checks, credit checks, rental history reports, income verification, and personal interviews when necessary. These critical steps and should never be skipped by any landlord or property manager

Your Screening Process is Your Filter

This is not an area to cut corners. A robust screening process may take more time upfront, but it saves countless hours and dollars down the line. Think of it as a filter that protects your investment. Create criteria, stick to it, and don’t make leasing decisions with emotions, save those for your personal decisions.

Retention Starts Day One: The Move-In Process

A smooth move-in process sets the tone for the entire lease. Ensure the property is clean, everything functions, and the tenant feels welcomed and respected. Remember, you never get a second chance to make that first impression. A great start builds trust and can significantly reduce turnover rates, especially if you can avoid the need for any repairs / maintenance in the first month. If you don’t have a thorough pre-move in checklist, take this as your que to go make one… yesterday!

The Bottom Line

The right tenants make your life easier and your investment perform better. The wrong tenants? They create stress, expenses, and hog your time. Don’t underestimate this part of the real estate game. Whether you self-manage or hire help, tenant quality is everything.

And remember, if you're looking for help finding and keeping the best tenants, Legion Properties is here to help. Based in the Twin Cities, we specialize in property management services tailored to investors like you. Let us help protect your investment and grow your portfolio the smart way.