When we buy properties with the intention of renting them out in the future, we want them to last. Whether or not you want to eventually live in that property yourself again, it’s important that you have it on hand as needed. Part of ensuring the long-term preservation of your rental property is being careful about who you rent to. In fact, a lot of landlords have an ideal tenant in mind. While it may be tempting to rent to whoever comes along first, it’s smarter for you to take a targeted approach to selecting tenants.
Not only does this approach protect your property; it also can benefit your wallet in the long term. Lots of people only rent to older adults, for example, because those people will be more likely to not only be responsible with a property but with their jobs as well. Other people like the idea of renting to young people because they have properties in areas where those people make up a significant portion of the market.
No demographic represents a perfect tenant. You may figure that senior citizens will have the reliability of social security and retirement benefits to live off of, but some are less responsible than others and have a hard time making rent. With that being said, we’re going to look into each of the different typical demographics for tenants and cover some pros and cons of renting to each one. While you may not always be able to rent to your ideal tenants, having an idea of who you want to rent to can make the process much simpler in the long term.
1. Families
A lot of landlords rent out their homes to families. In fact, if you are attempting to rent out a single-family home in general, it can be difficult for you to do so without renting to a family. It’s difficult for singles to justify the cost of renting a single family home unless they are splitting it with roommates. But that is an issue that we will delve into further below. There are many advantages to renting to a family. In most cases today, families with two-parent households will have two incomes, which means that you can depend on these households to make rent. Additionally, parents are often highly motivated to ensure that their rent is paid on time. Even if a household is a single parent household, in most cases another parent will be financially involved if minor children live in the household. Kids will typically spend 277 days out of the year with their custodial parent, with the other parent often paying child support to help cover rent and other living expenses to ensure that the child is well cared for.
Of course, children can certainly add some wear and tear to a home. If you have certain expectations regarding damage to the home that you’re renting out, you should cover that with your tenants both in their rental contract and in pre-rental discussions. Additionally, you should consider this before buying a rental property to begin with. Naturally, if your target audience is made up of families, there will likely be more wear and tear to deal with. With 90% of all real estate transactions happening through the MLS, you’ll have a lot of properties to choose from in your area. If you don’t want to target families as tenants, you probably shouldn’t buy a single family home.
2. Singles
There are a lot of advantages to renting out to singles. As previously mentioned, singles will usually rent out smaller homes, often living in apartments or small two- to three-bedroom houses. When working with single tenants, you’ll most often want to target working professionals, though many singles are also students. While students may have to balance their classes with work, they can still be reliable tenants. Many students do work full time, and some grad school students, in particular, receive stipends that can help them make rent. Singles typically are not as tough on rental properties as families with children can be.
What you do need to consider when renting to singles is that they often do split larger properties with roommates, which means that you’ll need to work with several different tenants. Additionally, singles may be more likely to break leases early, as they navigate life, move in with partners, and require larger spaces.
3. Senior Citizens
There are lots of benefits to renting to senior citizens as opposed to younger singles or families. Senior citizens typically are known for being responsible tenants. They may not work as consistently as they once did in most cases, but they can rely upon social security benefits and, if they were forward-thinking, their retirement savings. Additionally, senior citizens typically are not going to move from place to place very often, which means that they are often more likely to stick with the same homes for the long term.
The issues that can come up with senior citizens is that, as previously mentioned, they often aren’t working. This means that some seniors can run into cash flow issues. Generally, however, they are very money-conscious and stick to their budgets because they are on a fixed income. You’ll often see senior citizens be more actively responsible in regards to issues like energy usage. The Department of Energy reports that over half of the average home’s energy is used for heating and cooling, while 18% is used to heat water, and 6% is used for lighting. Seniors are often able to keep their energy bills down by being aware of this issue. Life experience can go a long way towards ensuring that you are a more responsible tenant.
These are just a few broad demographics to which you can rent. There are many more types of people that you can rent to beyond them, but you should begin with broad categories before narrowing down your target demographic. Nobody is a perfect tenant. But some may work better for you than others.
