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I own a four family building which I am actively renting.

Every time I go to rent it I raise the rent slightly and I check the comparables in the area to make sure I am still not pricing myself out of the market.

I ALWAYS get a ton of people that are willing to rent the unit and I end up having to pick one.

Is there a graceful way of doing this?

I tend to just pick the one I think is going to be best but honestly they're usually all fine.

Can I just start a bidding war? Is this a bad practice? How do you get people into a bidding war?

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I don't know how many people "a ton" is, but if you are getting more than, say, 6 people who are qualified to rent, you've priced it too low. Better to ask for $1200, and have a potential tenant haggle or ask you to reduce the price than to have 6 people want it for $900. It's worth it to run a credit report, and let that help you choose. I agree with Victor, a bidding war is appropriate for a house sale, not rental apartments.

You didn't mention your country, but I'd be sure to find out the local laws regarding tenant choice. You may not (depending where you are) discriminate based on gender, sexual orientation, marital status, race, or religion.

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    +1 Yeah 2000lbs doesn't translate well into people, unless we're going with weight, and then a ton is approximately 10.3 people. – Question3CPO Jan 27 '14 at 15:55
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    No that is what I meant. 10 full sized people and a little person want to rent my apartment. – Anthony Russell Jan 28 '14 at 17:47
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I wouldn't start a bidding war if I were you. Sometimes you may get potentially bad tenants who cannot find a property anywhere else offering more money just to get in a place. If you know nothing else about these people how can you guarantee they will keep paying the rent once they get in.

The things you should be doing is checking the prospective tenant's employment and income status, making sure they are able to easily pay the rent. You should check their credit report to see if they have a history of bad debts. And you should be checking with their previous landlords or real estate agents to see if they caused any damages to their previous properties.

You should create a form that prospective tenants can fill out providing you with all the essential information you are after. Get them so sign a statement that gives you authority to ask information about them with other people (their previous landlords/ real estate agents, and their employers).

Have a system set out on how you will assess all applicants and for the information the applicants need to provide you with. Treat it as a business.

  • I do all of the above. That isn't the problem. I know how to identify the best candidates. The problem is what happens when I have 3 best candidates. Is there a common method people use to identify who wants it most. – Anthony Russell Jan 27 '14 at 2:27
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    When I screen tenants, I request a credit score and ask for income information. These numbers are so specific, that if you are down to a 'final three,' you can pick the one with the highest score and income. Those are not likely to be identical. – JoeTaxpayer Jan 27 '14 at 10:56
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    We actually visit the prospective tenant's current residence to check how clean they are and how well they look after the place. If they are reluctant for us to come over it is an indication that they are not very clean. All the tenants we ended up choosing had no problem with us checking out their current place. – Victor Jan 27 '14 at 20:26
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    @AMR - that would be up to you, we wouldn't rent to someone like you then, partly because of your attitude. It is an investment and I treat it like a business with as little emotions as possible. This is part of our risk management to make sure we get the right tenant that will look after our investment. All of our better tenants have had no problem with us visiting their place. The one or two timse we have deviated from this policy (mainly due to the prospective tenant coming from interstate or far away) we have ended up having problems with the tenants. So the policy works. – Victor Jan 28 '14 at 20:01
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I'm surprised by all these complicated answers. Yes @Victor, you can create a form that asks people to put down their financial information but you want to be careful and not put off potential tenants by asking for too many details. Depending on the OP's typical tenants, an extensive background and credit check may not be necessary. For example, if I have proof that someone is a graduate student at the local university, that's usually good enough for me because I am willing to bet that they will follow my contract.

Bidding war doesn't sound doable, you advertise a price correct? You can only be haggled down not up.

So my suggestion is to look at other rental advertisements in the area. Compare what you're offering (location, quality of house, cleanliness, amenities, etc) to the competition and price accordingly. If you're getting a flood of interest, then you're probably pricing below the average price in your area. Or you live in an area where demand is just much higher than supply, in which case you can also raise your rent.

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    +1 I agree, simpler is better. Somehow, OP gets many applications while asking for what he believes is a comparable rent. This is what creates the complexity. It would be pretty unusual to get a great number of people at $X, but zero at $X+50. So the discussion starts. He's likely missing some reason his building carries a premium. – JoeTaxpayer Jan 28 '14 at 12:37
  • Well I know the area is a prime spot but the problem arises that I only have street parking and there is an eye sore next door while all my comparables in the area do not have either of these problems. I am asking the same amount they are. I think renters are just ill informed on what the true value is. That said, the next unit that opens up I will raise the rent... again... for the 3rd time... – Anthony Russell Jan 28 '14 at 14:39
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    @AMR - it's a good problem to have. Figure out your fair price, list it $100 higher. As others stated, you can always lower it or let tenant negotiate. But when 10.3 people respond immediately, you've 'left money on the table.' – JoeTaxpayer Jan 28 '14 at 16:33
  • Lesson learned I suppose. Thank you for everyones input – Anthony Russell Jan 28 '14 at 16:38
  • "...if I have proof that someone is a graduate student at the local university, that's usually good enough for me because I am willing to bet that they will follow my contract." That is absurd - just because they are a uni student you will hand over your asset to them without doing any checks. That is not keeping it simple, that is being reckless! You will lose your bet one day and end up getting burnt badly if you treat your assets like this. You know absolutely nothing about these people, except that they attend university. – Victor Aug 1 '14 at 1:09

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