But not all tenants are truly equal. Assuming they are, can quietly destroy your returns.
Tyler Barry, Acquisition Analyst at Marketplace Homes, put it into perspective in a way most investors overlook:
“It should come as no surprise that resident quality impacts investment returns. Some of those impacts are obvious, while some are often overlooked.
We all understand the impact of a resident who is unable to make their rent payment. Delinquency costs from lost rent and eviction expenses add up quickly, along with unit turn costs and vacancy during re‑renting. This lost income and added expense can easily wipe out an entire year of net operating income on a wholly owned property. When you have mortgage obligations to meet, the impact is even more severe.
But a resident being good for your ROI does not just boil down to whether they pay their rent on time.
If a resident stays for five years and takes care of the property, the investor saves thousands in leasing fees, thousands in vacancy, and thousands in turn costs. Add all of this up and the impact of having a good resident versus a great resident is just as significant as the difference between a good resident and a non‑paying resident.
Next time your resident requests that you let them paint the walls a different color, think a little less about the cost of repainting when they move out and think a little more about the impact of having a resident who feels a sense of pride and ownership over the place where they live. The best‑performing properties are not just filled. They are occupied by residents who treat them like home.”
➡️That last point is where the real shift happens.
A “good tenant” isn’t just someone who pays rent. It’s someone who:
- Stays longer (reducing vacancy and turnover costs)
- Maintains the home (protecting the asset itself)
- Creates predictability in your cash flow
Because in reality, your ROI isn’t just driven by rent, your ROI is driven by consistency and cost control.
📌 This is something Mike Tamulevich, Chief Operating Officer at Marketplace Homes, has also emphasized. In a Forbes Real Estate Council article titled “15 Things To Consider Before Closing A Real Estate Transaction,” published on April 26, 2018, he noted:
“The investor should scrutinize the current tenant with as much diligence as the property itself.”
And that’s the disconnect.
A property can look great on paper, but if the tenant brings risk, turnover, or instability, the projected return starts to erode almost immediately.
🔥 The Bottom Line
A “tenant in place” should never be the reason you feel confident in a deal.
The quality of that tenant (e.g. their payment history, longevity, and how they treat the home) is what actually determines whether your returns hold up over time.
The best investments aren’t just occupied.
They’re well-occupied.
💙What due diligence steps matter most to you when closing a real estate transaction?