How to Avoid Problem Tenants?

by Krantcents · 38 comments

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How to avoid problem tenants? If you ever thought about investing in real estate, renting out your home or a room in your home, you should read this!  Earning money from income property can make you rich or cause you a lot of problems!  So take it seriously!

Details, Details, Details

The best way to avoid  bad tenants is to never rent to them in the first place!  Take your time, do not rush!  Whether you buy an apartment building or rent out your home, condominium or a room in your home, you will have a vacancy at some time.  Every perspective tenant must fill out an application.  A legal application may not include irrelevant information such as age, race, religion, or gender.  Make sure to collect a non refundable fee to check their credit, etc.  Make sure the application is complete and ask questions about any missing items.  Ask for a refundable deposit to hold the space.

Check References

Why ask for a deposit or a fee?  The deposit will indicate how serious the person is about your space and will keep them from going elsewhere.  The fee will reimburse you for your costs to check the perspective tenant out.  How do you check them out?  There are rental property services that are usually available through a landlord organization to check credit, evictions and sex offender registries.  Check their references and past landlords  too.  A current landlord may not be entirely truthful because he/she may wish to get rid of the tenant.  If you can check with former neighbors, it may be worthwhile.

Students are Special

If this seems like a lot of work, think about the three or more months rent lost under eviction.  Unless you live in a college community, you may not want to rent to students.  Students are different and require more management and preparation on the front end.  First and foremost there will be no rental history!  You would want the parents to co-sign the rental agreement and larger deposits are necessary.  Students as a category are not ideal tenants!  They may cause problems in the neighborhood, more wear and tear to the space and require more monitoring.

The advantages of renting to students are you can charge more; the unit does not have to be pristine and location is everything.  All tenants will try to get away with things such as allowing guests to stay too long or adding a roommate or pet not on the lease.  You can catch this behavior by simply visiting the unit with 24 hours notice.  A surprise visit may reveal some of this behavior, but do not expect to be invited in.  This may be tricky; you have to think on your feet to get passed the door.

My Best Trick

You have checked out the perspective tenant with every agency, past landlord and work references.  Now what?  You drop by their home to give them the approval.  Why?  You want to see how they live in their current apartment or home.  If it is a pig pen, a wreck or you just have a gut feeling, you return their check.  If you like what you see and still feel comfortable, you tell them they are approved and work out the details of when they move in.  Why take my advice?  Read “My Journey to Success” and you decide.

Wrap Up

I know it is a lot of work, but believe me this is nothing compared to what you will go through with a problem tenant.  In my experience, you cannot bat 1,000, so expect an occasional problem, but this effort upfront will remove the really bad ones.  Practice makes this process a lot easier and you will develop a feel of who appears to be a problem without doing any investigation.  Investing in Income property can make you rich or drive you nuts!  This advice may help you find better tenants and avoid some of the pitfalls of being a landlord.  Let me know what you think?  How to avoid problem tenants?

Photo by:  Richard

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{ 32 comments }

Money Beagle August 25, 2011 at 2:52 pm

Well you forgot the surefire way and that’s not to invest in rental properties at all :)

I’ve thought about buying some rentals and I’m sure there are opportunities there, but so far the various risks and headaches haven’t made it worth taking the plunge. 

krantcents August 25, 2011 at 3:04 pm

Even if you do not buy rentals, you may rent a room or your home out. If I expand it further, it is a great lesson in problem solving. I will leave it up to you to adapt the information.:)

Tim-Faith & Finance August 26, 2011 at 3:46 am

I’ve heard some horrendous rental stories and most of those probably could have been avoided with your tips.  I think having a high deposit can help to sift out the crazies.  It obviously depends on your setup as well as the demand for your unit, but I’d suggest starting with a high deposit.  If it scares some good prospects away, you can always go down some. 

krantcents August 26, 2011 at 4:00 am

You would think that would cure everything, but it doesn’t when you have to evict. Screening will take out 95% of the crazies and visiting them should catch 99% of what is left.

Untemplater August 25, 2011 at 9:18 pm

So true, definitely worth taking your time, screening, and also listening to your gut.  I’ve dealt with problem tenants before and it sucks majorly.  It creates stress, wastes time, and is just plain awful. 

Jerry August 26, 2011 at 2:57 am

I have a property in the northeast and we rent to students but they’re med students.  Very different situation and we’ve never had a problem.  They’re never there which leads to less wear and tear on the house.  Plus, we just want reliable people there to cover the mortgage, taxes and insurance.  We’re not out to make a fortune.

MoneyCone August 26, 2011 at 1:04 pm

Can’t stress enough: Students are ‘special’!!  Excellent tips KC!

krantcents August 26, 2011 at 2:19 pm

There are a lot of people who specialize in students, particularly near colleges and universities. I just think they should be treated differently. There are more risks and expected wear and tear because they suddenly on their own.

krantcents August 26, 2011 at 2:10 pm

Not all bad tenants end up in eviction, some stay and ruin it for others. That in many ways is worse because good tenants will leave. Managing difficult tenants sometimes becomes a nightmare.

krantcents August 26, 2011 at 2:14 pm

Med students are older and already lived on their own. In addition, they are kept extremely busy with school and have very little time for partying. These students may fill a very limited and special category.

Mango Money August 26, 2011 at 3:51 pm

Another thing you might want to do is establish a pet policy early on and stick to it! I have a dog myself, but honestly, I wouldn’t rent to me with my dog. He’s about 100 pounds, he’s co-dependent, and he has an annoying tendency to scratch the paint off of doors when he is left out of a room for too long. And cats aren’t as harmless as they seem either– my (ex) roommate’s cat was responsible for the loss of many of our blinds. 

Oh, and one more thing to consider: insurance. How much do you cover as a landlord? Do you offer your tenants renters insurance, or let them figure it out on their own? I’ recommend doing some research, finding a good policy, and offering it to your renters. This will start your relationship out right, and then if something does go wrong, they’ll know that they’re covered and don’t need to rely on you to repair a broken into window or something.

I work for Mango Money and we recently posted a little something on renters insurance. You guys might find it helpful! http://www.mangomoney.com/blog/trends/why-you-need-renters-insurance

krantcents August 26, 2011 at 5:49 pm

As a landlord, I only cover the building and my leasehold improvements. If the landlord covered any contents, it would be a major problem. There would always be disputes. My policy was always no pets.

retirebyforty August 26, 2011 at 4:21 pm

We have been extremely lucky so far and have great tenants. Your best tip is really good, I’ll have to use that next time I screen a tenant.

krantcents August 26, 2011 at 5:51 pm

I realize you are “lucky”, but don’t rely on it! Good screening removes the risks and does not rely on luck.

Marie at FamilyMoneyValues August 26, 2011 at 4:35 pm

How would I find a landlords association?

krantcents August 26, 2011 at 5:55 pm

I would look up Apartment Owners Association on Google. In California, there is one for the state and then local ones to cover the major cities or counties.

Ashley @ Money Talks August 26, 2011 at 8:47 am

I was so afriad of getting a bad tenant that I ended up hiring a property management company.  It doesn’t mean I still won’t get a bad tenant but at least I’m not hanging myself out there as a sucker.  Being a new landlord I don’t know the ropes and I felt like I was prime pickings for a “career tenant”.  You know, the kind who has no intention of paying rent.  I figured career tenants don’t want to rent through property management companies since it’s harder to play on the sympathies or game the system when you are dealing with a company rather than a person. 

The tenant they found me seems great.  So far so good. 

krantcents August 26, 2011 at 5:59 pm

There is nothing wrong with your strategy! I had 34 units which made it expensive to use a management company. Besides, I had a resident manager. The resident manager would take the application and do some screening.

Buck Inspire August 26, 2011 at 11:08 pm

Awesome advice as usual.  Like any other investment, put in your due diligence and you should be rewarded.  Cut corners and all you will have is pain.

krantcents August 27, 2011 at 2:17 pm

Income property is like any other business, you need to pay attention to all the details! If you do not, you will be eaten alive.

Darwin's Money August 28, 2011 at 6:39 am

I’m about to do a college real estate deal.  You hit the nail on the head w students “The advantages of renting to students are you can charge more; “.  Sure, they beat the hell out of the place but they don’t care what it looks like, we collect a huge security deposit, it’s joint leasing so we get our money no matter what and the cash flow is really attractive.  I was a student not too far back, I remember how it was.  As long as the house is relatively safe, free of pests, and the utilities work, it’s livable…

krantcents August 28, 2011 at 2:49 pm

The additional cash flow covers covers many of the issues. The increased income gives the property more value too. Try to keep the ratio of boys to girls somewhat equal and the property will last longer.

Sandy - yesiamcheap August 28, 2011 at 11:09 pm

Three words… Screen, screen, screen!

krantcents August 28, 2011 at 11:41 pm

You can not say it enough!

Eric August 30, 2011 at 8:51 pm

I am about to have a very good friend become a roommate/tenant when I buy my new place. Any tips for that situation?

krantcents August 30, 2011 at 9:18 pm

Anything I may say could be negative! Put everything upfront. The more you agree to the better off you will be in the long run. Try to think of every conceivable conflict and try to resolve it ahead of time. You won’t be able to, but you talked it out. Good luck.

Harri Pierce August 31, 2011 at 11:47 am

My boyfriend is the landlord of our house and he has rented out the other rooms to a few of our friends. The key is communication and contracts. Don’t avoid taking deposits or drawing up tenancy agreements just because he’s a friend of yours. I’d also recommend discussing issues up front (mess, untidiness etc) rather than letting them fester.

krantcents August 31, 2011 at 3:11 pm

Agreed! The more you spend upfront to avoid problems later, the better. This is true in terms of screening and understanding of expectations.

Kellen September 11, 2011 at 4:41 pm

If I do own a “rental property” in the near future, it’ll be a house that I live in and rent out a room or two in. If I had someone sign a 6 month lease, going to month to month after that, and I wanted them out after 6 months, how hard is it to get them to leave? I heard it can be hard to get rid of tenants when the landlord wants them out…

krantcents September 11, 2011 at 4:50 pm

I don’t think I would ever have someone ( a stranger) live inside my house. I might consider a duplex or fourplex. In my post, I stress screening the candidate upfront because time is better spent before they move in. Each state has different laws regarding tenancy, but it takes a couple months to get them out. This is one of the reasons, some landlords will just pay the tenant to leave. It is cheaper and less of a headache.

Afford Anything January 4, 2012 at 8:14 pm

I’m big on checking references … that’s important!

krantcents January 4, 2012 at 10:42 pm

Checking referenceis important, but I like visiting them because it reveals how they live.

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