If there is one thing that a rental owner wants to avoid it is bad tenants. Leaking toilets? Broken furnace? These are easy to fix compared to the pain and cost of a bad tenant.
As a manager and owner, avoiding bad tenants means never letting them move into a property. There is another side of this issue though and it involves the tenant who becomes a bad tenant. Those situations are the ones that are more challenging. Creating structure so a tenant does not become a bad tenant is crucial.
Avoiding Bad Tenants
Start first with avoiding the bad tenant from ever becoming your tenant.
- Pre-qualify potential applicants if an owner does not want smokers or cat owners, why would we waste everybody's time showing a home to a person who is one or both?
- Application Fees need to be enough that people who believe they are good-to-great tenants apply. It should not be the price of a Starbucks. Avoidance also means not wasting time on reviewing details of applicants that would never be selected.
- Screening is your best line of defense. Simple credit screening is rarely enough. It tells a part of the story but just a part. There are people who maintain great credit scores but have a tangled housing history. Screenings need to include not only credit, but also employment, criminal checks, and previous housing verification and evictions.
Preventing Good Tenants from Becoming Bad Tenants
Now that you have what appears to be a good tenant, how do you avoid them becoming a bad tenant?
- Security deposits need to be enough money that the tenant respects the hurt if they lose those funds. Make it clear that a security deposit is NOT the last month rent and if treated as so the tenant will be reported in the future as a bad tenant.
- A detailed lease that addresses many issues that occur with tenants. It is the most important control document. Your lease becomes crucial if you ever need a legal path for a resolution with the tenant. Simple may be good when it comes to kitchen organization, but it is horrible when it comes to leases!
- Negotiate with a bad tenant to leave. This can be cheaper and better for your property. Work out a deal that includes a final inspection and the home being left in good condition within a limited time frame. In return the bad tenant's credit will not record an eviction. Never promise to misrepresent the tenant's history on future verification! There are many other chips you can throw down to cleanly end the relationship.
- Hire a good attorney and evict. Move on. This is not avoidance but a lesson learned.
Unfortunately, bad tenants happen. If you own a rental you know that renting a home is not risk-free. Take all steps to move the risk to the lowest threshold by avoiding bad tenants.