How To Avoid Bad Tenants Who Could (Potentially) Destroy Your Property

By Subodh / June 14, 2013

When you purchase investment properties, most of the time you’re looking for an investment that can bring in residual income. For many property owners, investment property is not purchased to be flipped. Instead, it’s rented out so that they can use the rent to pay the mortgage. One of the few downsides to renting and receiving that residual income stream is potentially picking tenants who are careless with the property, and end up damaging the property.

As a landlord, one of your most important steps with opening a home or building to renters is to take care in screening your potential tenants. Otherwise, you could end up with tenants who end up destroying the property you worked so hard to acquire. To protect yourself and your property, there are a few things you should consider doing. These include:

Bad-Tenants

  • Verify Employment & Income – All landlords need to verify a potential renter’s income. You need to make sure they have the ability to pay the rent on the property. Look for an applicant who has a reliable and steady monthly income, that is at least three times the rent. In addition to verifying employment by phone, ask for paycheck stubs for at least two months. When verifying employment, research the employer’s telephone numbers yourself instead of relying on what the tenant gives you. This way, you know you are actually speaking to the employer and not a friend or family member. If you notice that a potential tenant bounces from one company to another, you want to make sure that paying rent in full won’t be a problem.
  • Contact Previous Landlords – You want to verify with the potential renter’s current landlord as to whether they were a good tenant or not. Ask questions like: Did they pay their rent on time? Were there ever any problems from them? Did they do any damage to the property? Also ask what condition they typically keep the property in (and how they left it, if they have moved out). By asking a few basic questions, you can get more insight on who you may be renting to, and if possible verify through public records that the landlord name and phone number given by the applicant are truly the landlord’s. Lastly, take the current landlord’s word with a grain of salt – the fastest way for a landlord to be rid of a problem tenant is to help them move elsewhere.
  • Perform a Credit Check – Although a poor credit rating doesn’t mean that a tenant won’t pay the rent, it may help to know their history of making payments on time or at all. Usually there is a fee to process a credit check application that the potential tenant would have to pay (often this is collected as an application fee by the landlord).
  • Document the Condition of Your Property – While this may seem like common sense, you want to document every aspect of your property. From the larger aspects to the smallest ones. This way you can account for any damage that was already there and any new damage that is caused by your tenant. For example, if there was a deep scratch in the door, you will know this was not caused by your tenant. It’s easy to forget over time exactly what damages were there beforehand, especially if you have a tenant who rents from you for a few years. That’s why documenting everything is important, with a Move-In/Move-Out Walkthrough Checklist. The same form should be used when they move out, performing a move-out walkthrough together.
  • Secure Against Damage with a Deposit – Most often, landlords will ask for one month or even two months’ worth of rent as security deposit. That’s because if the property gets damaged, the repairs can be taken from the security deposit instead of directly out of the landlord’s pocket. Security deposit is dependent on the building or home owner and can sometimes be paid in monthly payments if it’s a high amount.
  • Routine Inspections – Once you have a renter, perform routine inspections. Many landlords shy away from this out of laziness or because they feel that it may be an invasion of their renter’s space and privacy, when in reality it is not. You should always give them a few days’ notice, depending on the law in your area.

As a landlord, your property is an investment in your future. Taking these necessary steps in order to ensure that your property remains in good condition is important. An investment in good tenants is precisely what makes the rental property a solid investment in your future.