Sometimes, the best intentions can get in the way of maximizing profits in your rental business. Precision property management can get things back on track.
Here are three common — but not so obvious — landlord mistakes along with suggestions on how you can fine-tune your rental management policies and keep your business running smoothly for years to come:
Giving Tenants (Too Much) Space
A tenant’s privacy is sacred. That means no illegal inquiries during tenant screening, no unannounced visits unless it’s an emergency, and protecting a tenant’s sensitive information. But many landlords take it too far, by virtually ignoring tenants unless there is a problem.
That’s like only paying attention to your children when they are acting out. Good behavior goes unrewarded, and soon they learn that bad behavior is the only way to get what they want.
The same is true of your best tenants. If you leave them unattended for too long, they won’t want to stay around. They might even start to act out, because that’s what they need to do to get your attention.
Good tenants want to be acknowledged — and praised — for their efforts. The occasional “Good job!” for habitually on-time rent and proper care of the rental property will go a long way towards retaining your best assets, and attracting more of the same.
Screening Tenant Credit (Only!)
Good credit is a strong indication of a rental applicant will make a good tenant, someone who will take the lease agreement and his or her financial responsibility seriously. The prospective renter with good credit is less likely to want to spoil it with a landlord dispute.
Someone with good credit also is less likely to have an eviction history or criminal background. But the credit report alone can’t guarantee that. Likewise, the credit report won’t expose tenants who have been disruptive or overly demanding.
Always runs a tenant credit report as part of a multiple-step tenant screening policy:
- Prequalify tenants on the phone first in order to eliminate obvious time-wasters.
- Demand a completed rental application to find out if the prospect appears suitable, and if the need arises later, to track them down. Look for qualifications and inconsistencies, like gaps in the rental history where the tenant may have moved prior to the end of a previous lease.
- A full tenant background check includes a credit report, eviction report and criminal background check.
- Talk with the current and previous landlords to make sure it all adds up.
Cutting Maintenance Costs (to the Bare Bone)
Reducing costs keeps profits high, but there is a limit.
Undercutting salaries of maintenance workers, for instance, seeking out those who will work for peanuts, leads to shoddy performance if for no other reason than lack of morale. Postponing needed updates or repairs — until you’ve squeezed every inch of life from fixtures and appliances — will in turn, suffocate tenant retention, tenant referrals, and the overall reputation of the rental property.
Let’s say the washing machine in a rental complex is failing. The vendor would have fixed it routinely for a fee, but the landlord waived that benefit. One day, the current tenant, a young mother, calls to complain that her wet clothes have been held hostage in the rinse cycle for over an hour. The landlord explains over the phone that it’s the vendor’s responsibility but he’ll bring it up next time they talk. Meanwhile, he suggests that the tenant jockey with the plug because that’s worked in the past, although that will require putting her money in again. Alternatively, she can carry her wet clothes to a nearby laundromat.
While at the laundromat, with the tenant’s cranky kids in tow, she uses her phone to scan neighoring apartment ads. When the time comes, she gives notice that she won’t be renewing. She’s told all of her friends about the maintenance issue, so no one steps up to take the vacancy. What’s more, new prospects will read about the incident on the Internet, and think to themselves, “I’ll pass.”
As a result, the property may sit vacant where before it was producing. Now, less-then-desirable tenants will vie for their chance to get into a place where the management is lax. And that’s the best case scenario.
Many times, a tenant has the right to claim a rent abatement when promised amenities are out of service or repairs are too slow. Worst case, a tenant may have the right to break the lease.
When considering maintenance expenditures, including salaries for maintenance workers, always look at the big picture. More income will be lost by attracting the wrong tenants then by spending more to service or replace appliances and general upkeep. Think about what matters most to tenants.
This issue is also important to consider when thinking about purchasing a rental property investment. Low maintenance history and projections might signal ongoing neglect. You could be inheriting that buggy washing machine — or tenants who’d just as soon live somewhere else.
This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).
Click Here to Receive Landlord Credit Reports.
Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.