Rental property owners are smart investors. They enjoy short-term income while the value of the property grows over time.
There are a few hazards that pop up along the way, so take stock. Fortunately, these risks are easy to avoid:
Bad Tenants Spell Income Loss
Most landlords understand the correlation between good tenants and profitability. Yet, many still the make the mistake of cutting corners with tenant screening.
It may be helpful to consider that it is not the amount of time spent vetting tenants that matters, but rather the particular steps taken. With a little experience and the right procedures, screening tenants boils down to a matter of minutes, compared to months spent trying to evict the wrong tenant.
It’s also important to keep in mind that the rental applicant under consideration may remain in the unit for many years, so a little due diligence is justified.
When it comes to nightmare tenants, it is too often the case that the problem could have been uncovered simply by contacting the previous landlords or by running a tenant credit report. And, all too often, the landlord opted out of tenant screening because the scammer seemed “nice” or lied on the rental application.
The best strategy for landlords to avoid income loss due to bad tenants is to have a tenant screening policy in place before advertising a vacancy, and to apply that policy to each and every applicant.
This policy should include:
Being specific enough in your rental ad so that individual applicants can determine if they are qualified;
Prequalifying interested applicants before giving a tour;
Analyzing the completed rental application to determine if the prospect is qualified, and then verifying that information, including income and rental history;
Speaking to current and previous landlords; and
Running a tenant credit check.
Absentee Landlords Pay a Price
There are a few different connotations of the term “absentee landlord”, none of them positive.
In it’s basic sense, an absentee landlord is one who is asleep at the wheel, allowing the lease term to run with the tenant and the property unsupervised.
What some landlords may not realize is that tenants feel cheated by an absentee landlord. By paying rent, tenants are bargaining for more than a place to live; they are buying a service. That service includes upkeep of the property as well as resolution of any tenant complaints. If the landlord is unresponsive, the tenant has to do the work. It’s akin to making your co-workers cover your job while you take a day — or a year — off. The analogy works because if you were chronically absent from your job, you probably wouldn’t make any money.
There are any number of reasons for becoming an absentee landlord. Maybe it’s because of geographic distance, or time constraints. Or, maybe it’s a lack of interest or confidence. Regardless of the why, absentee landlords are significantly more likely to experience diminished property values due to damage and neglect, late or no rent payments, crime, and abandonment of the property.
Handing the reins over to the tenant is not a viable option. It is extremely rare to find a tenant who is capable — and willing — to care for someone else’s property with the same degree of care as the owner. And, staying away does not lessen any common landlord liabilities.
There are two options to avoid income loss from poor property management: hire a property manager, or re-commit to actively managing the property.
The third option — remain an absentee landlord and wait for the inevitable — is not the best choice.
Discrimination Hurts Landlords
Tenants are the ones who suffer from discrimination, but landlords also pay the price. This cost is two-fold: First, a discrimination claim costs in legal fees and damages. Even more importantly, turning away qualified renters is bad business. Landlords who are discriminating are cheating themselves out of some of the very best tenants.
In order to discriminate, a landlord must skew the tenant screening process with some preconceived notion of the ideal tenant. The “ideal” tenant who makes it through those defective filters easily could be a pro — a chronically bad tenant who understands the tenant screening process, and knows how to game it.
Tenant Safety is Paramount
Landlords have a responsibility to keep the property in good repair and avoid injuries. As a consequence, landlords often are liable for injuries that occur at the property and can incur significant losses if that happens.
Safety issues revolve around proper upkeep of the property. For instance, it’s important to remove hazards like shaky railings or damaged locks, and provide clear access and outdoor lighting.
Beyond that duty, landlords benefit when they meet these standards. Safety is a high priority for tenants. The best tenants will seek out these properties, and will want to stay. That will boost short-term profitability and increase the overall property value, so these expenses are worth the investment.
Privacy is another factor that can lead to income lose. When a tenant’s privacy is violated, it makes the tenant feel unsafe. That can lead to costly disputes and poor tenant retention. Understanding the duty to preserve the tenants’ right to privacy, open communication, providing notice before entering, and directing workers to avoid these situations can minimize the risk of income loss.
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.