In 2015, landlords witnessed record high rents along with low vacancy rates. Improving job figures and a trend toward renting over home ownership made 2015 a banner year.
Yet, at the same time, many rental property owners learned that a “landlord’s market” is not always what it seems. Some have had to adjust their policies, especially when it comes to tenant screening.
There were some important lessons learned in 2015, and these strategies likely will serve landlords in the new year:
More is Not Better
While a tight rental market seems like a dream come true, especially after the housing crash, what’s good for landlords is not always good for apartment seekers. Desperation to find affordable housing can bring out the worst in rental applicants.
First-time or part-time landlords are the most at risk for problem tenants. That’s because these landlords seem more laid back, and less likely to run tenant background checks.
Regardless of your level of experience or the number of units you manage, always:
Advertise that you will require a tenant background check. That alone may discourage the worst tenants from applying.
Don’t make major concessions when speaking with prospective tenants. They may be testing your resolve.
Demand a completed rental application. Force the applicant to make a case. That’s an easier way to catch a scammer, especially those not willing to put in the effort.
Verify the information in the application and contact the references, including current and previous landlords.
Run tenant screening reports, including a credit check, eviction history and criminal background.
High Rent Attracts Scammers
It may seem counter-intuitive, but charging over-market rent actually can attract the worst tenants. There are two reasons for this: First, the best tenants can compete for better deals. Additionally, overpriced properties attract fewer applicants overall, giving bad tenants a competitive edge. After all, they aren’t planning to pay the rent anyway.
Make sure your rents are in line with the market, and stay at or just slightly below par to encourage the best pool of potential renters. That will make screening tenants exponentially easier and more effective.
It’s Possible to Be Too Choosy
With the phone ringing off the hook, landlords feel they are in a position of power. It’s easy to see how that could translate into a more subjective tenant selection process. However, landlords lose when they become too selective, and choose tenants based on personal characteristics.
One of the most common tenant screening mistakes is to choose tenants based on an ideal of who would best fit the property. Not only is this policy illegal, it’s flawed. A young professionals may have disposable income, but also may need to break the lease to chase a job opportunity. Families with children may be the most stable — and quiet — tenants, despite the stereotype that children are too disruptive.
No one can choose good tenants by outward appearance or demographics. If this strategy has worked in the past, it’s just blind luck. Don’t play those odds. Adopt a more sustainable tenant screening policy — one that works for each and every applicant — and you will win in the long run.
With rents so high, and so many millennial renters in the market, expect roommates to be the wave of the future. Roommate rentals present challenges for landlords, so be prepared:
Understand that one or more of the proposed occupants may have a bad rental history. Moving in with someone else is a top strategy of bad tenants, and in some cases, the only way that person will have a roof over his or her head. Be on the lookout for this scam.
Ask for rental applications and run tenant background checks on each adult occupant. Each adult should be on the lease. It is risky to rent to one person and allow them to choose roommates.
There should be one lease agreement with multiple tenants. That means one deposit, one rent figure. Avoid any actions that appear to segregate the responsibilities to individual roommates.
Special provisions, like joint and several liability apply when renting to multiple tenants. Make sure your lease agreement is up to the challenge. Speak with your legal counsel in advance if you have questions.
In addition to roommates, a popular practice for tenants today is secretly renting out beds in an apartment to overnight guests. This is just one reason why your lease agreement should contain language regulating both short and long term guests. It is crucial to know who is living in your rental property.
In It For the Long Haul
With fewer housing options, tenants may choose to stay longer than the first year. Tenant retention is great — so long as they are good tenants. That’s why it’s so important to carefully screen applicants.
One thing that often surprises landlords is the extent of damage that long-term tenants may have caused at the property. A poor record of property inspections or a lack of oversight can lead to catastrophic consequences. Just because tenants are paying rent doesn’t mean they aren’t trashing the place.
The solution: each time you choose a tenant, imagine the person will stay for four or five years. That’s good incentive to run a tenant background check.
The possibility of long-term tenants requires a shift in management strategy for some landlords. With the typical one-year lease, repairs and inspections are done at the end of a tenancy while the property is vacant. It’s much easier to access the unit and have several workers in there at once.
However, with long-term tenants, particularly month-to-month renters, the tendency is to wait on repairs. Meanwhile that leaky seal around the toilet causes major floor damage. Occupied properties raise issues concerning privacy and quiet enjoyment, so it’s necessary to plan repairs, maintenance and updates in conjunction with tenants.
While bad tenants always get attention, good tenants tend to languish. If you have cooperative long-term tenants, don’t take that for granted. Reward good behavior and it’s more likely to stay that way.
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).
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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.