It doesn’t take long to realize not all tenants have good intentions or want to play fair. There’s always a risk that a tenant will pay rent late, avoid late fees, damage the property, throw loud parties, or refuse to vacate after receiving an eviction notice.
These situations are a big problem for landlords. Unpaid rent means paying the mortgage out of your pocket, and property damage means going to court to recover what little you can in damages.
High-risk tenants often cause:
- Property damage/violence. They might damage the building, hurt bystanders or neighbors, or even you.
- Lost income. When a tenant doesn’t pay rent, you’re out that cash. If you rely on rent to pay your mortgage, you can’t risk renting to a bad tenant.
- Extra expenses. If you need to evict a tenant, you’ll pay fees to file the lawsuit and get them out.
- Police activity. Neighbors don’t want the police called all the time. A heavy police presence can make people feel unsafe and annoyed.
- Mad neighbors. Between police presence, loud parties, and late-night music, neighbors can get pretty mad.
If you’ve ever encountered a bad tenant, you know it’s critical to do everything possible to avoid repeating that experience. So, how can you protect yourself against high-risk tenants?
1. Hire a property manager
When it comes to finding great tenants in a sea of potentially bad choices, nothing beats experience. For property managers, identifying good tenants comes naturally since they’ve been filling vacancies for years. They usually know which applicants to reject on the spot. They also won’t lower their standards just to fill a unit. For example, if the only applicant has an eviction on their record, they’ll keep taking applications until they find someone who meets basic qualifications.
High-risk tenants generally avoid renting properties managed by well-known companies who have established rules. They know they won’t be able to get away with breaking the rules, so many won’t bother applying.
Hiring a professional gives you a better chance of getting the respectful, reliable tenants you want. It’s easy to find help, especially when you’re in a major city.
For example, Austin property management company Green Residential helps investors find good tenants for their rentals. If you aim to acquire long-term tenants who will take care of your property, you need support to find them.
When you hire a professional property management team, the risk of encountering a bad tenant is low. They won’t even entertain the idea of accepting someone who doesn’t meet your standards.
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2. Don’t make exceptions to your screening criteria
Start protecting yourself from bad tenants the moment you begin reviewing applications. Set your criteria and stick to them. For example, don’t settle for a low credit score, even if the applicant is willing to pay an extra deposit. They could be genuine, but you can’t know if they might skip rent to pay a different bill or stop paying altogether.
Another important standard is income. Most landlords prefer having tenants who earn three times the monthly rent. Sometimes an income equaling two times the rent is acceptable. However, don’t go below that. And if you prefer a higher amount, don’t settle. The last thing you want is to take on a tenant who can’t pay the rent. You’ll have to spend money to file an eviction lawsuit and things could get ugly.
3. Don’t offer low rents
Always research current rental rates before pricing your properties. It’s tempting to lower the rent to get someone in fast, but that is a quick way to get a bad tenant. Low rent can also signal to people that you’re someone they can take advantage of, and once they get into the unit, they will do just that. It’s also a bad investment decision.
4. Always call references
No matter how much you like a prospective tenant, always call their references and verify employment. Some people fake references, but use your best judgment.
If you suspect someone is lying about their place of employment, look for the company’s phone number and compare it to the number you were given. If they don’t match, search for the number the prospective tenant gave you to see if it’s associated with the company. If not, call the company directly and ask to speak to the reference you were provided.
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Protect your investment income
Who you rent to matters. Protect your rentals by doing what you can to avoid bad tenants. You can’t escape every bad situation, but you can prevent the worst with diligence.
