Risk Management for Landlords
Owning rental properties can be a lucrative and profitable experience, but it does come with risks. How you as a landlord handle those risks will determine the success of your rental endeavor. This is part four of our blog series on risk management and we’re talking about not renting to the wrong tenants. We have already covered insurance, tenant safety and important federal laws.
I have been a landlord for more than 30 years and I only got into trouble when I found myself in one of two situations: I accepted someone who didn’t meet the rental selection criteria; or, they met the criteria but there were significant warning signs before they moved in. Occasionally, these things can work out but my worst experiences as a landlord have been when I have actually taken people who didn’t meet the criteria or I ignored warning signs.
Renting to Unqualified Tenants
About 20 years ago, I had a property that was hard to rent. It had been vacant for a few weeks, so I accepted an application from a man who didn’t have a great background check. He told me that sometimes bad things happen to good people – which is true. But he wasn’t a good person. He moved in and almost immediately began harassing the neighbors. They were always complaining about him. And then he stopped paying rent and I had to evict him for nonpayment. He trashed my property on the way out and then he found out where I lived and came over and destroyed my front lawn with his truck. Then, he called my wife and threatened to murder her. It was a nightmare. So don’t rent to tenants who don’t meet your criteria. We have blogged before about rental selection criteria, so check that out for more information. If you only select people who meet your rental criteria, you’ll minimize the chances that you rent to the wrong tenant.
Identifying Red Flags
Another example of renting to the wrong tenant is someone who meets your criteria but then gives you warning signs that they might not be right for your property. There could be an attorney that takes your lease and submits a 16-page document of things they want included in the lease. Most of these changes are removing any potential liability off them and transferring it all to the landlord. Don’t do that; always use your lease. Or, there is a person who rents a charming historic 1920s bungalow in south Tampa and before they move in, they give you three pages of repairs that they want made to the property before they move in. It might be level wood floors or wavy glass in the window frames that they want replaced. But that wavy glass is 100 years old and handmade. It’s part of the bungalow charm. The floorboards squeak because it’s an old house. This person is obviously not the right person to rent that property. That tenant will be happier in a modern property, and you should let them go.
No good deed goes unpunished. That’s true for landlords.
It’s better to leave your property vacant than to rent to the wrong person. If you have any questions about avoiding bad tenants, please contact us at Hoffman Realty.
How Not to Lose Your Shirt – Risk Management for Landlords
Part 1: Insurance Requirements
Part 2: Inspections
Part 3: Fair Housing Act
Part 4: Renting to Unqualified Tenants