“Intellectuals solve problems – geniuses avoid them.”
- Albert Einstein
Avoid Tenant Problems from the Start by Following These Important Tips:
When dealing with tenants in long-term rental properties, the quote above offers some wise advice. Your ability as a landlord to avoid potential problems before they start can save you vast amounts of trouble and money. Here are four time-tested ways to set yourself up for a more profitable and enjoyable property management experience.
1 – Know the Law.
Depending on where your property is located can dictate everything from the required legal forms, the format of the lease agreement, and the procedures and processes that are in place to deal with potential legal issues. You will also need to make sure you are taking into consideration all the possible jurisdictions that your property may fall under including local, city, township, county, and state.
It is always smart to get some form of professional guidance before running blindly into renting property to tenants. Options include working with an attorney who specializes in real estate law or with a professional property management agency that works with properties similar to what you are looking to rent regarding either type of property, location or price range, etc.
Either way, you are utilizing someone else’s experience and expertise so that you can hopefully avoid painful and typically expensive “on the job training.” Know the law or find someone that does or you will likely learn it the hard, expensive way.
Have an Extensive Background Screening Process in Place.
Screening tenants is the foundation for creating rental income from investment properties. You have to know as much as you can about the person or group you are expecting to pay rent each month. You need to understand how they have paid their previous obligations, specifically their housing payments. You need to know where the money is coming from that will fund those monthly rent checks. Then, even if they have managed to pay their previous bills on time and are gainfully employed, how have they treated their previous rental properties, neighbors and the community in general?
Most of these items can be found via some form of online credit checks and criminal background checks along with direct phone calls to employers, managers, previous landlords, and references, etc.
Here is a quick checklist of the minimum background items you should be getting from prospective tenants.
- Credit Check
- Criminal Background Check
- Employment Verification
- Previous Landlord Verifications
- Reference Checks
Still be cautious, even if you successfully chase down all of this information, you still have to be aware of the potential for more malicious identity theft or credit fraud. You will want to plan on some additional checks that can help weed out those prospective tenants that are actively looking to deceive you. Having a property management firm make suggestions or turning to a local Real Estate Investment Group can help point you in the right direction. In many cases, they have protocols in place to cross-reference data and background information to help find potential issues that only an experienced professional would know how to find.
With tenants, it is always better to be picky. You are signing on to this person’s financial success for the term of your lease. You don’t need to “hope” that they will “figure it out.” You are expecting this person or family to be able to navigate the challenges of everyday life and be able to regularly give you thousands of dollars and in many cases tens of thousands of dollars over the next 12 months. Your tenant screening process should be thorough to the point of almost invasive. Enough random things happen that can adversely affect a person’s ability to pay bills. Your screening process should eliminate as many of the known challenges as possible.
Keep Exact Records.
If things do go wrong with a tenant, you need to make sure your record keeping is in line with a professional operation. Specifics like:
- When was the last rent check cashed?
- When was the last letter or phone call made requesting rent?
- Have there been any calls related to repairs or issues with the home that the tenant may use against you as to why they aren’t paying rent etc.?
When you approach an attorney or other professional, you will want this information recorded and cleanly organized. Dates become of the utmost importance if you need to go to court to evict a tenant for non-payment or for damaging the property. Lack of clear communication or expectations can slow this process dramatically. And, for every week that goes by, in most cases, it means no income to you from that property.
Be Nice but Firm and Clear.
For almost all landlords, the plan is to make a profit from your time, energy, and investments. Virtually any long time landlord will tell you that the best practice is to be polite but firm. If you have one rental unit or 50, you must demonstrate to the tenants that this is a business, and you have to run it as such. Most tenants – if adequately screened (see number 2 of the list) will have alternative ways to keep rents on time, i.e., a secondary income earner; savings; family, etc. If you aren’t using a property management agency; then think of yourself as that company. How would they treat a tenant? How would they communicate with that tenant? If they are running a successful operation, they are likely clear, firm, and professional.
If things appear to be headed in the wrong direction with a tenant, this is when crystal clear communication is paramount. You must ensure there is no ambiguity in your communication with tenants that are falling behind on rent. Communicate with exact dates, times, amounts, and responsibilities, and what results missing any of these items would create. This is not about being a greedy landlord or hounding tenants for money, but more about articulating your position in the situation and what is expected due to the legal contract they signed. Most tenants will respect this, and if they are looking at their position logically, they will hopefully appreciate the clarity that you are bringing to the relationship.
The tenant/landlord relationship has been around for hundreds of years and for the most part still revolves around the same or similar pillars. The tenant agrees to pay for the right to live in the property and typically further agrees to take responsible care of that property while they are the occupant. Although that seems like a reasonably straightforward relationship, it doesn’t take long to find a landlord that can likely tell you some nightmare stories about how that seemingly simple relationship can find ways to go wrong. Hopefully, these four suggestions will help you plan appropriately and avoid any unnecessary challenges in your property management adventure.
To ensure you are avoiding and properly handing problem tenants, hire a Lancaster County property manager! A full-service property management company will handle everything from tenant screening and placement to lease enforcement and rent collection. Bay Property Management Group Lancaster offers services to handle all your property management needs in Lancaster, York, Harrisburg, Camp Hill, and Carlisle!