 Tenants are the lifeblood of the landlording business. But as landlords, we don’t want just anyone as our tenants. We want good quality people who will pay, stay and respect our properties. We want tenants who will not cause problems, either to us or to our other tenants. We landlords already have enough problems to deal with, and the last thing we need is to add to those by selecting a tenant that will make numerous unreasonable requests, burn up the phone lines or just be a general pain.
Tenant screening is one key to finding good tenants. Another key is being aware of characteristics that can signal a potential problem. Over the years, experience has shown that there are several characteristics landlords should beware of and that are worthy of further investigation. I’m not saying that the following characteristics always present a problem, just that years of experience have taught me to look deeper and be a bit more cautious. 7 Types of Tenants Who Cause MAJOR Landlord Headaches The Storyteller The storyteller has always got to explain things before he answers your questions. Even the simplest questions that should require only a yes or no answer come with a long and convoluted story. For example, if you were to ask, “Have you ever been evicted?” instead of a yes or no answer, you are like to get a response such as, “You see there was this time when my roommate…” Be careful with the storyteller. Listen to the stories if you want to, but understand that the storyteller often thinks they can gloss things over and smooth talk their way into your property. Beware and don’t fall for it. The Momma’s Boy You know the type — the child who just can’t seem to cut those apron strings. Despite being 30 years old, they have never really made a decision on their own in their entire life and have not had to. Mom (or Dad) has made all of the decisions for them. This type shows up to apartment viewings, lease signings and other appointments with mom and/or dad in tow. They never talk to you; rather, mom does all the talking, negotiating, etc. Does this mean mom and dad coming along is always bad? No. But you can usually tell the child who is trying to spread their wings from one who has been coddled all their life. Beware of this type of applicant. Have they ever held their own job or been on their own before? They often have no clue how to live on their own or how to manage their lives. They and their mom could be a load of problems down the road. The Spoiled Deadbeat This type also has mom and/or dad in tow, but they are really excited to tell you how wonderful their kid is and how great a tenant he or she will be when the kid is indifferent and unengaged. The parents offer to pay the deposit, co-sign, anything to get you to rent to their wonderful kid. Beware. There is potentially something wrong that they are trying to dump on you. Most likely they just want them out of the house. But you have to ask yourself why. What is wrong with this kid? Perhaps it is nothing. Or perhaps the kid is a lazy deadbeat. The Perfectionist We have all had a perfectionist in our lives at some point. They drove you crazy, didn’t they? Nothing is ever good enough. Do you want to let one live in one of your properties? Will anything ever be right for them, or will they constantly harass you with phone calls about this little thing or that little thing? Beware of the perfectionist. The Complainer The complainer often shows up and very quickly lets the tongue start flapping: “My last landlord never fixed anything.” Or perhaps, “The property was never maintained, and the other tenants were trashy.” “Will that be fixed?” “This room is really small.” “Who lives next door? I don’t like a lot of noise!” The complaints go on and on. And they likely will go on and on if you let them in your property. A bit of complaining is normal. But beware of anyone who complains too much. The All Cash Dealer The all cash dealer looks and sounds really good. They wave a lot of cash in front of you stating that they can pay the deposit along with first and last month’s rent today. They might even say they want to pay a year’s rent upfront. Sounds great, right? But you have to ask yourself why they are doing this. Sure, there could be a multitude of legitimate reasons, but it is not normal. Paying a year upfront is not how things are normally done. Could they be trying to hide something? Maybe, maybe not. Again you need to beware. Plus, think about this — how do you evict someone who has paid a year of rent upfront if things go south? It is possible, but a bit more difficult. The Space Cadet Ever have someone get lost five times while trying to make it to a showing? Could they never seem to get the correct address or the correct time to show up? You might be dealing with a space cadet, and again, you need to beware of letting this person into your life. Can they remember to pay the rent on time, or will you constantly be calling them? Will they be able to care for your property? Again, the answer is maybe or maybe not. You just need to dig a little deeper to be sure they are nothing more than a bit directionally challenged. Remember, I am not saying that folks displaying these characteristics should automatically be disqualified. What I am saying is that you need to be on the lookout for these characteristics, and if you see them, beware. Check out the stories, review the cash dealer’s background, talk to the complainer’s previous landlord and current boss. Remember that rudeness and promptness can count. Remember also not to discriminate against the protected classes and to have your selection criteria written down and on file. What characteristics do you look out for? What makes you say “no way?” BY KEVIN PERK ON FEBRUARY 9, 2015
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 This is a guest post from Holly Johnson. Holly is a 32-year-old wife, mother of two, and frugal lifestyle enthusiast. She blogs about saving money, frugal habits, and whatever is on her mind at ClubThrifty.com.
In 2006, my husband and I bought our first rental property. We put 10 percent down ($8,500) on a small brick ranch in the same Midwestern community that we call home. I had gotten my real estate license several years prior, so I had some basic knowledge to build from. We still weren’t 100 percent sure about what we were getting into, but we thought that it would be a great opportunity to build long-term wealth. We also hoped that the home would provide a passive income stream for us once it was paid off. A few months later, we converted our starter home into our second rental, and we bought and moved into our third home, where we currently reside. So, there we were – 27 years old, with two rental properties and high hopes that everything would turn out as planned. Another landlord we know gave us a copy of his lease to use, and we got lots of advice from other friends who own rental property. We placed ads in the local newspaper and signs in the yards of both homes. Luckily, they both rented out quickly for the amount that we asked without much effort. We were young, dumb, and in love…and we thought that we were real estate moguls! However, the truth was quite different than what we had pictured. Soon, we found out that owning rental property requires a lot of hard work, patience, and planning. Being a landlord wasn’t turning out to be the glamorous hobby that we envisioned at all. Still, we were excited about the future and moved forward in our new role as landlords. The good Owning rental property is a great concept for building wealth. On our end, it required a cash down payment and will require years of cash support via repairs, upkeep, and major component replacements. At the same time, someone else is paying off a property for us. Once the homes are paid off, we will have two additional income streams to add to our earnings from our 9-to-5 jobs. Even after paying for repairs, the cash flow will be significant and will (hopefully) help us reach an early retirement. We often enjoy months at a time without thinking of the properties at all. Additionally, our properties generate a small amount of side income, though at this point we use the additional funds to accelerate their payoff. Holly’s first home, which became her first rental. The bad There are times when it is smooth sailing, but that is not always the case. Owning rental property can be a ton of work. It takes patience and the ability to deal with many different personality types. Each time one of our properties becomes vacant, we have to place ads to find a new tenant. Sometimes searching for a new tenant can bring a lot of shenanigans. For instance, we have had people lie on their application about their employment or credit rating. Others have been completely dishonest about having a job at all. After checking one person’s application, we found that they had multiple evictions on their record. Obviously, we didn’t rent to that person! Even after you find a qualified tenant, sometimes problems will still occur. Some of our tenants have been habitually late paying their rent. We have a late-fee stipulation in our lease, but we have never charged anyone. We simply don’t need the added drama, although we are probably just perpetuating the problem. Still, as long as they pay within a few days I don’t get too worried about it. We just choose to pick our battles. The good news is that the majority of people we have rented to have been absolutely pleasant. At the same time, just like with anything else in life, there are a few bad apples mixed in to give renters a bad name. Speaking of bad apples… The ugly Occasionally, being a landlord means living out your own landlord horror story. In 2010, one of our tenant families was nearing the end of their lease. We hadn’t been called recently and – therefore – hadn’t been at the house for many months. However, I happened to drive by one day and noticed that something about the house looked really strange. I drove by again and still couldn’t put my finger on it, but we would soon find out. A few weeks later, the tenant called and wanted to arrange a meeting. We arrived at the house and walked toward the front door. As we approached, I realized why it looked so weird: The picture window on the front of the house had been replaced with a different window! I knew that this wasn’t a good sign. Apparently, they had broken it somehow. Instead of calling us, they found a salvaged window of the same size and installed it themselves. The old and wooden frame didn’t match the newer vinyl replacement windows, so it stuck out like a sore thumb. Unfortunately, that was the least of our problems. Upon entering the house, we realized that the drywall in almost every room had giant holes punched in it. The carpet, which had been new when they moved in, was stained beyond recognition. All of the interior doors in the house were missing … gone. The refrigerator was missing. Someone had busted in the front door, and the entire door frame had been hastily and obviously glued back together. The house was an absolute disaster area, and the tenant had asked us for a meeting in order to resolve the issue. After some discussion, the tenant agreed that he would pay for some of the repairs to the home in order to avoid getting sued. We spent the next month and almost $7,000 repairing all of the damage. After another friendly meeting, we reached an agreement with the tenant and he repaid approximately $3,200 toward the damage that his family had caused. He didn’t pay for all of the repairs, but we were still satisfied and ready to put it behind us. Luckily, we reached an amicable agreement with our tenant and everything turned out fine. However, we lost more than just money. While most people were celebrating the holidays, we spent the entire month of December repairing that home. Did I mention that I was pregnant at the time? Still, I had to spend my days stressed out at work and my evenings crying and painting at the rental house. I had no choice. For close to a month, the situation consumed our whole lives. We were so glad when the home was finally fixed up and ready to be rented out again. Conclusion I think back to the days when we acquired our rental properties and wonder what we were thinking. Did we really think it would be easy? Were we that naive? Did we have a long-term plan at all? Luckily, I don’t worry about it too much. I don’t regret buying our properties, and I think it was one of the best decisions we have ever made. While being a landlord can be stressful and expensive, I believe that the future rewards will be worth it. Our two rental properties will be paid off in approximately 14 years…right in time for our two small children to begin college. We could use the rental income to pay for our children’s education. We could use it to pay for their living expenses while they study. If they go to college nearby, we could even provide them with a free place to live while they pursue their schooling. Once our kids finish school, the nearly $2,000 per month in rent will be ours to save or invest. The possibilities are endless. Owning rental property can be stressful and difficult. It can test your patience and even your faith in humanity. Yet, I think it is definitely worth my time and effort. While it certainly isn’t as passive as we imagined, I believe that our properties were a great investment and have no regrets at all. Is it worth it? I say yes. 3 tips for first-time landlords 1. Use your intuition. We have been advised by others to never rent to anyone with bad credit. We feel differently and tend to rent to people with bad credit as long as they are up front about it. I’m glad that we listened to ourselves because our best renters have all had terrible credit. 2. Keep your house nice. Saving money is a good thing, but don’t do it at the cost of your renters! If something breaks, have it repaired quickly and correctly. Between tenants, make sure that your home is clean and in repair. A nice clean home will attract renters who will work hard to keep it that way. 3. Have a large cash cushion. Owning rental properties means that you have more liabilities. You have more than one air-conditioner, furnace, refrigerator, and roof to worry about. You need to have enough cash to cover the cost of replacing all of these items. If you don’t have a large enough cash cushion, you should probably wait to buy rental property until you do. Have you ever considered buying rental property? If you already own rental property, do you think that you made a good investment? |
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