As a landlord working without a property management team, it falls on you to determine whether your prospective tenant will be a great one or a bad one. Unfortunately, choosing the right person for your property isn’t always as simple as running credit checks and verifying employment. The consequences of choosing wrong can lead you don’t an exhausting path.
We’ve all heard the horror stories: tenants who refuse to pay rent or damage your property beyond repair. But, even if they don’t become villains, it’s possible to make a mistake in choosing a tenant that results in months of painful headaches.
Losing Your Passive Income
We’ve all heard the horror stories of tenants dodging or outright refusing to pay rent. Many of us have even lived through those horror stories. Passive income isn’t as simple as many new landlords like to hope. Here are a few ways you could be losing rental income:
- Your tenant pays partial rent
- Your tenant fails to pay altogether
- Damage to your property is severe enough to warrant extra time and money
Let’s do some simple math to consider how much you might make in a single month. Say your new tenant is set to pay $1,800 per month. You use $1,300 to pay the mortgage and another $200 to cover utility costs. This leaves you with a $300 profit per month.
Every month your tenant pays partial rent or fails to pay altogether is money coming directly out of your pocket. Of course, the mortgage still needs to be paid, as do utility bills. So even three months of lost rent could mean a year’s worth of profit on that property due to out-of-pocket expenses.
Losing Precious Time
The potential of losing income might be enough to persuade you to take a second look at any tenant application that crosses your desk or inbox, but what about your time? Time is money, and wasting time with a bad tenant is troublesome to your wallet.
If you’ve ever had a tremendous renting experience before, you might not even remember most interactions with your landlord. That’s likely because you were a good tenant and chose the right rental property for your needs. That means that neither your time as a renter nor the time of your landlord was ever wasted.
Now, imagine dealing with the hassle, the frustrations, and the back-and-forth of a bad tenant. Whether it’s asking for rent every month, taking on complaints from neighbors, or trying to send a professional to repair damages the tenant has made, that’s simply too much time wasted. Between phone calls, emails, text messages, and written notices (not counting the potential in-person discussions), dealing with this one tenant(s) might be a full-time job within itself.
You can’t get back lost time. Remember that.
Property Damage
Many landlords, new or seasoned, are familiar with property damage. Of course, we’re not just talking about small holes in the walls from shelving units or chipped paint. Property damage can be severe when it comes to a bad tenant. It means replacing brand new appliances, carpet, drywall, cabinetry, and mirrors.
If you’ve had to begin the process of evicting a tenant for not paying rent, you could be dealing with retaliation damage. We’ve had a client who did a walkthrough of their property after a tenant finally left, only to be met with severe water damage—the tenant decided to leave the bathtub faucet running for days. Damages are no joke, and they can mean the end of your time as a landlord if you cannot foot the bill.
The Positive? You Can Avoid it All.
We’ve just laid out many ways a poor tenant can cause grief to your wallet and mental state, but there are ways to avoid getting to this point.
- Double-check all references.
- Follow Utah state and local laws. Landlord-tenant laws keep you and your tenant safe. Know them and work with them.
- Run credit checks. Although verifying past rental history and income can be enough, it’s always better to be safe than sorry. However, keep in mind that a poor credit score doesn’t automatically mean a poor tenant.
- Require employment verification.
- Don’t accept late or missed payments. If you let it slide once, you might be letting it slide multiple times.
- Eviction is a tricky process but can be within your rights when necessary.
You Don’t Have to Go It Alone.
Being a full-time landlord isn’t always in the cards for those investing in property. If, after reading this, you realize you don’t have the time, energy, or experience to handle finding the right tenants, it doesn’t mean you have to stop the journey altogether. Instead, put your trust in a property manager with the knowledge to keep you, your tenants, and your properties safe. Rhino Property Management is a full-service management company providing tenant screening, rent collection, and even eviction services. Let us help you.