Although owning rental property is an exciting financial adventure for anyone, there are many tenants who can make the experience a nightmare. Tenants’ bad behavior may cause you both financial and emotional hardships, so you should avoid all of these types of tenants at all costs.
Tenants who won’t pay
The most frustrating nightmare tenant is the one that refuses to pay their rent. This can also include tenants who repeatedly pay their rent late. Sometimes these tenants are simply forgetful, and you can do little easy things to remind them, such as sending them monthly reminder emails. However, most of the time, tenants who don’t pay rent are often experiencing serious financial or familial hardships. Because these tenants will severely impact your revenue stream and the eviction process is a long one, you should try to avoid these nightmare tenant before they even move in.
During the screening process, you should verify all potential tenants’ employment status. Not only should you have the tenant detail their employment, but you should call the tenant’s listed employer and verify that they do work where they say they do. When you make the call, research the employer’s publicly listed phone number and use this instead of the phone number the applicant has provided; applicants can easily give you a friend or family member’s phone number who will then pretend to be the employer.
In addition, you should investigate the potential tenant’s income for the past year. To do so, you can require them to provide you with their paystubs and W2s, or bank statements and Form 4506 from the IRS. Determine the applicant’s income for the past week, month, and year and verify that their average monthly income is at least three times the cost of the rent. You take a risk if you approve a tenant who doesn’t make much more than the cost of rent or does not have a stable income history.
Lastly, you should never accept an applicant before completing a credit check; all potential tenants should be required to provide you with their written authorization to complete one. If an applicant refuses to give you permission, you should end the application process because they likely have something to hide. Once you’ve obtained authorization from all interested parties, use one of the main credit reporting agencies, Experian, TransUnion, and/or Equifax to complete the credit check. If you expect to incur any fees while completing this process, you should collect this payment from the applicants beforehand.
When you receive the credit report, check the first page, which will include the Negative and Potentially Negative Items section, for any accounts past due, discharged or in collections. This is evidence that the applicant has a history of not paying their debts and will likely have a problem paying your their rent. Other red flags include instances of bankruptcy, late payment(s) eviction(s), or foreclosure. If you note multiple red flags or red flags that have happened recently, you should seriously consider denying the applicant; these applicants are the most likely to become nightmare tenants who don’t pay rent.
Tenants Who won’t move out
Along with tenants who don’t pay rent, tenants who won’t move out (aka squatters) are probably one of a landlord’s worst fears. Many squatters will try to exploit the laws that protect renters in order to complicate the eviction process and stay on your property as long as possible. In order to legally remove a tenant who won’t move out, you are legally required to complete a formal eviction process; this means that you must go through the courts to get them forcibly removed by law enforcement.
Because this is probably one of your worst nightmares as a tenant, you should thoroughly screen all applicants’ rental history to ensure that the applicant does not have a history of squatting.
When you conduct the credit check for each potential tenant, you should be wary of applicants who have a history of late or non-payments on accounts, evictions, foreclosures, and landlord tenant lawsuits. If they have had problems on other properties before, they will likely have problems again on your property. Call previous landlords and verify that an applicant has never been a tenant who failed to move out. Evictions can last months and cost you an average of $3500, so you should never ignore red flags that point to the applicants becoming squatters.
Tenants who cause property damage
Sometimes tenants will cause damage to your property that extends beyond their security deposit. Many landlords will find their property in disarray upon a tenant’s move out. Extensive property damage caused by a tenant may cost you thousands of dollars to fix and you may even have to take your tenant to court. Keep in mind that there is a huge difference between normal wear and tear and serious damage; the latter will be unexpected and will likely be financially draining. To avoid the costs associated with unexpected property damage, you should properly screen each applicant to ensure that they do not have a history that indicates they may be a danger to your property.
While a credit check will give you important information about an applicant’s money habits, you’ll need to complete additional investigations to ensure that no has a history that might indicate they will cause damage to your property. Obtain a criminal background check and verify that none of the applicants have been convicted of vandalism, theft, arson, or any other crimes related to potential property damage. Apart from the background check, you should also Google Search the applicant’s name and investigate any photos that come up; look for posts or photos that show that the applicant has caused property damage in their previous dwellings.
You should also contact the tenant’s previous landlords as references to confirm that they are a stand-up tenant. Follow up with more than just the most previous landlord, but also the applicant’s last two to three landlords for a comprehensive picture of the applicant’s previous behavior. Ask each landlord candidly about the amount of damage the applicant cause in previous residences. Like when you called the applicant’s employer, you should look for publicly listed numbers for the applicant rather than the phone numbers they provided; this will ensure that you are contacting the actual landlord and not a friend or family member.
In many cases, tenants may simply be nightmare to deal with in your day to day business; these people will have an opinion (mostly negative) about every way you run your business and your property. Although these tenants might not cost you financially, you may find working with them emotionally draining. While it is more difficult to spot an argumentative tenant than one with a criminal conviction or eviction, there are still ways to make sure you avoid tenants that constantly have frivolous complaints.
Keep an eye out for applicants that are hesitant to comply with your requirements, such as signing the rental agreement, authorizing a background and credit check, and/or providing references. If you notice an applicant asking extensive questions that are irrelevant to their tenancy, you should also be wary of this applicant becoming an argumentative nightmare. Look for other red flags from potential tenants that indicate that they might be difficult to work with in the future, such as disrespecting you during the application process, showing up late for appointments, refusing to comply with your rental application process, and/or asking ridiculous questions.
Tenants who move out unexpectedly
In this nightmare scenario, your tenant might unexpectedly move out, breaking your rental agreement. Often, tenants who do this will completely fall off the map and will not respond to any attempts to reach them. In this case, you’ll suddenly lose part of your income revenue from their rent and have no way of getting it back. Sometimes these tenants will even leave personal property in the dwelling which you will then have to deal with in the legally proper way.
The best thing to do to ensure that you avoid these tenants, is to call previous landlords and employers as character witnesses. Ask these references if the tenant has a history of being stable and responsible. If the applicant has a history of being flighty with employers (i.e. going through five jobs in five months), you can safely assume that the applicant might be flighty with your rental agreement. Verify with previous landlords that the applicant has never “ghosted” and moved out unexpectedly. As with the other red flags, you take a serious risk allowing these renters to live in your property.
The bottom line
All of these nightmare tenants can be avoided in most cases if you simply employ a thorough screening process for all applicants. Don’t ever ignore red flags that indicate that the potential tenant may fail to pay rent, damage your property, become argumentative, turn into squatters, or unexpectedly move out. Proper screening will keep potential tenants from hiding their troubled pasts and allow you to spot a problem from a mile away.