Real estate has real value. We all need places to live, work, and play, and there is only so much space to go around on our planet — and still less of it when we limit our searches to areas near employment and other attractions. So when you are able to secure an income property, you can rent that space out and profit.
But, as any landlord will tell you, things aren’t quite so simple as that. With the benefits of owning an income property come significant risks — and no risk looms larger than that of having a bad tenant.
The Risks of Renting to the Wrong Tenant
When you place the wrong tenant in your income property, you set yourself up for extreme financial risks and problems.
A neglectful tenant, for instance, will fail to alert you when things go wrong on your property. A leaky sink or a faulty electrical outlet can be easy to fix early on, but when they are ignored they can pose serious threats to your space. If your tenant doesn’t bother to tell you about problems with the property, they are setting you up to pay for pricier deferred maintenance later on — or, worse yet, for destruction and permanent damage to your property. Having a thorough inspection and detailed record of the property before a new tenant moves in can be a valuable piece of collateral if anything should go wrong according to commercial roofing experts at McDonald and Wetle.
Neglect is one thing; destruction is another. Other bad tenants may do serious damage to your space. Excessive filth can stain and destroy walls and floors, and hard-partying tenants may bang up walls or destroy doors and fixtures. Broken windows, damaged appliances, destroyed fixtures — the possibilities are, quite frighteningly, endless.
And what if a bad tenant simply refuses to pay rent? Every day that such a tenant spends in your rental property is a financial loss for you. Yet if you try to evict a tenant for this reason — or for any of the reasons above — you may be surprised to find just how difficult it actually is to boot a tenant from a rental property in many states and municipalities. On top of that, it may not be financially sensible to pursue the tenant in court (depending, of course, on the dollar toll of the damage).
How to Avoid Renting to the Wrong Tenant
Clearly, having the wrong tenant in your space is one of the direst risks that a landlord faces. But what can you do about it?
Simple: you need to vet your tenants carefully before you agree to rent the space to them. But this, of course, means more than just meeting the individual or individuals in question and sizing them up with the naked eye. You need more extensive resources in your corner — and you have them.
Background checks and tenant screening are essential in lease agreements, and there’s no excuse not to get them done: you can perform a free tenant screening online! Check out your potential tenant’s background, rental history, and financial security. You’ll want to make sure that they don’t have a criminal or personal history that would suggest destructive or neglectful tendencies. You’ll want to confirm that their past landlords were not burned by them financially. And you’ll want to make sure that they have the income that it takes to afford the lease in question, as well as a credit history that suggests they’ll stick to the terms of the lease and make good on the deal. Always verify the information on the rental application!
Nothing can protect you entirely from the dangers of renting to bad tenants — and, of course, you should always have landlord insurance. But if you cover the basics with background checks and other simple steps, you can rest a lot easier at night and — with a little luck — enjoy a safely profitable property.