The possibility of terrible tenants

[Abdiel Torres]

Hello everyone, I am trying to rent my home to try and have extra cashflow. My wife and I both agree we need a bigger home as we outgrew our present home. I want to rent and my wife wants to sell. She tells me what is we rent the house to those terrible tenants and they trash place and now we will be stuck with the bill to fix the place. I live in Texas and I am not sure if there are laws against tenets trashing your place and leaving. 

I really want this first rental property to work because I would like to continue buying and renting properties. If anyone has any tips they will be greatly appreciated. 

Thank you 

[Caleb Brown]

What's your area like in terms of crime and safety? Often you can minimize terrible tenants with good screening. That can either be you self managing or hiring a great PM. There is always risk to real estate. I would really sit down and have a deep conversation. Go over the #'s pros and cons and make a decision. Most of the worries don't come true unless you make a foolish mistake. Make sure to learn and soak up as much as you can

[Richard F.]

Aloha,

Indeed, PROPER Screening is your key. Determine your criteria, stick to it, and obtain all necessary background information and supporting documents. You cannot micromanage Tenants, but establishing fair terms and house rules will go a long way toward effectively managing them. Be sure they understand those terms and rules before they move in, and then, be sure YOU follow the terms and conditions in the Agreement. Every Time.

[Eliott Elias]

All you can do is vet your tenants properly. Require a minimum credit score, income, and background history. The rest is up to how the tenant wants to behave.

[Nathan Gesner]

Quote from @Abdiel Torres:

Find a quality property manager. Nothing is a guarantee, but you reduce the risk astronomically when you hire a professional that knows the market, knows how to screen, has solid policies, decades of experience, etc.

I manage nearly 400 rentals. I have over 200 tenants moving out in an average year. About 2% of them leave owing more than their deposit will cover. I have placed 70 tenants in collections and 80% of those are for less than $3,000. I have four accounts over $10,000 and most of that damage is from pets or because an owner refused to let me take action early, usually because of some bleeding heart story.

Find a professional, at least until you are more stable and prepared to take on management yourself.

Remember: cheaper doesn't mean you'll make more money.

Start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. You can also search Google and read reviews. Regardless of how you find them, try to interview at least three managers.

1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their staff qualifications.

2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.

3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 6% management fee but the extra fees can add up to be more than the other company that charges 10% with no additional fees. Fees should be clearly stated in writing, easy to understand, and justifiable. Common fees will include a set-up fee, leasing fee for each turnover or a lease renewal fee, marking up maintenance, retaining late fees, and more. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate, particularly if you have a lot of rentals.

4. Review their lease agreement and addenda. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.

5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that policies are enforced equally and fairly by their entire staff.

6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact that a tenant is complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.

7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?

This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!

[Vlad B.]

Quote from @Abdiel Torres:

Hello everyone, I am trying to rent my home to try and have extra cashflow. My wife and I both agree we need a bigger home as we outgrew our present home. I want to rent and my wife wants to sell. She tells me what is we rent the house to those terrible tenants and they trash place and now we will be stuck with the bill to fix the place. I live in Texas and I am not sure if there are laws against tenets trashing your place and leaving. 

I really want this first rental property to work because I would like to continue buying and renting properties. If anyone has any tips they will be greatly appreciated. 

Thank you 

If you rent your property it needs to move from an emotional attachment to the property to an asset. If it’s an asset then you treat it as a business. For business to succeed you need to have your legal, financial, and reserves in order. Not to mention the tenant screening, management etc. 

if you and the wife are not aligned, that’s a problem. Fix that first!

[Henry T.]

You didn't say what state youre in. It matters. the risk is much higher than it was 20 years ago. There are some parts of California, if you rent to a senior, you can't get your house back. Even if you want to move in yourself.

[Michael Bailey]

@Abdiel Torres, congrats on the decision to become a landlord!

The best advice that I can give that everyone else already has is make sure you do a proper background screening and have your criteria laid out and stick to it. It'll make your experience as a landlord so much easier.

Bigger Pockets actually offers tenant screening on their site through a trusted partner. There are multiple options available for screening packages; tenant involvement/no tenant involvement, instant reports, hand-compiled reports, and even income verification.

You can find further information by going to Tenant Screening under the Tools tab.

Best of luck to you!