Hello. I'm about to rent my house to a tenant, and I'm wondering if there's anything specific I should do to help ensure the tenant pays in full on time. We've run credit checks and things look ok, but any recommendations on other contractual things to help protect myself?
@Nick Bossert welcome to BP. Have you checked with their employer. Prior LL. Background check. Make sure when you reference check you are not just speaking to the applicant's friend or mother. There are companies that will help fabricate an applicant's background. Don't take a BG or CC from an applicant run your own. Make sure paystubs and bank statements are real. Especially if an animal is part of the package go see their current residence. Don't tell them you are coming invent a reason to drop by unannounced. All the best!
@Bjorn Ahlblad , thanks for the quick response! Even if I check everything (background, credit, references, etc) what happens if a tenant just stops paying? I have a colleague who rents out his properties who had a tenant 4 months late on payment, he took the tenant to court, and the judge ordered him to give the tenant more time to pay! This was last year - nothing to do with COVID. Is there anything beyond standard rental contract language (this is in Texas) I can include to help in case this happens? What do you mean by "LL"? One additional question... my home has a swimming pool and the tenant has 4 children. What is best practice from an insurance/liability perspective to protect myself? I assume standard homeowners insurance + umbrella policy? Any feedback/recommendations are appreciated!
You have to have policies and processes in place to keep them on track and let them know you're a professional. If your agreement says a late fee is charged on the third day of the month, you charge it. Every. Single. Time.
If your agreement says you will start the eviction on the 10th day of the month, you start it. Every. Single. Time.
You don't have to be mean about it. Just be clear about your policy and then march on in a professional manner. If you're mean or wishy-washy or negotiable, you'll fail.
@Nathan G. thanks for the advice! I will indeed stick to the agreement details. What do you mean regarding policies and processes, other than what is defined in the Agreement? Do you have further recommendations? Do you have suggestions on specifics about Agreement eviction language, or additions to make? If I come across a need for eviction (due to non-payment), am I at risk of the tenant refusing and having to go to court where they rule in favor of the tenant?
It won't do any good to have a lease that says rent is due on the first unless you have procedures in place to enforce that. Just because the agreement says something doesn't mean you'll enforce it, or enforce it correctly.
Your best bet as a beginner is to get a good book to learn the basics of property management. I highly recommend "Every Landlord's Legal Guide" by NOLO. It's a big book full of practical information and your state-specific laws.
It sounds like what you need to do is seek a professional's help (a property manager). There are companies that will find you a tenant, screen them and help you write the lease. As you are coming to realize, there is more to being a Landlord than just finding a tenant, and writing a lease. You need to consider Hold Over Rent, how maintenance will be handled, late fees, etc. Currently in Texas rent is late on the 5th and the maximum amount in late fees that can be charged is 12%. Do you have a standard criteria for a tenant to protect you in case someone tries to sue you for discrimination? Is your home up to property code? What kind of inspections are you doing? My advise would be if you absolutely want to manage it on your own (wouldn't suggest that at all) would be to find a property manager to help you write the lease. Owning a rental property is a business, and you should treat it as such.
Did you do a debt to income ratio analysis? Or better yet, did you have a professional do it for you. The question you are asking is can they afford the property. How could you possible answer that question without knowing all their debts and documenting all their income? I recommend Screen The Tenant . com (without the spaces). The fee ($50/applicant) is more expensive than your average screening because it is more complete, but the tenant pays for it.
Thanks everyone for the advice! I should note that I already had a tenant renting my home. They are moving out, so I just wanted to check in on these topics. The reason my current tenant is moving, is she has gone through a divorce making it difficult to hold the remaining year on the lease. So I made a deal for early termination. Fortunately, we have a good relationship and no issues have come from this. However, not all cases will be like this, and I want to protect myself as much as possible from non-payment.
I understand the point on checking a tenant's financials, which we have. But even if they are liquid, it doesn't mean they won't not pay on time, have financial issues throughout the next year (COVID??), or something else. Heck, my current tenant couldn't have predicted a divorce (...I don't think ;-)).
I did hire a management company for my first tenant, but got rid of him after 5-6 months. It just wasn't worth the 7-8% or so he was charging, and I was handling most of the issues. Also, I have lawn and pool care services I hire, already included in the lease. It works quite well.
I will check the screen the tenant .com recommendation. For $50, it's a not brainer for some additional information. However, I do already have credit reports, bank account balances, criminal history, etc. Late fees, maintenance processes, etc are already part of the lease.