6 Tips to Protect Newbie Landlords Against Bad Tenant Situations

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One of the main components of being a successful real estate investor is finding good, qualified renters for your properties. There are few things more frustrating and cash flow draining than a renter who is always late on paying their bills or worse, a renter who never makes their payments.

Here are five easy tips for you to follow to protect yourself against deadbeat renters.

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6 Tips to Protect Newbie Landlords Against Bad Tenant Situations

1. Before you rent your property, come up with a “perfect renter” profile.

To do this, first list the main selling points of your house from a renter’s point of view. What does the perfect renter do for a living? Do they have children? What would be the renter’s interests? Once you have your avatar built, then you can actively start marketing your property to the perfect client.

For example, if the main selling point of your house its school district, then you might want to let the local PTA group of the grade school, middle school, and high school know that your house is on the rental market. You might also want to put up flyers of your house on the school’s community board.

2. Perform background checks.

This might seem like a very logical thing to do, but you would be surprised at how many landlords never ask the prospective tenant for a background check. The one I use is Tenant Background Search. This service provides me with an eviction report, FICA score, and nationwide criminal background report — and the best part is that it costs around $25 per report.

3. Have a real estate attorney provide you with all legal documents.

Don’t be cheap and buy your rental agreements off the internet at one of these do it yourself websites. Many of these agreements have loopholes that allow the renter too much wiggle room. As my father always told me, “Prepare for the worst, and hope for the best.”

Related: 6 Reasons Landlords Should Thank Their Tenants This Holiday Season

To prepare for the worse, you should go into the agreement with the understanding that you might have to take legal action against the renter — so wouldn’t you feel more at ease knowing that your attorney provided the legal agreement?

4. Be upfront and honest with the renters before they rent.

I have one rental property here in Orlando that has joust windows. Now, these windows give the house a lot of character, and it does give the house a lot of appeal; however, these windows are not air tight, and the electricity bill can be quite expensive, especially in the summer months. I have always been very upfront with all the renters, and I even put this warning in the contractual agreement.

What is interesting is that I have had only one person who decided not to rent the house because of this language, and not one renter in the past 8 years has tried to get out of the rental agreement early due to the high monthly upkeep. On the flip side, the house next door has the same joust windows, and that house always seems to have a “for rent” sign in the yard. As a landlord it is always the best practice to be fair and upfront when dealing with your tenants.

5. Include routine maintenance in the monthly rental amount.

I had to learn this the hard way by having to re-sod the front yard to one of my houses because the tenants never cut the grass, and the yard was overrun with weeds. There is nothing that will hurt the value of a house more than poor curb appeal.

Related: Rent Payment Plans Can Benefit Both Tenant & Landlord: Here’s Why

To protect your investment, include the upkeep of the yard, spraying of weeds, trash removal service, etc. in the monthly amount. This way, you can pay to have someone other than the renter provide these services, and you can make sure they are done properly.

6. Make sure the renters provide their own insurance.

It is always a good idea to put in the agreement that the renters must provide their own renter’s insurance. This way, if something unfortunate happens, it does not back up on you. I also think it is a good idea to have the rental property or properties set up in an LLC; this way, your personal assets are protected should something happen unexpectedly at your rental property. If your accountant tells you an LLC is not advantageous for you, then I would get a million or two million dollar umbrella policy for extra protection.

Being a landlord is really not that hard — just be careful and treat people fairly. Word of mouth is the best marketing, and people want to rent from good landlords.

Experienced landlords: What would you add to this list? Newbies: Have you run into any of these issues yet?

Leave me a comment below!

About Author

Trey Duling

Trey Duling has been managing and marketing vacation homes in the Orlando and Disney World area since 2001. His passion is helping investors make their vacation homes more profitable. Please visit his website at http://www.orlandovacation.com/home-rentals/.

6 Comments

  1. karen rittenhouse

    Great post, Trey.
    Absolutely, one of the most important things you can do as a landlord is to screen your prospective tenants. Do all you can upfront (credit and background checks) to make sure your tenant is who they say they are and to let them know you’re serious about your business.

    Next is communication. We make sure all of our processes are spelled out in our contracts, and we sit with the tenant to go over the details as they initial each item and sign the paperwork.

    Finally, be quick to evict. In our state, the tenant has 5 days to pay. On day 6, we start the eviction process. Why? Well, lots of reasons but you’ll find that many tenants have learned from previous landlords that they can pay late or not at all and get by with it, at least for a time. I want to retrain them that we’re not that way! We let them know our practice when they sign the contracts and we let them know that, if we file, they are responsible for filing fees along with late fees. It only takes once or twice for them to realize we’re serious and we have never had a tenant move because of this policy (unless they were not planning to pay anyway!). I would rather know on the 6th that a tenant is not going to pay than on the 26th. And, if we do make it to eviction court, we’re way ahead of the other landlords and the courts are not backed up like they are later in the month! We manage hundreds of properties and have very few late payers.

    Thanks for your post!

  2. Mindy Jensen

    Easily the top tip here is screening your tenants. I still can’t believe there are people who do not. It just takes one bad renter to completely ruin your cash flow. Eric Dreckenhahn had a great post recently about what all the information in a credit score means.

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