One of the largest challenges that landlords are faced with today, is the possibility of bad tenants. This is enough of a fear that it actually deters a lot of people from even considering the option of buying an investment property. We all hear too many stories and read too many articles about these so called bad tenants.
So what can you do to protect yourself from a bad tenant and how can you avoid them?
Let’s take a step back and start off by exploring the key characteristics that define a bad tenant;
- Someone who doesn’t pay their rent on time
- Someone who doesn’t pay their rent at all
- Someone who causes damage to your investment property
- Someone who disrupts others tenants enjoyment of the property
So what can be done to avoid a bad tenant? There is no simple answer or simple solution and the risk of a bad tenant can never be completely eliminated, but there are a number of things you can do to greatly reduce the risk of getting a bad tenant, and reducing the risk is the key concept there.
The idea is to do everything you can to reduce the risk, especially before you approve a tenant but you also need to be ready and prepared as a landlord to deal with any of the above mentioned items when they do occur.
References and Reference Checks – I would bet that the majority of you probably feel that references are a complete waste of time because who in their right mind would provide a bad reference right? WRONG! Reference checks are actually extremely important and extremely valuable if they are completed correctly. So what exactly does “correctly” mean? If you do your reference checks correctly you can gain some real insight into your potential tenant, before you accept them. Reference checks typically fall into the following categories, Employment Reference, Professional Reference, Personal Reference, and a Former Landlord Reference. Let’s go over each one of these and how they can benefit you.
Employment Reference – This allows you to confirm where the tenant is employed, what they do and how much they make. All extremely important factors when you consider the amount of money the tenant will be responsible for paying you over the course of a 12 month lease and the value of the property that they will be renting from you. How do you know that the tenant didn’t provide you with their friends number to call? Google the company and call the number that you find on the internet and ask for the person that the tenant provided and mention that they were provided to verify the tenants employment. This ensures that you got to the right person and that the tenant actually works there. At this point you will have confirmed whether the potential tenant provided you with the correct information and you will have confirmed the employment data. If someone is lying to right from the get go, definitely a red flag.
Professional Reference – This is typically someone that can vouch for the qualifications of the tenant, a former employer, a colleague, a client, a vendor, a supervisor, etc. This is someone whom you can ask about habits, responsibilities, work ethic and items of this nature. I like to specifically ask for a direct supervisor or managers that the potential tenant reports to. This way you can again Google the company, call in and ask for the tenants direct supervisor or manager, or say that you are calling to verify the references position with a supervisor and then ask to be transferred to them. This allows you to ensure that this Is not just a buddy of the tenant who will say what you want to hear. If the company is not too large you can even call in and say that you are looking to do a reference check on the tenant who only provided the company info and you are looking for the person that they report to and get transferred to the supervisor or manager that the tenant reports to without providing a name. A good way to ensure that you get the right person on the phone.
Personal Reference – This is typically a friend, a co-worker or a family member. This type of reference is a good opportunity to find out what kind of people the tenant is friends with. It is also a great opportunity to ask the personal reference where the tenant works to see how well they actually know the tenant and to confirm that they do work where they said they work. This also typically screens out people who are not serious about renting your property as it takes effort and time to pre frame and ask friends to be references, typically a sign of someone who is serious about renting and not just wasting your time.
Former Landlord Reference – This allows you to gain insight into what kind of tenant you are dealing with. Ask lots of questions on the tenants habits and what kind of tenant they were and if they paid rent on time and so on. Keep in mind that it is much more valuable to talk to an actual former landlord whom is no longer renting to the tenant as a current landlord may tell you whatever it takes to get rid of the tenant and pawn them off on you if they are a bad tenant. If you want to confirm that it is an actual landlord and not just a buddy call the landlord and tell them you are calling about their property for rent and you were wondering if it was still available. If the person on the other end says that they have no clue what you are talking about then you know the tenant provided a buddy and told them to tell you that they were a great tenant. Calling to ask about a property they have for rent throws them off. Another great way to see if the potential tenant is trying to lie to you from the get go.
All of the above reference checks take no longer than 5 minutes each and can really reduce your risk of being exposed to a bad tenant. Good tenants provide you with the actual references that you requested and the references come through good. A great worthwhile investment of your time that ensures you get the information that you are looking for about your potential tenant.
Credit Checks – Credit checks are a great tool to attempt to assess the risk of how likely a rental applicant is to miss their rental payments. A good score does not mean they a tenant will never miss a payment and a bad score does not mean that a tenant will never pay their rent on time. A credit check is merely a measure of risk. Obviously the higher the score the better and less risk that the tenant will miss payments. Now credit scores can be quite confusing and hard to read. Our rule of thumb is that a score of 600 plus is rent worthy and a score less then 600 may be a risk. Having said that I would not completely dismiss a tenant just because they had a credit score under 600, but our rule of thumb is to go with tenants that score 600 or more. Remember that a credit score is determined by the number of things, one being someone’s payment history. If their credit score is below 600 it is for a reason, so keep that in mind.
Social Media – Yes I said Social Media. In todays society people like to make their lives very public. Social media and public profiles can be a great tool for you as a landlord. You can gain a glimpse of someone’s lifestyle and evaluate their integrity via their posts. Some individuals have complained that using social media for screening is a violation of their right to privacy, but if the information is on a public page, these claims typically carry little weight. Go through some posts and pictures and form an idea as to whether this person will make a good tenant. Example; If the potential tenant has lots of pictures trashing their current rental, common sense says this may not be the tenant that you looking for.
Meeting the Tenant – One of the oldest forms of forming an opinion is quite simply a face to face meeting and having a conversation. A good way to do this is to show your own property instead of having a property manger or realtor show it for you. Schedule a time with the potential tenant and see if they show up on time. See how they present themselves, and ask them lots of questions. Think of this as an interview that you are conducting.
Please keep in mind that discrimination can be a problem when screening tenants and you as a landlord need to be really careful not to discriminate. Discrimination occurs when a landlord refuses to rent to someone because of the impression they form about the person’s class, race, color, religion, national origin, marital or familial status, gender, advanced age or disability.
Don’t be lazy, your property is worth a lot of money. Invest 30 minutes of your time and ensure that you do everything that you can to reduce your risk of a bad tenant.
We have recently launched a new company called Leaseourhouse.com and one of our key focus points is in helping landlords attain better tenants through all of the above mentioned items. We actually provide landlords with a step by step guide through the entire rental process along with a “Reference Check and Tenant Screening Guide”, which even provides a list of specific questions to asks along with tips to ensure you get the most out of your tenants references. We provide a detailed lease template that is customized to your property based on some simple yes or no questions, a simple to read credit check through TransUnion, an essential move in/out inspection form with instructions to protect you as a landlord, a summary of what landlords and tenants are allowed to and not allowed to do based on your geographic region and access to an array of landlord forms like eviction forms of various nature, rent increase forms and lot’s more. Leaseourhouse.com is a one of a kind online portal that helps landlords through the entire rental process, helping landlords each step of the way and providing them with everything that they may need right until the tenant moves out. Were not just another rental listing sire or a rental application site. We don’t just help you find a tenant, which is the only thing that everyone else seems to help you with. We help you with everything. We even educate tenants on the rental legislature so that they know what they are allowed to and not allowed to do, in an effort to provide better tenants that pose less risk to you as a landlord. We help you reduce your risk exposure to bad tenants.
Our services are completely risk free in that you can list your property and if you find your own tenant we just ask that you take your listing down. If we are successful in helping you find a great tenant that you approve based on references and a credit check, if the tenant signs your lease, if we collect your first and last months rental deposit from your tenant, and if the tenant moves in, then we take a small fee of half of one months rent, and we still provide you with everything that you may need right until your tenant moves out. The listing and credit check is absolutely free, so there are no upfront costs to you. We are cheaper than everyone else and we provide you with way more value and services. Other companies only help you find a tenant and they charge you one full months rent. We are revolutionising the way rentals are done.
At this moment our services are only available in Ontario Canada, but that will change soon as we expand to the remainder of North America.
We also partner with realtors and property management companies.
If you have any questions or would like to explore partnering with us, please feel free to reach out.
Lease Our House Inc.