Written By Sally Norton for Vogue Real Estate Australia
Having rent coming in every month is a great way to add some more funds into your monthly budget. In fact, this is such a lucrative situation that some people have made it their mission to acquire as many rental properties as possible which will then be rented to potential tenants. However, if you are going into this situation with unrealistic expectations, you might find yourself disappointed at the end of the day. Especially if you haven’t taken any measures to protect yourself against bad tenants.
Hey, these things happen. As a landlord, you will most likely have to deal with a bad tenant sooner or later (unless you have crazy amounts of luck). In that situation, you’ll need to come up with good solutions to solve the crisis. But one might ask you this – why look for a remedy for the situation when you can prevent it altogether? Whether you have just bought your first condo that you are thinking about renting or you already have a range of properties, take the aforementioned measures of precaution and you won’t regret it.
Never make verbal deals
This one almost seems too obvious of a mistake for anyone to make. Yet, you would be surprised to know just how many landlords rely on verbal deals – at least in the beginning. For starters, verbal deals never hold up in court. Should you have any problems with your tenants, you will basically be trapped with zero chance of winning.
That’s why you should not only sign a formal contract but also ensure that every tenant gets his/her copy of the agreement. The lease agreement should state clear rules, such as no smoking on the promises, the time frame when the rent is paid and so on. Just make sure the rules are clear to all parties – should they neglect a rule, you always have the protection of a lease working in your favor.
Make sure your tenants provide sufficient information
You are not exactly offering a job but the person who gets your home for a year (or more) needs to be qualified. You need to ensure that they can afford the rent, for starters, especially if your property is located in a good neighborhood where the rental prices are steep. That’s why it is completely okay to request your tenant to fill out an application form. Only a few of the pieces of information your tenant should provide include:
- Social security number
- Current and last two addresses (in pair with the landlords’ name and contact information)
- Sources of income
- Major expenses
- Information about the vehicle they own
Check the references your potential tenants gave you
Your potential tenants bothered to provide the pieces of information you requested. Great – now you have to do your part of the job. You need to call up every contact that was listed as a reference! We don’t suggest you rely too much on close personal friends of the potential tenants or even their current landlord. Who knows – the landlord might be eager to get rid of them, forming an unrealistic picture. The best references (or the truest ones, at least) are those that come from past landlords and past/current employers.
Trust us – the knowledge you gain this way will be priceless. Some landlords find out that tenants aren’t responsible when it comes to paying rent. Others find out they are casual rule-breakers. And then there are those who learn that the easy way to disassemble your furniture is simply to let tenants occupy your house – that’s how extreme of a situation others have found themselves in.
Perform all the necessary checks to protect yourself from bad tenants
That’s right – you can probably guess what this means! This is the right time for a background check where you would look into the existence of a criminal record. Also, you want to perform a credit check and get an insight that will be of great help. Luckily, these days it is very easy to perform background and credit checks, so you shouldn’t have a problem with this.
It goes without saying that you should let your tenants know you intend on performing these checks. The good news is that you might be able to weed out incompetent tenants this way. If they suddenly lose interest in your property after you disclose your intentions, you can rest assured they have a skeleton in their closet. You will be saved without having to lift a finger.
Be regular when it comes to inspections
One of the best ways to protect yourself from bad tenants is to simply keep a close watch on things. And that’s what regular visits to your property will do! You are legally within your right to perform inspections that will ensure your property is being well-maintained. Of course, that doesn’t mean you can just barge in and perform an inspection on the spot. That’s not how these things work. You need to give your tenants a weeks’ notice prior to conducting an inspection.
But be careful – we always suggest you play it safe and check the local laws on what’s the legal way of performing an inspection. Better yet – consult with your attorney when forming the property rental agreement in the first place. They will be able to give you the best pieces of advice that will ensure your maximum safety. And that is the end goal here, isn’t it?
One thing is for sure – regular inspections will give you enough time to notice anything going wrong. You won’t have to wait before the problem becomes too big to address it. You can simply nip it in the bud. That will not only help you protect yourself from bad tenants but it will also help you maximize your profit. You won’t have to spend time or money on tenants that will turn out to be bad. If you notice them breaking the rules and not keeping your property in decent shape, you will be able to take the steps needed for them to vacate your premises.