Many real estate investors get burned by tenants all the time.
A lot of these unlucky landlords are so fed up that they are ready to do anything to get out of the tenant nightmare.
And sometimes it just gets worse! So what can you do as a real estate investor to be relatively safe with your tenants? This article explores a few options that can protect you.
Yesterday, a friend of mine, Willie, called me to assist him return a flat screen TV back to Best Buy using my van.
Now, Willie is a very composed guy who never raises his voice and always seems to know his way around.
On our way to Best Buy, he got phone call that ticked my attention...
Willie was raising his voice with every sentence; by the end of the conversation he was shouting and looked so mad that I had to ask him to break the conversation.
It turned out his tenant of 6 months breaks something in the house every month.
Her rent is paid by section 8, so she only pays $86.
Every month, she has to make sure that something is broken and has an excuse not to pay the $86 so she can fix it.
Willie now lives in Texas, her tenant is in Indiana - which means he usually accepts these bills from her tenant! To make matters worse, she recently called section 8 to complain about the "deplorable condition" of the house - which had passed section 8 inspection just 6 months ago.
As a result, section 8 stopped making any rent payments.
Now he is stuck with a tenant who breaks down his house, who refuses to move out, and who will not even pay $86.
So what to do? Lots of landlords have similar horror stories to tell.
How can we protect ourselves from this nightmare? 1) Screen, screen, screen! We are living in tough economic times, and chances of delinquency are now bigger than ever before.
Make sure the rent application is fully completed.
Make sure they sign documents that allow you to pull their credit.
Call their place of work to verify employment even if you have a paystub.
Talk to every previous landlord and ask specific questions about their stay there.
The questions must be specific, such as "Has she ever been late making her payments?" "Have you ever taken her to court?" "how well does she take care of the apartment?" etc.
These questions allow you to evaluate not only the credit worthiness of the tenant but also the kind of character you are dealing with.
2) Do a background check Do a criminal background check to make sure they don't have a criminal record.
I cannot emphasize the importance of this.
3) Use a good lease contract Make sure your contract is mandated by your local real estate commission, or that your attorney has approved it.
A good contract will protect you on all fronts.
If you do find yourself with a bad tenant, a good contract will protect you in front of a judge.
While nothing is bullet-proof, this will be an asset you may value in such bad cases.
4) Inspect the property Make sure you take your tenant through the house as they inspect the house.
Take pictures of them inspecting the house, as well as any noted problems.
Make sure you sign the contract inside the property.
They must initial every page on the contract.
5) Good luck! Hopefully this process has protected you and you will enjoy a good cash flow with your properties.