Sometimes tenants can be very frustrating to landlords. In fact, if you are reading this, you are an experienced landlord so you already know that the pareto principle usually applies to tenants: “20% of your tenants will cause 80% of your tenant problems.” In fact, often, it’s a far smaller number than that. Nevertheless, problem tenants can damage property, disturb other residents, and cause serious cash flow issues by being late with rent or not paying at all. Sometimes, problems with tenants can be avoided, though through good planning and setting firm boundaries. Here are 3 tips you can work into your own rental business to help manage the problems of having difficult tenants.
Tip #1: Practice Good Tenant Screening
Tenant screening can often prevent having problem tenants in the first place. Tenant screening starts long before you ever have a conversation or email exchange with a prospective tenant. It can (and should) start when you place your ad to rent your unit. In down rental markets when it’s more difficult to attract tenants, some less experienced landlords often think they “can’t be too picky” because “I need to fill this unit.” These days, prospects are more plentiful, so landlords can afford to be a bit more choosy.
[Note: Be sure you are in compliance with Federal and State Fair Housing Laws. It is illegal for landlords and managers to discriminate against prospective tenants or tenants based on race, color, religion, sex, disability, familial status, national origin, creed, sexual orientation, ancestry, marital status, receipt of public assistance or age. Do not assume you are in compliance. Check with your state’s Attorney General office, or Hud.gov they will have resources for you.]
It's true that tenant screening only goes so far, and you can’t ever know for certain how a tenant will be. However, when you place a for-rent ad, you should be thinking about your ideal renter and how to attract only that ideal renter (without discriminating inappropriately).
Along with your list of features of the property, consider including a list of requirements of tenant applicants. Being clear in the ad is very important. It’s ok to be specific, as long as you aren’t discriminating against a protected class. Here are some preferences you can have criteria for:
Smoking or not
Pets or not, or else with what restrictions
Income to rent ratio
Credit score threshold
Eviction history (check municipal laws, Minneapolis just passed an ordinance preventing landlords from rejecting tenants on the basis of evictions older than 3 years.)
The more detailed your list of requirements, the narrower your focus. The idea is that only the best-fitting prospects will apply. But the longer your list, the more this limits your pool of prospects too, so play around with different ways to word your ad to find the right mix of inviting applicants and weeding out applicants that don’t fit your requirements. A well-crafted ad can avoid having problem tenants apply at all.
TIP #2: Call Rental References
Professional landlords and managers do not skip this. This is your best possibility of finding out what kind of a renter you are considering renting to. Remember, you are running a business and your business depends upon steady income, your tenants provide your income. If they don’t pay, you don’t have a business. So, ask for references on an application, and actually call the references and ask simple questions of these landlords. Be careful to avoid personal or discriminatory questions.
Questions You CAN Ask a Previous Landlord Reference:
“How was this tenant’s rent pay history?”
“Did they pay on time?
“Did they take care of the property?”
“Would you rent to this tenant again?”
Questions you CANNOT Ask a Previous Landlord Reference:
“Is the tenant white?”
“Are they married?”
“Do they have kids?”
“How many kids do they have?”
Any other questions related to a protected class as defined by Hud.gov or your state’s laws.
Tip #3: Set Clear Expectations
Assuming you have been clear and set some expectations in your for-rent ad, consider also being crystal clear when you sit down to talk with applicants and show apartments. When I sit down with applicants to sign a lease, I’ll say things like “It’s not fun to bring this up, but I want to be straight with you, we have a zero-tolerance policy for late rent or disruptive behavior. And I don’t like to scare people but I will file with the housing court on the 5th day of the month if we haven’t received your rent.” We all know this does not prevent a chronic non-payer from shirking their duty to pay rent, but it frames the relationship so that they know you will take the necessary action to lawfully protect your investment and will pursue legal remedies if you need to.”
Maintenance calls are also a big concern for many landlords. The best way I’ve found to minimize these issues is to set clear expectations from day one about the process for dealing with maintenance items. At lease signing, I make a clear distinction between a management emergency item and a maintenance item. Example: if tenants plug the toilet they may think that’s management’s emergency, but doesn’t have to be. I make it clear to them that part of being a responsible tenant is having plunger around and trying to deal with it themselves first. A little training goes a long way. It’s important to sit down with tenants early on and clearly define what constitutes an emergency and what is a regular maintenance items. I’ve even given tenants a sheet that defines common problems with a list of people to call for real emergencies. Example: they turn a faucet and it starts spraying water all over the kitchen. [Hopefully you have already checked your faucets before renting the unit and made sure they are not old enough to be at risk for this kind of failure.) I want them to first turn off the shut-off value, then call my handyman. [Note: you need to have the right arrangement with your handyman for this to be cost effective. If you have a good relationship with the handyman, they can go look at the problem and then only call you if the repair is more than $75 for example.] Then you don’t need to be called unless it is more serious and you have avoided a late night or weekend call or trip to the property.
Thanks for reading this post and as always, please – share and comment below.
What are your favorite ways to deal with and prevent problem tenants?