Owning a rental property can be a great investment, a source of consistent recurring income without you having to physically be there most of the time. Unlike a job, a rental property makes money while you’re on vacation, while you’re sleeping, and while you’re doing whatever else it is that you do.
However, one of the surest ways to turn a money-maker into a money-loser is to rent the property to problem tenants. Tenants who don’t pay their rent on time constantly complain or damage your property can be a stress on both your wallet and your mental well-being. Here are some tips on how to avoid renting to problem tenants.
Start with Having a Solid Lease
A lease signed by a rental property owner and tenant(s) is a legally binding contract. The lease should include clear provisions for what both parties are responsible for and all that’s required of them.
An ironclad lease can go a long way toward preventing disputes. A landlord can include language about what maintenance duties fall on the tenants, what hours they can be contacted, what determines an emergency situation, and more. A solid lease provides the foundation for avoiding problems with a tenant.
Should the owner decide not to manage a rental property located in Santa Clara, CA, for example, they could use a local Santa Clara property management company to provide a tried-and-true lease document that establishes that foundation. It’s important to use a lease reviewed by professionals in the local real estate market where your rental is located to ensure it complies with local state and county laws and ordinances.
Gather as Much Financial Information as You Can
Usually, the best predictor of future behavior is past behavior. Prospective tenants who have struggled to pay rent on time or have mountains of debt are likely to continue that behavior.
There are several aspects of gathering the information you’ll need to get a good picture of a tenant’s past, starting with their financial situation. You’ll want to get pay stubs, look at a few months of bank statements, and examine credit reports.
Even if a property is in an area of high-earners, like Sunnyvale, California, a professional Sunnyvale property management company will verify that tenants have the means to afford rent now and a history of paying bills on time. Even high-paid professionals can have a poor financial history, and may not pay their bills on time.,
Do a Background Check that Includes Landlord References
Even if all the financial information points to a tenant applicant’s stability, you could still end up with a problem tenant. Tenants with a history of domestic violence, serious drug convictions, or property damage can cause problems for property owners even if they’re paying rent on time. It makes sense to conduct a thorough background check on tenant applicants.
A criminal history doesn’t necessarily disqualify someone, but it gives you some idea of what you might expect should you choose to rent to them. Another way to get a clear picture of what to expect is to ask for and follow up on past landlords’ references.
A professional Santa Clara property management company would contact previous landlords to see what they have to say about paying rent on time and taking care of the property.
Do a Face-to-Face Interview
Sometimes, gathering all sorts of documentation and reviewing an applicant’s records can reduce them to numbers on a screen. Numbers don’t always tell the whole story, so it’s a good idea to meet rental applicants in person.
Even if you’re inexperienced at managing a rental property, you might have enough experience with people to trust your gut about someone after meeting in person. Another option is to use a property management company that provides on-time rental services, including tenant screening services for property owners. They will provide credit screening and meet with qualified applicants in person before making a recommendation to rent to them.
Management Services from Valley Management Group
The professionals at Valley Management Group have been providing trustworthy and affordable property management services to rental owners in Santa Clara, Sunnyvale, San Jose, and throughout Santa Clara County for over 35 years. If you own a rental property in Santa Clara County, contact Valley Management Group for a free property management quote and one free month of property management services when you sign up for services.