Minimize Damage to your Residential Rental

The Best Defense is a Good Offense

That’s an old sports and military adage … with equal accuracy when applied to owners of residential rental properties. Said another way, many times property damage will be limited to normal wear and tear when landlords take a proactive stand in tenant selection, communications, enforcement of lease provisions and property management.

At the very least, taking the initiative and dealing with all tenants in a consistent manner will minimize the likelihood of destruction of your rental by inattentive or disgruntled renters.

So, where to start? Start with the mindset that No Tenant is Better Than a Bad Tenant.

                 

Before Signing the Lease
Written Rental Application

In keeping with that, an excellent first step is with a written rental application. Ensure that the application addresses financial information, employment history and personal data. Click here for an example

https://app.propertyware.com/pw/portals/krsholdings/tenantApplication!print.action

The application must notify the applicant that a background check, criminal history report and credit check may be ordered if appropriate for each adult prospective occupant. The prospective tenant must grant authorization to do so as part of completing and signing the application.

Note: An incomplete application is a red flag. Depending on how critical the missing information is, it may be grounds to reject the applicant.

Background Checks

Upon acceptance of the application … you, the landlord, may choose to conduct one or more of the following reviews of the prospective tenant’s history: criminal background check; credit check; standard background check.

  • Criminal Background Check: You want to avoid accepting a known criminal capable of harming you, other tenants or neighbors.
  • Credit Check: Certainly, you want to be sure a potential tenant may be relied upon to pay the rent … in full and on time. A credit check will review the prospective tenant’s previous credit history. What to look for.
  • Current Debt: Are there large loans, late payments or maxed out credit cards? If so, there may be issues in collecting rent.
  • History: Be wary of a history of collection accounts, charged off credit card accounts or recent bankruptcy
  • Standard Background Check: This will include a search of public records to identify past financial gaffes, e.g. delinquent child support, law suits for unpaid rent or property damage. Additionally, a history of evictions may be uncovered which should prompt further scrutiny of the applicant by you.

Previous Landlord Experience

The best predictor of future behavior is past behavior. Contacting the prospective tenant’s former landlord can be revealing if you probe  timeliness of rent payments and whether there was any major damage to the rental unit not covered by the security deposit. Were there negative lifestyle issues that caused disturbance to neighbors? And most importantly, would you rent to this tenant again?

Whenever possible, seek references from a landlord that preceded the applicant’s current landlord. The current landlord may be motivated to “gild the lily” in an effort to get rid of a bad tenant.

Employer

Contacting the employer will tell you whether or not the prospective tenant is a current employee. If the employer is willing to share, it is worthwhile to ask about length of employment, compensation and on-the-job behavior. This may provide you with telling insight into the applicant’s approach to safeguarding and maintaining employer assets in the workplace and how that may translate to attention to your rental unit.

Your Image of the Ideal Tenant

Focus on tenant qualifications and likelihood to meet rent payments and maintain a sound rental unit. For example, some landlords are uncomfortable with pet owners as tenants. If you screen your applicants, find no evidence of past pet damages and price for the potential of added exposure … go for it … why exclude otherwise responsible tenants?!

After the Lease is Signed

The Lease (Rental Agreement)

Memory is often fleeting as well as selective. That underscores the need for a lease that is legally binding in your state. To minimize the potential for excessive damage to your residential rental property, your lease should include provisions for the following:

  • Specific descriptions of your rules, regulations and best practices as they apply to tenant attention to safety.
  • Specify tenant repair and maintenance responsibilities.
  • Require tenant notification of dangerous or defective conditions at the rental unit.
  • Any home improvement, even as simple as painting a room, must be submitted in writing for your approval.
  • Include provisions regarding subletting or addition of new occupants. As landlord, you should reserve the right to approve or deny new occupants … ideally based on a background check.
  • Consider a non-smoking policy.  Nowadays, most renters welcome a smoke-free environment, so may attract tenants that show a regard for the property. Such a ban will also minimize property damage and reduce turnaround costs.
  • Highlight periodic visits to the property to determine condition.

Make it a point to discuss the lease provisions in detail with the prospective tenant. Getting reactions to specific provisions may offer insight into what kind of renter behavior to expect. Emphasize that you are serious about the lease clauses and always enforce them consistently.

Don’t get “played”. The old adage of “giving an inch and they take a mile” has application here. Don’t entertain discussions of alterations to your lease provisions in an attempt to accommodate an applicant’s request. You are in charge and must demonstrate your intent to protect your interests and property based on lease provisions that best support those objectives.

Note: When purchasing a property with existing tenants, confirm that all leases conform to state legal requirements. Your attorney will be the best judge to determine compliance and necessary revisions, if any.

Evidence of Condition – Before & After

The condition of the property is the focal point of most tenant/landlord disputes. So being able to show an accurate picture of the property when the tenant took occupancy vs. the look at move-out will show solid evidence of normal wear and tear and excessive damage.

Reassure your tenant that your intent is to return the full security deposit. That is an incentive for the tenant to take proper care of the rental unit in anticipation of a return of cash upon vacating.

Personally Inspect the Property

Plan on getting your eyes on the inside of the rental unit a couple of times a year … of course, only after providing proper advance notice as required by state law. Catching a bad tenant early on will minimize property damage and hasten a quicker turnaround. Your scrutiny should include signs of neglect, deliberate damage, evidence of new occupants and breaking lease provisions or other safety and maintenance rules.

The Tenant From Hell!

It doesn’t happen often … but it does happen … especially with a tenant faced with eviction. Every landlord’s worse nightmare is the willful destruction of property by a tenant enraged by eviction proceedings. When it occurs, damages can soar into the thousands of dollars between structural damage and destruction or theft of appliances.

There are a number of legal moves that a landlord can take. Unfortunately, with the length of time an eviction can take and likely lack of finances of the tenants, there is not much of a practical solution or restitution for the property owner. So the best gambit is to minimize your losses.

“Cash for Keys” is often a motivating factor for financially strapped tenants to vacate a property without doing damage. The offer of quick cash may save multiples of that amount in loss of property value or repairs and replacement costs.

Summary

  • Do your due diligence in screening applicants.
  • Have a legally binding lease/rental agreement.
  • Enforce the provisions of the agreement consistently.
  • Document property condition “before” and “after”.
  • Personally inspect the property, inside and out, twice a year.

 

 


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