Accepting a bad tenant will inevitably lead to problems. It might take several months for issues to surface, but you may rest assured, they will.
There’s no guarantee you can avoid every potentially bad tenant, but most can be readily avoided with the proper due diligence. That means a thorough tenant screening.
If you don’t screen your tenants thoroughly and maintain strict standards for your tenants, you could eventually face the following five consequences.
1. Lost rental income
There are three ways a poor tenant will make you lose rental income:
- Failure to pay rent
- Payment of partial rent
- Damaging the property so much that you have to spend extra time and resources on repairs
Every month that you don’t collect rent in full represents lost income and additional costs. For example, say a tenant’s monthly rent is $1,700 and you use $1,200 to pay the mortgage and $200 to cover bills, which leaves $300 profit.
Every month without rent costs you $1,400 out of pocket to meet property-related expenses. Four months of lost rent would cost you $5,600.
That’s 18.6 months of profit. For every four months of lost rent, you lose more than a year and a half of profits to out-of-pocket expenses.
2. Legal fees
You never want to get sued by a tenant. It doesn’t matter if they’re wrong and the judge rules in your favor, because you still have to pay court fees and attorney fees (and good luck collecting a judgment against a tenant ordered to pay your legal fees!).
A bad tenant might sue you for any number of reasons. For instance, he might wrongfully sue you for harassment just because you asked him to park in a designated area.
Or, the tenant might sue you for discrimination in an attempt to pressure you into paying settlement money. There are professional tenants who repeatedly rent a property, then take advantage of the landlord and the system.
Some of these schemes may entail false accusations of discrimination and the filing of false reports with government agencies.
3. Lost time
The amount of time you’ll waste going back and forth hassling with a bad tenant will make your head spin. Between phone calls, emails, text messages, notices, and in-person arguments, you’ll be kept busy.
You can never get that lost time back. Managing a bad tenant is exhausting and a waste of your time. If you’re an active investor, you’ll have less time to pursue additional investments as well as less time to spend with friends and family.
4. Severe property damage
When you think of property damage, you might envision a hole in the wall, a ceiling fan dangling loose, or doors taken off their hinges. Admittedly, none of those situations is fun to deal with, but they’re all a breeze compared to what some tenants leave behind.
Certain tenants will completely destroy a property before they leave, especially when they’ve been notified they’re about to be evicted. They’ll take a sledgehammer to the walls; others urinate and defecate on the carpet.
Sometimes evicted tenants intentionally leave the water running when they depart from the property for the final time, or when they go on vacation. Water damage is the worst kind you’ll have to deal with, since repairs often require removal and replacement of floors, walls, and roofing.
Bad tenants often retaliate in strange and obnoxious ways. For example, some landlords have found rotting fish in the walls of their property after a tenant has been evicted.
You might also get dragged into court as retaliation. For example, say your tenants caused $5,000 in damage when they left the property. Their security deposit was only $700, so you put their entire deposit into repairs.
Even when you do everything by the book, your tenant still might sue you for withholding the deposit. Tenants who do things like this know the court won’t side with them, but the goal isn’t to win their lawsuit; they only wish to get even with their landlord.
Here’s how you can avoid getting caught with problem tenants from the start:
- Ask prospective tenants pertinent questions. Screening requires asking the right questions so you can assess the answers.
- Check references to avoid getting scammed. Believe it or not, some applicants will list references who won’t say nice things. Always verify the references provided.
- Follow Texas state and local laws. Every law matters, including landlord-tenant laws, Fair Housing laws, and local regulations.
- Run credit checks. There’s no other way to verify whether an applicant is financially responsible.
- Require all adults to be responsible on the lease (only minors or adult dependents can be occupants). It’s risky to allow adult occupants who aren’t financially responsible for paying the rent. This isn’t a rule, but it’s less risky.
- Cross-check phone numbers provided with official business listings during employment verification. Require a company phone number. When you verify employment, call only legitimate business numbers. Don’t give applicants the chance to have a friend pose as their former boss.
If they try to give you a former manager’s personal cell number, request the company’s verifiable number, call it, and request to speak with the manager at that number. Only accept a personal number as a last resort.
- Don’t let missed rent payments slide. If you let one missed payment slide, it can turn into multiple missed payments and the expectation that you’ll waive late fees.
- Evict when necessary. Don’t hesitate to serve formal eviction papers when you see red flags that are grounds for eviction.
Being a landlord is exhausting, so hire a property manager
Have you ever wondered how much time and energy you can save by hiring a property manager? When you don’t have the time, energy, or patience to be a full-time landlord, a property manager can pose a huge relief.
If you own rental property in the Houston area and you’re looking to get some relief, contact us today for a free rental property analysis.