Owning and managing a rental property that is always in demand comes with a wide range of risks for landlords. One of the most importance source of risk is the tenant. A rental agreement between a landlord and a tenant gives the tenant the right to live in the property with varying degrees of freedoms and options as well restrictions and limitations, depending on the specific rental agreement. However, a substantial problem with tenants is that some of them are simply not responsible enough to leave the property free of damages, regardless of how strict the rental agreement might be.
For landlords the cost of repairs of damages caused by a bad tenant or hefty cleaning fees for cleaning the mess after a reckless tenant might become a major financial burden, particularly in cases of high average tenant turnover. This leaves owners having to deal with a double load: having to take the time and the responsibility for cleaning a mess as well as having to incur the costs for it. It is fair to say that usually tenants do not go on a destructive phase of properties by intent; in most cases, it is their negligence and carelessness (often resulting from the fact that the property is not their own home) that cause these damages. Many tenants don’t have the urgency to fix or even report minor damages (especially if they don’t plan to remain in the rental property for too long) that could eventually become much bigger problems. A minor pipe leakage that would cost the investment property owner a $100 to fix right away could lead to a number of severe problems (destroyed walls, damaged electric appliances, etc.) that would cost the owner thousands of dollars in repairs.
So this pending risk in real estate investing raises an important question: How can landlords protect themselves from these types of tenants? There are several ways to deal with tenants and to keep them in line with the rules of the landlord without infringing on their rights or making your property undesirable. These steps should as a minimum ensure the owner that once the tenant leaves, he/she will cover any damages caused during his/her stay.
Preventing Tenants from Damaging Your Rental Property
1. Security Deposits
Asking the tenant for a security deposit before he/she moves into your property is the best way to ensure that you have a financial guarantee for damages or missing items. The security deposit’s main purpose is to act as a reminder for the tenant that he/she should take care of the property. If a tenant’s financial guarantee is under risk of being deducted, then it gives him/her an incentive to treat the property as their own. Moreover, security deposits have the added benefit that they are very popular in tenant-landlord relations, so having such a requirement would not make you less competitive than other real estate investors.
2. Building a Healthy Relationship with Your Tenants
Like any business, real estate investing is also about the interaction among different people with different positions. Thus, as a landlord it is important to have good social skills that make you communicate well with your tenant. Developing a healthy, friendly relationship with tenants makes them be more respectful to you as a landlord and to your property. It makes the tenant not feel obligated to take care of the property but rather want to do it out of respect to the landlord. An owner is supposed to encourage tenants to have a standard when it comes to property cleanliness or functionality; it means they care about the living conditions they are in. This reflects positively on the owner. Don’t take it wrong though – you don’t have to become besties with your tenant and watch football together. Just make sure to build an understanding, kind, and amiable relations.
3. Set a Standard and Keep It
Tenants’ expectations of the future state and cleanliness of the rental property by you as the landlord will depend largely on how the property is on their arrival for their first visit. If the property is well managed, clean and completely functional, then the tenant will view this as a standard that he/she should uphold. However, showing a potential tenant a property that is not clean and in need of major repairs sends the wrong message, specifically that the landlord is negligent towards their own property, so why should the tenant care. Thus, it is absolutely worth it putting enough time and effort to maintain and clean up your investment property after the last tenant leaves before you start looking for new ones. It’s better to lose one month of rental income due to vacancy than to get a tenant who will cause damages worth 5 months of rent.
4. Detailed Lease Agreements
In the lease agreement, landlords should state specifically how they expect the apartment to be returned once the tenancy period is finished. Lease agreements are legally binding and therefore they force the tenant to fix any pending repairs or cleaning required before he/she leaves. The lease agreement isn’t just to keep the tenant in line but to also keep the landlords on their toes to retain the highest standards. That’s why it is very important to draft and sign a lease agreement which is as detailed as possible. You might even want to attach pictures of the state of the property when you handed it to the new tenant to show how you expect to receive it back, of course taking into consideration some normal wear.
5. Tenants Screenings
Choosing tenants is never easy. Landlords must be careful when selecting the people who will be using their property. Tenant screenings involve references from previous landlords, and this should be the biggest indication about the responsibility of the tenant towards rental properties. As a real estate investor, do not ever opt for the choice of shortening the tenant search period just so that you start receiving rental income immediately. Instead, take your time to make sure that you get a good tenant who will not cost you thousands of dollars. Develop your own screening criteria, and stick to them strictly. With so many people out there looking to find a place to rent, you are guaranteed to find the right candidate.
Related: 8 Things That Make a Good Tenant
When it comes to rental agreements, the one who stands to suffer more if unprepared is the landlord. This is why it is vital for landlords to follow the steps described above in order to protect their properties from a negligent tenant who will not pay attention to the cleanliness and the overall condition of the property. Having a completely bulletproof way of preventing damages is never guaranteed, but with these steps a landlord is more likely to minimize them.