The Dangers Of Choosing Bad Tenants For Your Rental Property

What is a bad tenant? 

You might think this is subjective, but from an investment perspective, a bad tenant is anyone who costs you money. How they do this can differ from tenant to tenant – a few examples include: 

• Not paying rent on time
• Damaging your property
• Creating a mess when they move out
• Making your property harder to rent out in the future

Bad tenants are a virus for landlords and should be avoided like the plague. You’ve invested a lot of money into this property, so you don’t want to find yourself in a loss-making money pit. Some tenants can cause so many problems that you give up on your property and sell it for cash just to recover some funds as quickly as possible. 

Obviously you want to avoid this – so let’s look at how you can dodge the worst tenants, along with the benefits a good tenant will bring to your rental investment. 

Conduct A Full Screening Process

In all honesty, you only need to do one thing to ensure you avoid bad tenants: screen them. 

Implement a tenant screening process so you can check everyone who applies for your rental property and ensure they’re a good fit. You’ll find software platforms that handle all of this for you, and the screening process should look at the following: 

• Background Checks: This is your standard check to see if a prospective tenant has any shady history. You’re mainly looking at criminal records and charges here. While not technically an indicator that they’ll be a bad tenant, it does throw up some red or amber flags. Is it worth taking a risk on a tenant with a long criminal record, especially if they’ve been charged with crimes recently? 
• Credit Checks: Without a doubt, the most important check of all. A credit check tells you about a tenant’s financial history and how reliable they are at paying things on time. You should avoid any tenants that are flagged with poor credit scores – especially if they also have a track record of missing payments, falling into debt, etc. How can you guarantee that they’ll pay you on time every month? You can’t, so they are not worth the risk at all. 
• Eviction Checks: You should also conduct some eviction checks, which will basically tell you if a tenant has been evicted from somewhere before. As you can imagine, it’s not the brightest idea to rent your home out to someone who’s been evicted from their last few properties. 
• Reference Checks: Some landlords also like to carry out reference checks on tenants, though this is optional. Ask them to provide you with a reference if they’ve been renting previously – this lets you call their old landlord and ask about the tenant. It could transpire that the tenant has a clean background and paid rent on time, but they left their property in an absolute state that cost the landlord a fortune to deal with. You may also discover that they were quite rude or just a bit annoying, which could put you off. 

Be very thorough with the screening process because it can literally be the difference between finding good or bad tenants. Why is all of this so important anyway? Well, take a look below to see the benefits of choosing good tenants, and the dangers of sticking with bad ones. 

Bad Tenants Cost A Fortune, Good Tenants Save Money

A bad tenant will force you to spend more money on your property than intended. This can happen if they don’t look after the place or decide to do their own decorating. In scenarios like this, you’re spending money on maintenance or repairs to correct their wrongdoings. 

Not to mention that you’ll may also need to evict bad tenants, which can cost time and money in legal fees. Then, when they finally leave, you spend more money recovering the property, listing it on the market, and finding new tenants. 

A good tenant doesn’t bring all of this baggage with them. They leave your home in the best condition, minimizing any maintenance or repairs. They also stick to the rules and won’t need to be evicted, so you never have to deal with any legal fees. If you want to avoid spending a fortune on your rental investment, good tenants are the way forward. 

Good Tenants Ensure You Have A Consistent Income Stream

Good tenants will also pay rent every month at the agreed upon date. This gives you the confidence of having a consistent stream of rental money coming into your account. Having this consistency makes it easier for you to plan future investments or pay your property management agency.

On the other hand, bad tenants could go weeks or months over their rental payment deadlines. You’re put in an awkward situation of needing to chase them up or take legal action. Meanwhile, your consistent flow of income is no longer there. This can eat into your plans and mean you struggle to pay property managers, etc. 

Good Tenants Will Stick Around For Longer

Tenant turnover is a silent killer for all rental investments. The more time you spend trying to get new tenants into a property, the more money you waste. Bad tenants will not stick around for a long time because you want to kick them out. Now, imagine you deal with a series of bad tenants, all of which only last a few months. You’re in a constant cycle of emptying the property, getting it ready for the market, hiring estate agents to promote the property, and so on. 

It puts a drain on your resources, but good tenants stop this from happening. Find the right person (or family), and they will stick around until they feel like leaving. This can mean you have the same tenant in your property for years. Your rental is rarely empty, and you aren’t wasting money. 

The dangers of bad tenants are real, but you can avoid them by taking a few simple actions. It’s all about screening everyone who inquires about your rental property so you can confidently lease it out to someone trustworthy.