September 4, 2023
Don’t Let Tenants’ Financial Issues Become Your Own
When things go well between you and a tenant, the professional relationship can be a beneficial one to both parties. As a competent and upstanding landlord, you provide a comfortable and attractive space well worth the rent that you charge. The tenant, of course, fulfills basic duties like keeping the place clean while providing you with a steady income. Your income property can be a successful investment, because you’ll make money even as you hold onto an asset that could increase in value over the years. However, again, this is only the case if things go well. However, not all landlords get so lucky. Some end up with tenants who have financial problems. When a tenant can’t pay his or her rent, his or her financial problems aren’t just their own; they’re yours, too!
The Dangers of Insolvent Tenants
A great deal can go wrong with a rental property, but few problems become as expensive or as frustrating as having a tenant who is not paying his or her rent. A vacant property may not make you money, but vacant properties do not deteriorate as fast as occupied ones, and therefore require less maintenance. Vacant properties can also, of course, be filled. When you have a tenant occupying your space who is not fulfilling their rental obligations, then you have an occupied space with higher maintenance costs that operates at a total loss. Worse still, your options for recovering rent can be limited, and may be expensive in and of themselves. Between potential eviction proceedings and court costs, you may find that you recover just a fraction of the money you deserve, if you make any of it back at all. In fact, you may end up not going after the tenant for back-rent with any real legal zeal, just because the cost-benefit calculation doesn’t show that to be a worthwhile option. That’s frustrating and depressing, and it’s just one more reason to fear having a tenant who doesn’t pay rent.
Having a tenant who can’t or won’t pay rent on your property is a disaster, but it’s an avoidable one. The key is to be cautious during your initial search for the right tenant. While no guarantees exist in this business, a careful search and proper background checking with the proper landlord tools can help you be more confident about the financial state of your renters, meaning they’re less apt to have financial issues that become issues for you, too!
Protect Your Property with the Right Tools
It would be wonderful to live in a world in which we could rent to nice people without having to worry about them hurting us and our finances. However, that’s not our world. That’s why you need to protect yourself. Every potential tenant who wants to rent your property should be subjected to a background check and a credit check, experts agree, and you need to have an accurate idea of what their income is. After all, you must make sure they can pay the rent!
So, what should you look for in a potential tenant? Experts often agree landlords should demand that tenants make at least three times the rent of the property (you can just compare annual income to annual rent). You may find that this figure needs to be a bit flexible, depending on what sort of market you’re renting in and what sort of property you’re offering (in cities with very valuable real estate, renters sometimes pay more than this proportion of their income in rent). Look for good credit, too, because even wealthy folks can live outside their means and fail to pay their debts.
You don’t have to check for any of this on your own, of course. You have plenty of tools at your fingertips, including landlord software options. Performing a tenant credit check through a site like Turbo Tenant is easy, and it will help ensure that the tenant you’re accepting is going to keep your income property profitable.