How to Avoid Bad Tenants - Real Estate Investing .org (2024)

We’ve all heard about the “tenant from hell.”

You know, the one that that knows every law, knows how to take advantage of the system, and will take advantage of you and live for free in your rental property for the next year?

Unfortunately, tenant-friendly states like Massachusetts, California, New York, and others, just make it harder for us to run a good business. They make the situation worse for us and for prospective tenants!

So, the key is to try to avoid the bad ones in the first place!

The single most important thing a landlord can do to avoid bad tenants is to screen them. In fact, MOST landlords have little to no screening process, which is why you should implement a formal screening process and application with an application fee. The application fee should cover the cost of doing a background check, credit check, and eviction records check.

Start by downloading afree tenant application form(and you’ll find a ton of other free forms as well)You should include these questions in addition to anything else you may find necessary to screen for bad tenants.

Then, follow these: 7 Steps to Avoiding Bad Tenants

1. Collect the Background Information

Gathering comprehensive background information is a pivotal step in safeguarding your property against undesirable tenants. This process is not just about ticking boxes; it’s about delving deep to uncover the true character and history of potential renters.

A. Essential Identity and Credit Checks

Begin by obtaining the applicant’s Social Security Number and a valid ID. This basic step is crucial to confirm the identity of the applicant, especially since individuals with a history of evictions or unpaid bills might use another person’s identity. Once you have confirmed their identity, proceed with a detailed credit check. It’s important to assess their financial obligations – a tenant’s total debts shouldn’t exceed a third of their income to ensure financial stability. However, be judicious and consider the context behind a credit score, as factors like divorce or a lack of credit history can impact it.

B. Enhanced Background Screening with Technology

In today’s digital age, traditional background checks can be significantly augmented with technology. Utilize advanced tenant screening software that goes beyond basic credit and criminal checks. These tools can analyze a tenant’s online behavior, social media profiles, and even rental history databases to provide a more nuanced view of their lifestyle and potential as a tenant. For instance, AI-driven screening platforms can flag patterns of behavior that might be missed in standard checks, such as frequent late payments or a history of disputes with previous landlords.

C. Verifying Employment and Income

Always verify the tenant’s employment status and income. In an era where documents can be easily forged, direct verification from the employer is essential. Avoid relying on phone numbers provided in the application; instead, use contact information obtained from the company’s official website or professional directories. This step ensures that the income stated is accurate and not inflated by deceitful means.

D. The Power of Social Media and Online Footprints

In addition to traditional background checks, explore the tenant’s online presence. A simple Google search or a review of social media profiles can reveal aspects of a person’s character and lifestyle that might not be evident from official documents. Be cautious, however, to respect privacy laws and avoid discriminatory practices in this process.

E. Digging Deeper into Rental History

While checking with previous landlords is standard, extend this inquiry to cover a longer period, possibly the last 3-5 years of rental history. This approach gives a more comprehensive view of the tenant’s long-term behavior. Employ techniques like cross-referencing landlord information with property records to authenticate the references provided.

F. Get Contact Information for Previous 2 or 3 Landlords

The most recent landlord’s information is useless because the landlord will say anything to get them out if they’re bad

I love it when I receive calls from landlords screening someone I had as a tenant. I also love it when they didn’t pay or caused a lot of damage! So, make sure you are asking for at least 2 landlord’s information and more if they have it.

A little trick I use is to verify and make sure these people are actually their previous landlords. Start by checking the city records to determine who owns the building then try to find their contact information from some source other than the tenant. That way you know they didn’t provide a friend’s number who will just act as the landlord.

I personally have seen rental applicants invent addresses or give names and numbers to friends. I always check public records to see if the owner is the same as the name/number provided. If they list an apartment complex with an on-site manager, I search the leasing office number online instead of using the one provided.

G. Ask if they’ve ever been evicted or sued

If you want to be agreat landlord, you need to always cover yourself. These days, it seems like everyone sues over the smallest thing. Especially with housing, make sure you reject applications for very specific reasons. The best way is to catch them lying to you on the application.

Most bad tenants don’t realize how easy it is to actually check their eviction history and court records especially since you have a copy of their ID, SSN, and previous addresses.

On multiple occasions, a prospective tenant has said “NO” when asked if they have ever been evicted just to find multiple evictions including one pending! Lying on an application immediately disqualifies an applicant and so does a recent eviction.

2. Verify Specifics About the Tenant’s Job and Income

Always verify income and never accept under-the-table income toward their numbers.

Any document can be forged. Research the company they work for and contact them directly to ask about employment.

Do not use the phone number listed in the application.

If a bad tenant would lie about their income, they will probably put a friend or family member’s number there to lie for them as well.

3. Have a Written Lease or Tenancy Agreement

A lot of problems can be resolved easily if the agreement is written instead of a verbal tenancy or lease agreement. This is especially important if you do end up in court.

The agreement is mutually beneficial as it lays out all requirements from both parties and reduces conflicts. But, since you write the lease, make sure it is full of language that protects you.

4. Follow the Law and be a Professional Landlord

It is very easy to get emotionally involved when your money is being wasted. It’s imperative that you know how tomanage your relationship with a tenant– you are a business person and should always act like it.

The fact is that many bad tenants will goad you into doing something just to use it against you in court.

Avoid the emotions. Don’t act on a whim. And make sure you follow all applicable laws.

5. Do not Hesitate to Deliver a Notice to Quit

A notice to quit is not an eviction (it may be called something else in other states). It simply tells a bad tenant to fix their mistake or they may be evicted. Explain to the tenant that it is just a formal step you must take and if they pay it will have no effect on them.

Every state calls it something different, but the premise is the same.Do not hesitate to deliver the notice and start the eviction process.

6. Require Renters Insurance

It’s important to have rules and policies in place. You should tell prospective tenants about some of them and judge their reaction.

A great example isrequiring tenants to have renters insurance. Tenant’s that have no intention of paying you are very unlikely to want to protect their belongings with insurance.

Renters insurance will cover their belongings and protect you in the process. It costs less than $10 a month usually, so it’s a no brainer for the tenant.

7. Avoid Tenant-Friendly States

If you have the option, avoid tenant-friendly states and try to invest in landlord friendly states.

Here is a quick list of tenant-friendly states to avoid (not in order):

• Vermont
• California
• Oregon
• Washington
• Minseota
• Massachusetts
• New York
• Maine
• New Hampshire

Here are some landlord friendly states to invest in:

• Texas
• Georgia
• Florida
• Ohio
• Arkansas
• Louisiana
• Alabama
• Mississippi

Avoiding Bad Tenants is Done in the Beginning

The only way to avoid a bad tenant applicant is to screen properly and reject them!

These steps simply won’t help you once you’ve already put a tenant in place. Once the bad tenant is living there, the only way to get them out is to evict them, which takes time and costs a lot of money.

Instead, take some extra time up-front to screen them, interview them and their contacts, and do all the investigation you can. An hour of time now is worth months of frustration!

What else are you doing to screen tenants?