Once they get the keys, it can be too late for a property owner.

by jay.raman@ashokalion.com 16, September 2010 19:29

Landlords who own investment property property always want to fill their properties as quickly as possible. However, you must realize that once a tenant moves into a property that there is an inherent risk that they will not be able to honor the terms of their lease. If there was no risk in rental property, then everyone would be a real estate investor ( Author's Note: Well, we know that a few years ago everyone tried to be, but we can see where that got us.)

The risks that are inherent in a bad tenant are numerous and include:

1) The tenant is unable to pay their rent.

2) The tenant is able to pay rent, but the tenant will not take care of the property.

3) The tenant may be carrying out illegal activities at your property.

For example, in Dallas, a landlord had leased a property to a tenant who used the property as a group home for developmentally challenged adults. However, he had not disclosed this at the time of leasing the property. The landlord had not screened the tenant's previous rental history or verified with previous landlords if this issue had arisen. There is no guarantee that the screening may have detected this, but there is a good chance that other landlords had evicted his business from previous properties.

This is why our property management company constantly works vigilantly with our tenant screening process. Our process includes requesting that tenants provide:

1) Copies of ID to verify against lease application information

2) Copies of Payroll Checks to verify against lease application information

3) Copies of old lease to verify the identity of the previous landlord or property managers and confirm that the tenant was in good status

Our screening process entails running a professional report that runs credit check, criminal history, and a search for judgements filed against the applicant. Even with a thorough background check, a tenant's situation can change after they have moved in. This means that a background screening will not be able to remove this risk, and with today's economic issues, it is likely that it could. This is why owners must fully appreciate the risk in the rental management business. Owners should confirm that they are financially secure enough to take on the risk of carrying a mortgage payment without a tenant's rent payment or have excess cash to handle repairs or issues that may arise with their property. With our help in property management and/or leasing your property, we aim to reduce these risks in owning investment property by making a diligent effort to screen a tenant's background.

 

 

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