When you own a rental property, you have a powerful asset that can give you income in the short term and increased wealth in the long term. An income property can be sold or simply maintained and used to create profits via rent. Also called, appropriately enough, “income properties,” these sorts of real estate holdings can create real long-term wealth for their owners. But in order to do that, these properties require one key component: a tenant.
Without a tenant, of course, there can be no rent payments. That means no income from your income property, which is certainly not a good thing. But landlords should also remember that not all tenants are created equal. As tough as it can be to go without a tenant on your rental property, that issue pales in comparison to the disasters that can come with having the wrong tenant on your property.
To maximize profits with an income property, landlords need to be able to fill their space with the right tenants while avoiding the wrong sort.
Why tenant quality matters
Income properties exist to generate income in the form of rent. So you may assume that as long as a tenant is paying rent, you shouldn’t care how “good” or “bad” that tenant may be. This, of course, isn’t true.
There’s no guarantee that a bad tenant will pay rent. Deadbeat tenants are a real risk for landlords, and recouping the losses that come with unpaid rent can be difficult. Want to take our deadbeat tenant to court? Be prepared to have lawyer fees and court costs eat into any awards you may get. If you don’t win your case or if the other party is simply unable to pay, you may even lose money by suing. In some cases, it may be better to simply take the unfair loss.
And bad tenants may cost you in other ways, too. What if a careless or destructive tenant breaks things or otherwise damages your property? Even if a tenant is not actively damaging your space, you may find that their carelessness and neglect costs you. A tenant who never cleans can allow mold, rot, and other long-term damage to build. A tenant who fails to report minor issues with the space, such as leaks or broken appliances, can cause you to miss your chance to fix such issues and therefore increase the risk of more serious issues, such as flooding or fires, down the line.
And evicting a problem tenant can be a nightmare. There are a lot of renter protections built into the laws in certain cities and states, and that can make eviction a costly and drawn-out process. In the meantime, you’ll be dealing with destruction on your property and a loss of income.
Finding the right tenants and screening out the bad ones
Finding a good tenant, then, is paramount for any landlord. But how can you ensure your potential tenant is reliable?
The process starts with good advertising, of course. You need to advertise your place properly by using photography best practices to snap flattering shots of the space. Combine that work with a description that addresses concerns and priorities that potential tenants might have. Try to hit on keywords that renters might use in an online search.
The vast majority of modern apartment-hunters and house renters start their search for their next home online. If you’re going to compete in this market, you need to use online landlord tools to get your space posted on the internet.
The same landlord software solution that you use to get your property posted online may be able to take care of some other things for you, too. You could get a free rental application set up and use online tools to perform background and credit checks on your potential tenants.
These background and credit checks are your line of defense against the problem of a bad tenant. Get those checks, and don’t be afraid to reject tenants based on the results! As a landlord, you need tenants, but you have to be sure you get the right ones.