Financial Resource

Article by Matt Miller – The Real Estate Investor

Buying rental property is supposed to provide you with long term passive income and increased net worth. If purchased at a good price with good terms, even the most challenging tenants will prove to be only a minor inconvenience on your way to real estate investing wealth. But, whether it is not paying rent, damaging your property, or even suing you, a trouble tenant is a landlord’s biggest headache. Here are 5 tips to help you build your real estate portfolio while avoiding a costly bad tenant.

1) Always have prospective tenants fill out a rental application.Many sample rental applications can be found online and downloaded for free. It is important that you not ask any “discriminatory” questions on the application, as it may be later used against you in a lawsuit. It is important to find out where they lived before and their previous landlords’ contact info, how much money they make, as well as asking a couple of general questions regarding their credit.

2) ALWAYS ALWAYS ALWAYS call the previous landlords!This is one of the most important steps in verifying that you do not wind up with a problem tenant. Calling only their current landlord will not be as helpful since if they are a truly terrible tenant, the current landlord may be willing to say anything nice about them to make their problem tenant your problem tenant. The 2nd and 3rd previous landlords the prospective tenant had will likely yield a more honest picture of what you will expect from them.

3) Only do a credit check if you want to get paid rent.Some landlords ask the prospective tenant if they have good credit, and actually believe them when they say they do! Spending the to get a copy of their credit report is worth it every time. You may find out they have 3 lawsuits filed by previous landlords for non-payment of rent. Or, that what they thought was “good” credit is really only a 520 FICO. The worst case scenario of getting their credit report is peace of mind in knowing they actually do have good credit. Just do it.

4) Verify their employment.Have the prospective tenant provide current pay stubs AND call their employer. Anyone can make a photocopy of someone else’s pay stub and change the name on it. Calling their employer’s HR will provide you with confirmation that they really do have the income to afford to rent your property.

5) Trust your gut.If while talking with the prospective tenant you get a bad feeling about them: trust your instincts. Even in the worst rental markets where finding decent tenants at decent rents takes months, it is better to have a unit sit vacant 6 month than have a bad tenant move in for even 1 month. If you think they are going to be difficult, they probably will be. If you don’t think they will pay, they probably won’t.

From one landlord real estate investor to another; Good LUCK(Laboring Upon Correct Knowledge)!

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