Monday, June 4, 2012

Lee J Schneider Three Tips on How to Choose the Right Tenants

There is an old saying: “That the only way to know if you have a good tenant is when they leave..." Unfortunately, this saying IS usually true.

You can do all the correct things by reviewing pay stubs, credit reports, personal and business references, etc.  However, no matter what you do you can still get burned, regardless of your experience as a landlord, and it's going to happen. No one ever bats a 1,000%!!

That being said, here are some things to do to which can limit your exposure to "bad tenants”:

1-     Don’t ever rely on a realtor’s reference to vouch for a tenant.
First, understand there is good and bad in everything, especially in realtors. Some really do take their careers seriously, and look to build long term relationships. Others are part-timers looking only for the quick buck turnaround. Once they get their commission they are on to the next deal, while you are stuck trying to manage a problematic nightmare.

Its true that everyone has motives and some people will abandon their principals, morals, ethics or responsibilities in an effort to secure their own self interests in scoring the deal. That being said, just know that this rule of human nature applies equally to realtors.

In fact, the worst tenants I ever had were through a realtor, amazingly enough. Yes, the tenants had a credit report and although there were some issues with it, the realtor was only too glad to help "sell" them to me. In actuality, they were really helping me overlook issues that normally would have raised warning signs. In fact, right before the tenants moved, my gut was telling me it wasn't right. I had tried to terminate the lease and exit out of the deal, but the realtor was right there to assure me that everything would in fact be OKAY.

Well, it was not.  The result was an eviction several months later and getting beat for over ten thousand dollars in lost rent and damages. Yes, these were professional tenants. They had screwed just about everyone they had come in contact with along he way. Judgments from doctors, businesses even the IRS was owed hundreds of thousands of dollars. Sure, I won a judgment, but who do you think got paid first me or the IRS? 

Don't take anyone’s word for someone and don't let them fool you that they have your best interests at heart! Let your gut tell you what to do, it will never fail you. After you sleep on it a night, your answer will come to you usually by the next morning...Remember, when in doubt, stay out!!!

2-     Telephone call back's don't lie and reveal the real tenant.
Whenever I run an ad for an apartment, I usually get many calls, and it's virtually impossible to pick up the phone to speak with people at that time. I usually call them back at a time more convenient and where I can focus on the conversation. I can't tell you how many times I get a message, “Hi! This is Jane Smith, how are you? I saw your ad about the apartment and would love to set a time with you so that I may come to look at it? Please let me know when it would be convenient for you to show it? Thank you very much.”

Pretty standard, right? Only the Jane I call back often times answers the phone like she just finished having a bar or arguing with her phone company.  I get this, "Hello, is Jane there? Yeah! Who’s this?,” in a gruff, defensive voice.  Then when I tell Jane that I am returning her call about the apartment she changes her inflexion once again and becomes "Nice" Jane. Who do you think you're going to deal with down the road when a problem or depute arises? You guessed it! "Not-so-nice-Jane”!

People are always telling you who they are and what it will be like dealing with them.  It's YOUR job to listen and look for the signs. Remember it's easy putting them into your place, it's hard getting them out!!!

3-     Never rent to single tenants for a multi-family house.
It has been my experience that when you have a two bedroom apartment and two single, non-partnered people want it, you are asking for problems.

Here’s why: two single people are untethered, meaning they are free to pick up and leave it anytime they want. This generally means the other party is left holding the bag for the rent. As a result, there are a few poor options.  They could either pay the whole amount, and if they do, won't last for very long, or leave as well which probably means breaking the lease, or find themselves another roommate which if they don't scrutinize them, like you would do, often leads to a potentially bad match as well as acrimony for the remaining tenant and you the landlord.

I did such a thing once. I rented out a nice multi-unit house to two single teachers. They seemed great! Communication was great, income great, job security great.  However, the outcome...not so great!

Although they had signed a lease and committed to at least two years, the whole thing unraveled in just the first month. One of the tenants met a man, fell for him, had a falling out with her roommate who seemed slightly less enamored with him. In one fell swoop, the tenant was moving out and asking for her security back.  The remaining roommate tried to work things out with us, and did by moving her to another available apartment. However, the moral is that life is unpredictable. With two single people you double your chances for changes. In addition, you have scenarios of adding more cars to the property because so and so's boyfriend decided that he likes his girlfriends new pad better than his and keeps parking in roommate "B's" spot. Roommate "A's" boyfriend takes exception to that hence more drama. When you rent to a couple or family, you lessen or straight out avoid scenarios like this from ever happening.