April 15th 2019
Imagine you are going out for the evening. Somewhere special. Maybe it’s off to dinner at your favourite restaurant, then to a show. Men, you are dressed in a new custom tailored suit, monogrammed shirt, pin collar. Ladies, you look dazzling in that figure flattering evening gown with Ferragamo shoes and bag. But when you step out of your front door on the way to the car suddenly you have a sharp pain in your foot. Stabbing. It’s a stone in your shoe.
Suddenly you’re not thinking about how nice you look, or the steak you are about to enjoy or even the evening entertainment. Nope! Your mind is focused on one thing, and one thing only. The stone in your shoe. Until you get that fixed, nothing else matters.
And that’s exactly the way it is when you have a bad tenant. Nothing else matters. You may have followed ‘The Simple Plan’ to the letter. You’ve amassed your 10 rental properties. With a mix of singles and multi-families maybe you’ve got 15-16 tenants. All of them wonderful. Except one. One bad tenant. The stone in your shoe.
This is the single biggest reason that landlords get out of the rental business. I remember the first time I rolled out ‘The Money Machine’ seminars, back in 1989. One young couple in the audience I recall in particular. They went out and bought a semi-detached. It was a gem. Probably over-improved for a rental, but it was the one they wanted. They added some loving special touches and put it on the market for rent. Took the first tenant that came along and things quickly went downhill. After enduring a lot of grief they began the process and had the tenant evicted. They put the property back on the market for rent and made the same mistake. Another stone in their shoe. 
It wasn’t long until they decided they were not cut out to be landlords. They came to see me to get the property sold. I tried to get them to reconsider. No! Even if they lost money, they not only wanted to get rid of the stone, they wanted nothing more to do with the shoe.
It’s a shame really. Had they kept the property it would have been fully paid for by now. Not only would it have gone up in value by more than $200,000, it would also have given them a steady income stream of $1,000+ a month after expenses. All lost because of a bad experience with a bad tenant.
So what can you do to avoid going down that same path? Let me begin by saying that regardless of what you do, you can’t guarantee you won’t one day have a ‘nightmare’ tenant. You will at some point in time, 
regardless of how thorough you are at screening. We’ve all had them. And just like that stone in your shoe, they prevent you from enjoying all the things that are going right. But while you can’t totally avoid a mistake, there are things you can do to help. A couple of small points. As we said last issue, buy quality. Having a good unit that’s well maintained and in a good area will attract a better selection of quality tenants. Oh, you’ll still get problem ones, but you’ll have a better selection to choose from. Your odds will increase. And avoid charging the highest rent you can. Often when you over charge, the tenant who’ll be willing to pay is the one that can’t get anything else, and also the one who doesn’t care what you charge because he’s not going to pay you beyond the first month.
Insist on a completed rental application form and don’t accept a deposit at that time. With a deposit you’re more or less committed unless you have solid reasons to turn it down. Collect applications, weigh them, select the best, and only then ask for the deposit.
So what do you look for on an application form? First you want to carefully go over the past rental history. You want to talk to not only the current landlord, but especially past landlords. And you want to be especially vigilant about time not accounted for. Often holes in the rental history indicate problems with past rentals.
Another practice I try to follow is this: if the tenant has a history of short term rental, stay away from them. They will tell you there were reasons for each move, but now it’s different. They want long term. But people don’t generally change. If they have moved every 6 months, they will be leaving you soon. And high turnover wastes your time and costs you money.
When you interview them, if they start telling you about all the terrible landlords they have had, beware! If it has happened once, it might well be true. There are certainly irresponsible landlords out there. But if it’s a recurring theme in their past, you can bet the problem is with them, not the landlord. Stay away!
If the reason they are moving is because the landlord needs the property for a family member, that’s a red flag. It may be the case, especially if the property has recently been sold. But if a landlord has a problem tenant, one of the easiest ways to get rid of them is by moving a family member in. This is especially likely in the case of a multi-family building.
If I own a triplex for example, and I do need a unit for a family member, son, daughter, parents, I’m more likely to select the unit with the most problematic tenant, than I am to evict my best tenant. Stone in the shoe. Don’t necessarily say ‘no’, but take a careful look before you say ‘yes’.
To be continued next issue.
Wayne Quirk, Author
“THE MONEY MACHINE”
wayneq@remax-gc.com