THE MONEY MACHINE
Avoiding the 'Tenant From Hell' - Part 2
Last newsletter we began discussing the possibility of renting to a nightmare tenant – the tenant from hell. Over the years I’ve seen it happen often, even among fellow realtors. They have bought an income property or two. Over time they have seen their property equity increase. Monthly payments have reduced the size of the mortgage and over that same time their property value has gone up. They have a tidy little sum of money now available in that property. And then they get a bad tenant. Maybe two. So they decide ‘I don’t need the headaches.’ They put the rental property up for sale. It sells. They realize a nice pile of cash, and the tenant problem goes away. Alas, so does their investment portfolio and their potential for a stream of passive income on retirement.
But at least now they have a story to tell. Years from now, whenever they drive by that property they can say “I used to own that property once. Worst mistake I ever made was selling it.” Believe me, I’ve heard that numerous times from numerous people. I don’t want that to happen to you. 
The reality is, it can happen to anyone – the Tenant from Hell. I’ve had a few over the years. But while you can’t absolutely insulate yourself from ever making a mistake when selecting a tenant for your rental property, there are things you can do to increase your chances of selecting a good tenant. What you are looking for is simple enough. You are looking for a tenant who is going to look after the place, pay the rent on time and who is hopefully going to be long term. And the clues you have to work with are the impressions you form when you meet them and the information they provide you on the application form. But people are not always who they appear to be. I think of a lady I knew once. Now divorced. She told me how she had enjoyed a wonderful dating period with Mr. Right. He was charming, thoughtful, sensitive. Great courtship. Fairy tale wedding. Even on the honeymoon things were wonderful. But as soon as the honeymoon was over, in fact, as they were crossing the threshold into their new home, he said: “Now that the honeymoon is over, I want you to know what I expect from here on in.” and he began to lay down the law, where she could go, who she could see. How he expected her to keep the house, etc. etc.. 
Perspective tenants can be just like that. You know what you are looking for. So does the tenant. And they will come across like the perfect model tenant even if they are not. Until they cross the threshold. So have your antennas up when you meet them. What is your overall impressions? Ask questions and listen carefully to their answers. And as we saw last issue, get them to fill out a Rental Application Form. Make sure it is complete. All past landlord contact information is important. And you need to ask them about any ‘holes’ in the history. Now, a word of caution as you begin your due diligence talking to the current and past landlords. I’ve had situations where the applicant has had friends post as past landlords on the phone. When you are talking to a past landlord, ask lots of questions. “How long did these people rent from you?”, “How did you first get in touch with them?”, “Were you ever in their unit while they rented from you?”, “How did it show?”, “How much rent were they paying?”, “Did you have any problems getting the rent?”, “When they moved out, what if anything did you have to do in repairs?”, “Would you rent to them again?” The more questions you ask, the clearer picture you’ll get. And if the person on the other end of the line is an imposter, the chances are they’ll get tripped up in the details and contradict what’s in the application. Once a questionable story starts to emerge, walk away. 
Don’t be afraid to investigate further if after the interview you like the candidate but still aren’t sure. I remember a few occasions where I just needed more assurance. On one occasion the landlord was a management firm. All they would confirm was that the tenant paid the rent and on time. On another occasion the landlord was a fellow realtor who I knew in the business. He said all the right things but somehow seemed to lack conviction. In those cases I ask the prospect if I can drop by and take a look at where they are living now. I recall on one occasion all I needed to see was the state of the yard, the weeds, the wrecked car and I was in a position to make my decision. In the case of the lady in the large apartment complex her unit was immaculate. I rented to her and she is a tenant with me still. The tenant who a fellow realtor recommended was a bit of a shock. I asked to drop by and have a look where he was now living. His bathtub was full to the brim with car parts. He had a transmission on the living room carpet and you had to step around and over junk to just move in the kitchen. Plaster was falling down from the ceiling and had never even been swept up. Had I gone by the landlord reference alone and rented to the guy, my apartment would have deteriorated to that in no time. Don’t get the wrong idea. These are the exceptions not the rule. There are definitely more good tenants than bad ones. These are the ‘stones in the shoe.’. But in cases where there is some doubt, do some extra digging. If they owned their own home and sold it, there is perhaps no past landlord. Call the realtor who sold the property and ask him/her about the house and the clients. Drive by their current location and see how they now live. Go to Geo Warehouse and see if the actual owner of the property is who they hold out as the landlord. Do your homework up front, and after you do, if you still have doubt, listen to your gut, put the application aside and keep looking. It’s better to wait a bit, perhaps lose a month’s rent than get into a rental arrangement that makes you regret being a landlord.
Wayne Quirk, Author
“THE MONEY MACHINE”
wayneq@remax-gc.com
