Avoid Bad Tenants

Today TaxMama hears from Jack in the TaxQuips Forum, who had a really bad experience.  “I have a rental property and rented to a woman for a total of 2 months. First, she gave me two bad checks (1st month rent and deposit) and moved in. I found out 2 wks later the checks were bad. I initiated eviction right away and got her out 2 months later. By then, the house was seriously damaged. The property damage, lawyer fee, lost income, etc totaled >$10,000. I did not collect a single penny from her over the ordeal.”

OK My Friends,

This is for all of you who rent properties, or a half of a duplex, or your previous residence, or even a room in your home.

I don’t understand the mind-set of people who feel they not only need to steal from you, but must also trash your home. It’s a really scary experience. Imagine if you had rented a room in your home to this person – and during the two months it took to get her out she was living with you. [shudder]

You can avoid bad tenants. Really you can. Spend a little more time doing your screening of prospective tenants. Make it clear, even in a bad market, that you are very selective about who moves into your properties. You will attract a better class of people in the first place.

1)       When it comes to new tenants who want to move in right away, accept only cashier’s checks. Verify with the bank it’s drawn on that it really IS one of their cashier’s checks before turning over the keys.  Sigh, yes, there really are fake cashier’s checks out there – yet another scam.

2)       Be sure the lease lists the names of all the people who will live in the house:

a.       Get their names, Social Security Numbers and Drivers License numbers – and get a fingerprint of the primary person.  (I just read Sue Grafton’s T is for Trespass and realized the entire problem with the killer nurse could have been avoided if they had only checked her fingerprints. A flaw in an otherwise compelling story.)

b.       Make sure your lease specifies that only the named tenants are allowed to be living there. If anyone else moves into the residence, they must get written permission to add that person to the lease (and have them pay extra). (Define “moves in” – a boyfriend who sleeps there 3 or 4 nights a week – is he living there?)

3)       Do a credit check and a criminal check of the adult tenants. When more than one adult lives there, you often find the person on the lease moving out and someone else staying in. I used a company called SentryLink to  provide that information. Naturally, your prospective tenant must sign a release.  If they refuse to allow it – do you really want to rent to them?

4)       Don’t hesitate to call their former landlords and current/former employers and speak to them yourself. Sometimes, in a friendly conversation, you will learn the truth about a prospective tenant.  Or you will learn that the landlord or job reference is fake.

a.       Incidentally, for the landlords and employers, look up their phone number in the phone book or online. Do not use the number provided. Be sure that you are calling the correct company and/or apartment complex ; then ask for the name of the person on the application. 

b.       Look up the prospective tenant online – enter their name in a search engine and see what you find out about them. See if the online picture related to that name matches the person you met.

5)       Never, never, never, never, ever rent to someone who urgently must move in right away. Immediately. No time to check references. That is a SURE and CERTAIN sign that you will be ripped off.

 I know all this sounds like a lot of work, and makes you look very suspicious. But con artists are very charming in the beginning. They will beguile you, or give you heart-wrenching sob stories to gain your trust or sympathy.

Trust me, it’s worth the extra time, and the longer vacancy time, to get a really GOOD tenant. I’ve spent enough years dealing with all kinds of rental properties and training managers.

The last thing I want to leave you with is…if someone doesn’t feel quite right, don’t rent to them. I once ended up with a horrible roommate. Someone so awful that I did serve her with eviction papers two weeks after she moved in. She continued living with me for two months until the courts approved the eviction. In this case, it wasn’t a money thing, it was a behavior issue. My intuition had warned me there was something a bit off. But…she seemed nice and I couldn’t afford not to rent the two rooms to her and her friend. Turns out – I should have kept looking.

And remember, you can find answers to all kinds of questions about good tenants and other tax issues, free. Where? Where else? At www.TaxMama.com.

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