5 Tips to Avoid High-Risk Tenants

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Renting out properties can be a risky investment. After spending hundreds of thousands of dollars to buy a rental property, the last thing you want is an unruly tenant destroying your home or failing to pay you rent. As a landlord, it’s important to remember you’re running a business. This means you need to put as much effort into finding a good tenant as you would find a good employee. Below, we’ll go over five tips that can help you avoid high-risk tenants.

1. Tenant Background Check

One of the first things you should do when looking for tenants to occupy your rental property is conducting a background check. A tenant background check can uncover a lot of pertinent information that can help you make a decision on whether you want a particular person, family, or group to occupy your property. On a background check, you can uncover:

  • Credit report
  • Employment history
  • Criminal history
  • Eviction report
  • Income insights
  • Previous addresses

All of this information is vital if you want to avoid a high-risk tenant. For example, a tenant’s credit report can tell you their payment history and if they can make on-time payments. If they have trouble paying off loans or other expenses, they may have trouble paying rent on time. Criminal history can provide you with information on past convictions, such as whether an applicant had previous domestic disputes or property damage. And employment history can provide information on where an applicant has worked and for how long. If you notice they jump from job to job, they may not have a steady income stream, which means they can fall behind on rent payments.

Related:
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2. Landlord References

When you apply for a job, employers often ask for references. This is for them to determine whether your resume and cover letter truly reflect your skills and abilities. For landlords, it allows them to determine whether you’ve been a responsible tenant in the past or not. If you’re a landlord, always ask for landlord references. If a previous landlord has any complaints, such as excessive damage, difficulty collecting rent, or any other nuances, it’ll make your decision much easier. To contact a landlord reference, require potential tenants to provide an email and phone number. This way, you can schedule a call and ask for information.

3. Security Deposit

Most landlords and property managers require tenants to place a security deposit. Amounts vary, but most ask for one or two full months of rent. The reason being is that the security deposit can be used to pay for any expenses after the tenant moves out if they did any damage. It can also help landlords avoid high-risk tenants because if they can’t pay for the security deposit before moving in, it can be a sign that they can’t afford rent.

4. Post an Ad

Posting a detailed ad is another way to weed out applicants interested in your property. There are plenty of platforms where you can place an ad for your rental property, such as:

  • Craigslist
  • Zillow
  • Apartments.com
  • Zumper
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You can also go the old-school route and post an ad in your local newspaper or bulletin. To ensure you attract high-quality candidates, you want to ensure your ad is clear and descriptive with all necessary information. Make a note that you require a background check, security deposit, and references. Also, make sure to post high-quality photos and videos that show a polished and clean apartment. After all, no one wants to rent a home that looks as if it might fall apart at any minute.

Note: Make sure your criteria aren’t discriminatory or violate state laws, such as choosing tenants based on gender, age, race, sexual orientation, familial status, or disability status.

5. Interview

Once you’ve narrowed down your results, bring your last few candidates in for an interview. During COVID, this may be difficult. However, there are plenty of video chatting platforms where you can see each applicant face-to-face, but virtually. Once you set up an interview, look at body language and how they present themselves. If you want to avoid risky tenants, make sure they’re presentable and serious about the property. If you notice anything’s off, trust your gut instinct—it’s usually right.

Finding the perfect tenant

To keep your real estate investment in good standing, it’s essential you find the right tenant. However, doing so can be time-consuming and challenging, but it always pays off in the long run. With these five tips on avoiding high-risk tenants, you’ll be on your way to having the perfect inhabitants for your home.