Yahoo Finance How Independent Landlords Can Protect Themselves From Professional Renters
The term "professional renter" conjures up an image of a tenant who pays rent like clockwork. However, it's the opposite. Professional renters are scam artists who rent properties under false pretenses and then use loopholes in the legal system to reside there for months without paying any rent. They are becoming increasingly common as residential rents in America continue climbing. Keep reading for tips to protect yourself and your property from this menace.
Keep Your Eyes Open and Don't Ignore Your Instincts
The adage "possession is nine-tenths of the law" explains why professional renters are so difficult to deal with. Once they're in, the only way to remove them is via the legal system. Sadly, professional renters know every loophole and trick of the trade, delaying legal action by filing frivolous legal motions and other tactics. That means your best defense is keeping them out of your property in the first place.
Don't Miss:
If there was a new fund backed by Jeff Bezos offering a 7-9% target yield with monthly dividends would you invest in it?
Warren Buffett once said, "If you don't find a way to make money while you sleep, you will work until you die." These high-yield real estate notes that pay 7.5% – 9% make earning passive income easier than ever.
Start by establishing a tenant-screening procedure that you never deviate from. This procedure should include:
· Instituting an application procedure where you run full background checks on any adults over 18 who will reside on your premises. This means a credit report, criminal history check, and eviction screening. You can charge tenants for the cost of these screenings and never allow a tenant to "provide their own" credit report.
· Verifying both their employment status and payment history with their previous landlords.
· Getting emergency contact data (e.g., tenant's mother's phone number and address).
Do not deviate from this procedure under any circumstances. Professional renters may have various "stories" for why their credit is bad or why they can't have a background check run on them. These stories range from "being victims of ID theft" to "they don't want their credit run because they are trying to buy a house and it hurts their score."
Stand firm. This is your property and you're in charge. Politely inform prospective renters that you won't consider them as tenants if they refuse to undergo background screening. It's a red flag and likely means they have something to hide.
Insist On Initial Payment in Guaranteed Funds
Professional renters will employ various tactics to move into a property without paying the first month's rent or security deposit. Many of them involve long, compelling stories that initially seem perfectly reasonable. Even if their story is true, this is still your property; only you can protect yourself. Insist on being paid the first month's rent and security deposit in guaranteed funds (e.g., cashier's check or money order).
Trending: Boomers and Gen Z agree they need a salary of around $125,000 a year to be happy, but millennials say they need how much?
Yes, it's still possible for a tenant to give you a fraudulent financial document, but this is an actual crime. That's an important distinction because an eviction case for nonpayment of rent is a civil matter that plays out in civil court. However, if a tenant gives you fraudulent financial documents, you can report them to the police who may be able to effect an arrest.
There is always a chance they won't make bail. That means they can't attend your eviction court hearing and could lose by default. If you're dealing with a professional renter, the move-in funds may be the only "real money" you ever get. That's why you never accept personal checks or promises of future payment in exchange for keys at move-in.
Have a Well-Written Lease and an Experienced Legal Advisor
Many states don't require written leases between tenants and landlords. However, if you have to evict a tenant, a well-written lease will put you in a much stronger position to win. If you have a "handshake" deal with a tenant, they can pretend they don't know how much the rent was or when it was due. That will be a lot harder for them to do if you have a written lease they signed.
Joining a local apartment association or paying an experienced landlord-tenant lawyer to write a strong lease that abides by local rental laws is a worthy investment. Remember, an eviction case is a civil matter, which means the quality of your lease may go a long way toward determining the outcome. This is another reason to contract with an attorney specializing in landlord-tenant law to handle eviction cases.
It only takes one error on an eviction notice or court filing to have a judge throw your case out of court and force you to start all over again. You could wait several months for a new court date, and your professional renter won't pay you a thin nickel. Professional renters know this, so they target "mom and pop" landlords who may be less experienced.
Hire Professional Management
Employing competent, licensed professional property management is your best protection against professional renters. Real Estate Investment Trusts (REITs) and large property management companies are successful because they understand landlord-tenant laws where they operate and have years of professional experience to fall back on. Their applicant screening procedures are designed to root out professional renters. This is also why professional renters typically target independent landlords instead of management companies.
The ugly truth about professional renters is that many of them think it's a victimless crime that only targets the wealthy. However, a 2023 study by the National Association of Realtors shows that 70% of the rental property in America is owned by small landlords who operate between one and four units.
A single professional renter not paying for one of your four units costs you 25% of your income. That's why it's critical that you take affirmative steps to protect yourself if you're an independent property owner or real estate investor.
Keep Reading:
Private credit offers up to 20% APY to potential accredited investors looking to capitalize on this growing asset class.
Miami is expected to take New York's place as the U.S. Financial Capital. Here's how you can invest in the city with as little as $500 before that happens.
"ACTIVE INVESTORS' SECRET WEAPON" Supercharge Your Stock Market Game with the #1 "news & everything else" trading tool: Benzinga Pro - Click here to start Your 14-Day Trial Now!
Get the latest stock analysis from Benzinga?
This article How Independent Landlords Can Protect Themselves From Professional Renters originally appeared on Benzinga.com
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
