Purchasing a rental property comes with dreams of a high return on investment (ROI). But what’s the biggest mistake landlords make that undercuts their ROI?
Not screening applicants well enough.
Many, if not most of the problems landlords encounter start with improper screening techniques. These issues can undercut one’s bottom line in unique ways that involve the law. Luckily, it’s a problem they can avoid pretty easily!
Have A Screening System – And Use It Every Time
Not screening tenants before accepting their applications isn’t a rookie mistake: even landlords who have been in the business for years can get lax when screening their tenants. This is why, no matter who it is – a stranger, a casual acquaintance, even a family member – they should follow the same screening process to avoid problems and ensure a high ROI.
To follow the procedures with every prospective tenant, set up a screening method before you talk with even one applicant. Write up a list of set questions you can ask every prospective resident, including:
- What’s your monthly income?
- When will you be looking to move in?
- Why are you moving from your current place?
- Do you have funds for a security deposit and first month’s rent?
- Do you have any pets?
In the meeting, have tenants fill out a rental application and take the time to verify the information on it. Call their references and run a credit check to confirm that you can trust the tenant and that they can afford your rental property.
Proper screening reduces the likelihood that you will have to evict a tenant, which will lead to vacancy costs and the potential for a lengthy legal process. While evicting can be necessary, it’s something you’ll want to avoid!
Evicting A Bad Tenant Is Costly
Evictions are an expensive, time-consuming problem, no matter where you are. One way to keep evictions from spiralling out of control is to know where you stand under the law. Be familiar with our province’s landlord-tenant law, and if you can, have legal representation at the ready. Make sure to include a late fee and eviction clause in the final lease.
If you notice a bad tenant situation brewing, take control as soon as possible. Once a tenant starts paying late, don’t brush it off – enforce your penalties as soon as possible.
Bad Tenants Do A Lot Of Damage
One reason why screening is so necessary is that the wrong tenants won’t just be late on payments – they can do major damage before they leave. Sometimes this is tied to the previous problem: tenants who draw out the eviction process in a nasty way can feel that property damage is justified. While you might have the law on your side, the drawn-out legal process and repair bills aren’t worth risking.
What If My Property Isn’t Occupied?
As a landlord, you should understand that a vacant property is better than renting to the wrong tenant. Vacancy expenses can be tough to handle, but a good renter that pays on time and treats the property well is more than worth the time it takes to screen through applicants. They’re more likely to stick around longer too, cutting down on costly turnover times!