Owning a rental property can be very lucrative at times. However, it can also be an absolute nightmare. Plenty of property owners exists because it is a reliable source of income to buy a home and rent that property out each month for some cash. People make a decent living off renting out cottages. If you rent multiple properties, you can bring in some serious money. There are property owners out there who have had the same tenant for years with not one problem. The tenant will pay their rent on time. The owner may never hear from the renter. Then there is the wrong tenant, the one that causes issues. Not every tenant will be like this, but not all will be good. The worst part is that you can screen the person, but that will only tell you so much.
Screening a tenant properly.
When we buy houses to rent them out. We must do as much research on our potential tenants before renting. If you are not checking into everything about the person, you may be in trouble. There are always certain things you can investigate that can give you a better situation on who you are dealing with. For example, if you rent to them and stop paying, you can be dealing with a squatter in your property. A squatter is a person who unlawfully occupies an uninhabited building or unused land.
The credit report will show you a lot about a person. Property owners can request this information from a tenant. Ask them for a credit report making sure their name is visible on the credit report’s history. Look into specific things such as missed payments. Are they paying their bills on time? How late are they if they miss payments? Is it only once or is its multiple times in a row. Who exactly are they in debt with. Is there a car loan, credit card loan, bank loan? Depending on how much they owe in debt, it could be a red flag. Most mortgage companies decide to loan people based on debt-to-income ratio.
How much do they make a year?
It is essential to determine how much the potential tenant makes a year. Because if you ask for $1000 a month and only make $800 a month, we can see the problem with that. Make sure they make enough to cover the rent and pay utilities. If they are in severe debt and are making payments on that debt, be aware of their monthly payments for that debt. That way, it will not affect them paying you rent.
References are important
When you have a potential tenant filling out a rental application. There should always be a section for references. Hopefully, they will provide you with at least two people to call. If the two people are their parents, it won’t be a great person to call. Make sure they either work with these people or work for them. Knowing what type of worker someone is can make an enormous difference.
Tenant stops paying rent.
Once they move in, sometimes things can be going well with the tenant. Then one day, things can begin to go south. They may stop paying you rent. If you find yourself in this situation, things can get terrible. If you stop receiving rent, there is not much you can do except file for an evection process. It can take months for you to get the tenant out, leaving you broke and frustrated. Not only that it takes months, but it costs a decent amount of money for you to go through evicting someone.
A tenant may destroy the property.
In some instances, you have someone you move in that may seem pretty put together. Then an entire year went by you had no problem with the tenant at all. Then the property owner steps foot inside the property and realizes that the entire property is a mess. Everything is destroyed in the house. Appliances and lights are broken. The carpets are all messed up and disgusting. It can happen a lot with tenants who trash your home, causing you to make repairs. Or it could make you want to sell my house fast instead of keeping it any longer.
Having an issue with everything
Most tenants are renting because they do not want to own a home. They may feel too many things go wrong with a home. When they rent from people, they may call them with every bit of problem. Most people understand that if they have a clogged toilet, they should plunge it. Or if a light goes out, the bulb needs to be replaced. Unfortunately, tenants out there do not know how to do these things. They rely heavily on their property owner to come over for the most minor problems.
Owning a rental can be lucrative.
Yes, plenty of problems can happen when owning a rental property. If you do not screen your tenant correctly, someone can face a squatter situation. Or they can find themselves renting to someone who destroys the home. Even a person who will be calling you all the time to fix the smallest of problems. People do run into all these problems when owning a rental property. The truth is, though, once someone has the rental home paid off, they can make a decent profit. Yes, you still must pay taxes and insurance, but the money you would generate each month can really be nice to have. You can sell your home when you get to a certain age and use that money to retire.