Being a landlord is not easy. Sometimes you think you have the best tenant, then they turn out to be a real pain.
Before you throw that tenant out on the street and get stuck with all of their back rent, do yourself (and them) a favor: take note of any red flags that may have been overlooked so you know what to watch out for next time.
If you haven’t had such experience before or need to know more red flags to watch out for, we’ve had a chat with veteran real estate investor, Winston Deloney and he has told us the real estate flags all landlords should know before renting out their property.
Chances are, you aren’t going to get rich off the interest provided by a tenant’s rental payments. Most investors say they continue to rent out properties for the tax benefits.
So, it doesn’t make sense to take on a tenant with bad credit as this person will be more likely to end up not paying you back (or paying in a way that doesn’t work for the IRS).
Thus, it just doesn’t make sense to have a tenant with bad credit in the first place.
Winston Deloney’s Real Estate Advice: Get a copy of your potential tenant’s credit report and take a close look at it. If you see anything that makes you uncomfortable, don’t rent out your property to that person.
It may sound obvious, but it’s surprising how many landlords overlook this one. When you find a tenant, make sure to ask them about their eviction record.
Winston Deloney’s Real Estate Advice: If the previous landlord evicted the tenant within the past six months, rent to a different tenant with a clean record. However, if the previous landlord has had only a history of non-payment (or another minor problem) then you may be fine and will have no need to worry.
Frequent moving is usually not a good sign. This can indicate that the person has an unstable job or personal life. And in turn, they are more likely to not pay rent on time or just stop paying altogether.
Deloney’s Real Estate Advice: Make sure to ask your potential tenant about their current living situation and how long they’ve been at their current address. If it’s a short amount of time it could be a red flag.
Finding the best tenant for your rental property could be challenging, but it’s definitely worth it in the long run.
If your tenant claims they make a lot of money but have no documentation to prove where that money is coming from, this could be another red flag.
Deloney’s Real Estate Advice: Tax returns are an absolute must when it comes to figuring out how much your tenant can afford in the first place. Try to get copies of the past two years for your own purposes. If they don’t want you to see it, then that could be a big red flag as well.
If your prospective tenant is lying about things such as their income or credit history, there’s a good chance they’ll lie to you about other things. And in turn, this can lead to problems for you down the road.
Deloney’s Real Estate Advice: Don’t trust someone who lies. It just doesn’t pay off in the end and it’s not worth taking the risk.
These are just some of the challenges you may encounter as a real estate investor. Be sure to recognize the real flags early on to avoid fatal mistakes.