Poor property management can take one of the most stable, secure, and profitable investments you can make, and turn it into a feat which is, as Earl Nightingale was wont to say, “More difficult than trying to juggle two skunks and a bobcat”.
Why all this focus on the underhanded gambits of tenants? Are the majority of people applying for my rental properties out to trick or deceive me?
The answer, my friend, is absolutely not. The majority of tenants that will apply for your properties are decent, honest, hardworking folks. The problem is that their unethical counterparts move around a lot, thereby giving you a greater chance to encounter them than their proportion of the tenant pool would indicate. So onward to preparing you for these “tricks”. Forewarned is forearmed!
Here are some of the most common “tricks” they will use to muddy the waters of their past history and therefore current stability:
- Falsified rental history. If done cleverly, this can be very difficult for the untrained landlord to detect. A common technique is to list their rental history for a long period of time as “living with relatives”. This is a favorite of the unscrupulous and unsavory because it is very hard to verify. A slight variant is use an address which they have never lived at, and give you the name and cell phone number of a friend or close family member. Both of these techniques can be easily overcome by pulling credit reports, and seeing if the address history on their credit report matches that which they have listed on your application. Do not hesitate to look up the phone number of the person who actually owned each property listed on their credit report at the time they listed it as a residence (a good application will grant you permission to do this) and ask the true owner if they did indeed rent to that person. I have uncovered some disturbing rental histories with this technique.
- Putting the lease in the “good applicant’s” name. With this technique, your applicant will attempt to apply for only one adult, saying either that they want the lease in only one of their names, or that the other person is just living with them for a “little while”. Don’t fall for it. I require permission to pull credit and criminal history for every adult that will be living in the property. No exceptions. Best that you know who will be residing in the immensely valuable asset that you are “loaning” to your applicants. If they balk, there is almost certainly something they do not want you to see.
- Moving additional occupants into your property. Besides the fact that the state has legal limits for how many adults may occupy each bedroom, and the additional problem of people whose criminal history you have not had a chance to review are in the house, there is an unavoidable result of too many people occupying your property- increased wear and tear.
The math is simple. If there are 2 times as many people living in the property than were intended, the toilet is being flushed 2 times more, 2 times more bacon grease is being poured down the kitchen sink, 2 times as many feet are walking on the carpet, causing it to wear out twice as fast . . . you get the picture. The solution is to have your rental application require that every vehicle that will be parked there be listed, and the lease state that if additional vehicles occupy the property beyond a certain timeframe, the rental rate will retroactively increase. Check with your attorney for specifics.
4. Attempting to use their security deposit as their “last month’s rent” when moving out. This is also common, and many landlords overlook the glaring problem with agreeing to this arrangement- you no longer have a security deposit. If damage is done to the property, you are unlikely to uncover the full extent of it until after your tenant has vacated, taking with them the money you should be holding against the need to make repairs. You will not do this very many times before figuring out that it is a win/lose situation, and you are not the winner.
Lou Gimbutis, owner of Property Solutions, LLC, www.SoldCarolina.com, has been buying and selling houses full-time since 2004, first in Michigan, then after moving to NC in 2007. He serves as Director of Education for the Metrolina Real Estate Investor’s Association.