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6 Ways Landlords Avoid High-Risk Tenants

There are a few things that will make or break your success as a landlord – and the quality of your tenants is one of them. And while they come in all shapes and sizes, learning how to weed out the high-risk tenants and find reliable individuals is a skill that will ultimately set you up for long-term profitability and success.

6 Ways to Repel High-Risk Tenants (and Attract Good Ones)

High-risk tenants take on a number of different characteristics, some of which include:

  • Poor finances and a high likelihood of being unable to consistently pay rent on time
  • Misaligned priorities (giving preference to other bills over rent payment)
  • Lack of respect for the property itself
  • Causing and/or inciting disturbances on your property
  • Participation in illegal and/or salacious activity that’s detrimental to the neighborhood.

And though there’s no such thing as a perfect tenant, you can vastly improve your chances of being a successful and profitable landlord by repelling high-risk tenants who are likely to create problems. Here are some suggestions:

Work With a Property Manager

Hiring a property manager is one of the single best things you can do for lowering risk and magnetically attracting better tenants. Not only will property managers help you find tenants, but some of them will even offer guarantees.

For example, Green Residential in San Antonio has something they call a “Rental Income Guarantee.” If a tenant who is screened, placed, and approved by the company fails to pay rent during the lease, they promise to reimburse lost rent. That’s a pretty good deal!

Create Better Listings/Ads

Your rental listing should do more than provide details like the number of bedrooms, rent, and contact information. It should proactively warn tire-kickers and risky tenants that this is not the property for them.

Use your listing to indicate all of the thorough (but legal) measures that you’ll take to qualify applicants (like background checks, credit checks, and at least two references). You can also forbid things like smoking and pets. If you have a minimum lease requirement – such as 12 months – list this in your ad too.

Set a Competitive Rate

Be diligent about setting the right market rate. While you want to avoid going too high (which will scare away good renters), you should also avoid going too low (which may attract people who are less than ideal). A rate that’s on the high end of the competitive range will typically help you reach people with strong finances and plenty of income stability.

Pre-Qualify Via Phone

Never agree to meet with a tenant in person for a showing without first pre-qualifying them via phone. A simple five-minute phone conversation helps filter out anyone who is obviously unqualified and can give you a much better feel for which ones are promising. Consider asking questions like:

  • Are you currently employed full-time?
  • What attracted you to this house?
  • What’s your current living situation?
  • What are your career plans for the next two years?
  • Are you prepared to provide me with both a security deposit and the first month’s rent?

There may be a few questions you’d like to add in addition to these, but this gives you a solid start. If nothing else, it’ll save you time showing the property to people who aren’t qualified in the first place.

Develop Thorough Screening Practices

When screening tenants, you’re required to abide by Federal Fair Housing laws; otherwise, you could attract lawsuits and other legal problems your way.

While you can never discriminate based on factors like age, gender, race, or religion, you are allowed to inquire about income, past criminal behavior, credit scores, recommendations from previous landlords. We recommend being as thorough as possible with each of these.

Create a No-Nonsense Rental Agreement

Your lease agreement is your last opportunity to repel a high-risk tenant. By developing a thorough lease, you can usually weed out anyone who has slipped through the cracks to reach this point.

A no-nonsense rental agreement must be legal, but it should be landlord-friendly. In other words, create very strict rules regarding when payment is due, what consequences exist for late payment, what’s included as part of the tenant’s responsibilities, etc. You don’t necessarily want to scare people away, but it should make people think twice about whether this is something they want to do.

Kiss Bad Tenants Goodbye

Bad tenants are a nightmare. They cost you money, hog your time, and create unnecessary levels of stress, frustration, and anxiety. The more intentional you are about repelling these high-risk tenants, the less likely it is that they’ll run your investment properties into the ground.

At the same time, you’ll be more likely to attract good tenants who pay on time, respect your property, and improve the neighborhood. Perhaps it’s time to retool your approach?

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