With real estate prices low, many people are considering buying an investment property and becoming a landlord. It might sound simple, but real estate pros warn that there’s a lot to know. The landlord who doesn’t follow such basic guidelines as conducting a thorough background check can get stuck with a nightmare tenant. It takes both business sense and common sense.
The down economy that has resulted in real estate bargains also means it’s more difficult to find a tenant who can afford to pay first and last month’s rent and a security deposit upfront. Landlords report they have to go through 30 to 40 applicants before finding a qualified tenant.
Landlords also find they are competing with foreclosed houses, which some people rent below market, forcing rents lower.
A West Palm Beach landlord contacted recently did not conduct a background check. Now he has a tenant whose true identity is a mystery. “My experience with landlording has not been positive,” the man said. “I am in the middle of an eviction and the person will not say who he really is.” ‘Never be desperate’ for a tenant
Just because you’re offering a place you own for rent doesn’t mean you have to rent to the first person who comes along. A rental applicant can be denied for such reasons as poor credit, poor personal references, poor job reference, lack of job stability, insufficient funds to move in, criminal background and too many occupants for the size of the dwelling Dweck said.
“Never be a desperate landlord or landlady,” Dweck advises.
If the prospective tenants have been through a foreclosure or short sale, that doesn’t rule them out if their credit is otherwise OK, Dweck said. “At the end of the day you have to make a good business decision. Do not let them tug on your heartstrings,” Dweck said.
Rill agrees that background and credit checks have to be conducted. At the same time, don’t expect a perfect credit report. It’s not uncommon to find people with credit scores below 600, Rill said.
Professional tenants
No matter how ironclad the lease is, what some experts call “professional tenants” do exist. These are people who move in and never pay rent. They know that it often takes awhile for an eviction to be carried out.
“Anything is only as good as the tenant’s word. They can still walk out on you,” said a West Palm Beach landlord. “I went to court on an eviction. The guy said, ‘Yes, I owe the money.’ The judge said I did not properly file the three-day notice. The name and address were supposed to be on the bottom right-hand side. It was at the top on my letterhead. It cost me a couple thousand and the guy owed me four grand. I never got paid.”
Landlording is a business, and experts say it’s not for the softhearted. When rent is past due, Florida law requires landlords to give tenants three days’ notice that they must pay the rent or move. If the rent is not paid after three days, excluding weekends and legal holidays, then the landlord can begin legal action to evict the tenant.
“You have to be on top of it. The stories can get ridiculous. I keep a three-day notice act in my car. I have had people tell me they will not pay the rent because they are buying Christmas presents,” Rill said. Despite the challenges, people like Alberto Rabadan, a Jupiter real estate broker who owns a 14-unit apartment building in Miami, say they want to expand their investment holdings.
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