Owning income property can be a tremendously exciting opportunity. You find a great tenant, rent the property to them in exchange for cash flow each month, and let them help pay down the mortgage.
It's a great plan, and one that's helped many savvy investors to grow their wealth.
The downside, though, is that things don't always go as planned.
Sometimes you'll get amazing tenants who will pay the rent every month and abide by the terms of the lease. Other times, though, you may find that you end up with a tenant who soon shows themselves to be less-than-ideal. Someone who stops paying the rent, refuses to communicate, and yes, in some cases -may even cause a significant amount of damage to your rental.
Ending up with a disgruntled tenant is every landlord's worst nightmare, and for good reason. A problem tenant can quickly cause a significant amount of damage to your property. Not to mention, that unless they've already vacated the property, you'll also be faced with the hassle of trying to evict them, and everything that's involved with the aftermath of that as well.
To help you navigate the often-confusing and frustrating process of dealing with the repercussions of a disgruntled tenant, here's a look at a few steps that you'll want to take when a tenant causes damage to your property.
Handling Tenant Damage
We're not talking about holes from hanging pictures, worn carpet, or dusty cupboards. While some minor scuffs and scrapes can fall under the category of normal wear and tear, sometimes tenant damage goes above and beyond the usual wear of everyday living. In rare cases, it can involve serious damage that may even be intentional. Smashed windows, holes in the flooring, mountains of trash...the list goes on and on.
If you find yourself in the unfortunate position of assessing damage at your rental, here's a look at what you should do.
- Assess the Damage
First things first, it's important that you carefully and accurately assess the extent of the damage -and document it. Be sure to take photos that are date-stamped, and even consider taking video, if necessary. In images where it's not clear, consider placing a quarter or a ruler in the image to give a sense of scale. This step will provide valuable evidence, should you end up needing to prove your case before a judge. Hopefully, you'll also have photos that you took when the tenant first moved in, so you can prove what the condition the rental was originally in. Next, you'll want to obtain quotes from contractors for the repairs, to help justify the costs that you end up requesting from the tenant, or taking from their security deposit once the lease ends.
- Know the Law
It's also important to recognize that tenant damage can be caused a number of different ways -from intentional to completely accidental. Additionally, different states -and even cities in some cases, have different laws concerning rental damage; specifying who is responsible for what, and which steps landlords must take to collect for damages that are the tenant's responsibility. In most cases, the tenant is responsible for any damage that they or their guests caused, both intentional and otherwise, and will be responsible for paying.
However, things that are considered to be normal wear and tear are not the tenant's responsibility. This includes things like faded paint, worn carpet in high-traffic areas, or worn hinges, for example. Things like this can all safely be considered normal wear and tear, and expense that you'll be responsible for as a landlord. On the other hand, things like holes or burns in the flooring, broken windows, broken locks, or pet damage -all go beyond standard wear and can usually be considered the tenant's responsibility.
Taking Action
The right course of action that you take will vary, depending on your state law, as well as your current situation with your tenant -for example, are they still residing in the rental? Or have they moved out already?
Keep in mind that you'll want to document any attempts that you make to inform the tenant of their responsibilities.
Here's a look at some potential courses of action now:
- Talk to the Tenant
The first order of business is talking to the tenant. If the damage seems accidental or if your tenant has been an ideal renter up until this point; then try talking to them to see if you can work something out. Be sure to bring along a copy of the rental agreement -which they signed and agreed to uphold. Ideally, the tenant will be willing to accept responsibility and the issue can be resolved easily. If an agreement is reached, be sure to document the plan of action that you and the tenant agree upon. However, if the tenant is uncooperative, you'll need to move on and consider taking more drastic measures.
- File for Eviction
Tenants who have broken the lease, and pose a significant threat to your property, should be evicted as soon as possible. While eviction can be a slow and complicated process, it can be a necessary step for removing an uncooperative tenant. Just be aware that informing a spiteful tenant that they're going to be evicted could result in them causing further damage. So be sure to handle the situation in a clam and professional manner -and document every step that you take.
- Consider "Cash for Keys"
Cash for keys is a controversial practice, but it's something that many professional landlords swear by! In this scenario, you'd offer your tenant a sum of money -usually a few hundred dollars, to leave peacefully. In this scenario, you can also specify the condition that you'd like them to leave the property in -i.e., cleaned and no further damages! While it's certainly not an ideal option, it's one that can help you to get rid of a particularly stubborn tenant, while helping to prevent further damage to your rental.
If Your Tenant Has Already Left -Or Isn't Responding
- Apply the Security Deposit
Ideally, you will have collected a security deposit when your tenant moved in. Damages to the rental are exactly what a security deposit is intended for. Once the tenant is out of the property, consider deducting the cost of repairs from the deposit.
- Consider Taking Legal Action
If the security deposit isn't enough to cover the damages, you may have to pay for the remaining costs yourself, or consider taking the case to court. If the damage is especially severe, and the tenant's long gone, you may even want to hire an investigator to locate the tenant; although generally, this is a more extreme scenario. At this stage, it's also a good idea to enlist the help of an attorney. Here's a look at some tips for finding an attorney.
- Consider Filing an Insurance Claim
Finally, consider filing an insurance claim. In some cases, this may even be the preferred course of action. Generally, your insurance policy will include tenant damage, so check with your insurer to make sure.
Helping to Prevent Tenant Damage
While there's no way to completely eliminate the chance of problem tenants, the truth is that there are steps that you can take early on to help drastically reduce the likelihood of your tenants going rogue!
Your best option is to ensure that you have an airtight tenant screening process in place that you refer to each and every time to help ensure that only qualified applicants gain access to your property. You'll also want to create a rental agreement, with terms that the tenant is required to abide by, and details of what happens should the tenant violate the agreement.
Next, you'll want to ensure that you, or someone who represents you, performs regular inspections at the rental. This can help you to spot minor problems, before they escalate.
Finally, if dealing with tenants isn't exactly your scene, no worries! The truth is that you can outsource just about every aspect of rental management -and that includes handling tenants and evictions. From sourcing and screening, to repairs and maintenance, to taking action when things go wrong -and when necessary, dealing with evictions and all of the necessary paperwork, a good property manager can help to make short work of landlording, while allowing you to rest easy knowing that your properties are being managed to a high standard.
Whether you decide to go it alone or enlist the help of a property manager, the good news is that the benefits of owning income properties, by and large, far outweigh the challenges. Most of the time, extreme examples of tenants going rogue and destroying properties are the exception, rather than the norm, and there's a lot that you can do ahead of time to mitigate problems, helping everything to run like clockwork.
Would you like to increase your chances of securing reputable tenants? Be sure to take a look at this article: Perfecting the Tenant Placement Process. And if you'd like to outsource the work entirely, be sure to get in touch with a local Renters Warehouse professional landlord today!
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