Home > Real Estate > Rental Property Series: Let’s Drink to Having Tenants

Rental Property Series: Let’s Drink to Having Tenants

It has been a little while since our last rental property update. In case you’re new to this site, we purchased our first rental property at the end of August this year. My husband and I became slaves for a month to get it renovated and ready for rental.  You can read about it here if you missed it.

Our goal was to have it ready for rent by October 1. We decided to use a property management company because we are just too dang nice and might let in a criminal if they look sweet and have some money. We were hoping to get $750 per month in rent. With our mortgage, insurance, taxes and property management fees paid, we should net around $340 per month from this property. Sweet deal, right?

Well, we did have the property ready by October 1. I assumed there would be a line of people waiting to rent the place. We worked so hard, and I got a pretty shower curtain and mirror for the bathroom.  Reality is that it takes a while to find the right renter. One thing I like about property management is that they have no emotional attachment whatsoever. Sob stories don’t hold any water. Potential renters have to pay for a background check and credit report.  We had two very interested parties. One never brought back the paperwork to be screened. The other did not have a good rental background or good credit.

My husband and I were really getting frustrated. Did we do the wrong thing by going with property management? Did they have too many rentals to manage, and we were not high enought on the list? Should we lower the rent? Finally, we got the call we’d been waiting for. Renters who had decent credit and good rental history wanted our place. Their last landlord said they aren’t the best house cleaners, but didn’t do any damage. They are actually two bachelors who have a long work history for the same company. I believe they are related in some way, but never quite figured out how. They travel quite a bit for jobs. They make more that enough money for rent, and have no criminal history. Doesn’t mean they couldn’t trash the place, but it probably isn’t likely. After the condition of the house when we bought it, I can live with a little poor housekeeping. I guess they probably didn’t care about the fancy bathroom mirror and shower curtain either, but you never know.

They were set to move in last Monday. I got an email asking me to sign off on the final paperwork. On my way home from work, I drove by the place, expecting to see lights on and cars in the driveway. I was surprised to see total darkness and the “For Rent” sign back up in the yard. This couldn’t be good.

After a call to the property manager, we learned that only one of the two showed up for the move in appointment. He came with another unknown fellow who was driving. Good thing, because our tenant was drunk as a skunk. He showed up wasted to meet the manager needing to go over the rental checklist and sign the lease. She was so mad that she made them leave and put the rental sign back up. You can’t have someone incoherent sign a lease and expect it to be binding. About an hour later, another lady viewed the house. She was very interested, but was in the midst of changing jobs and wouldn’t know what she wanted to do until later in the week. Back to waiting.

Of course, the next day our two bachelors called wanting to move in. They had taken the previous day off to move, and well, I guess they just had a little too much time on their hands. We went back and forth. Does one episode of bad judgement mean they will be poor renters? The property manager called their former lanlord again. Maybe she lied to get them out? She confirmed her good reference and said this was not normal behavior. These guys go to work at 5AM every week day, and have excellent work history. If they are drunk every night, they seem to still manage getting to work. We agreed to let them move in, and we never heard from the other lady, so hopefully this is the right decision. I’m thinking they are probably no worse than if we were renting to college kids. They paid the deposit and first month’s rent in cash.  I guess if we decide to send a holiday gift, we can give a case of beer!

If you are thinking about taking the plunge into investment property, as a first time landlord, I’ll share my advice.

  • Have enough of a cash cushion that you can carry the property longer than you plan. We had to pay an extra month of mortgage and utilities because we didn’t get a renter right away.
  • Renters don’t like to look at a place that isn’t fully renovated. If your rental needs major work, plan to complete it before renters seriously start looking. We had several showings during construction, but no one was really interested until it was all done and cleaned up. Most people can’t see your vision with renovation debris everywhere.
  • Wait  for a good tenant. I highly recommend doing a background check and credit report before taking on a renter. Check out this post at Free Money Finance for some great tips. If you don’t want to do it yourself, hire someone. If someone hasn’t paid bills in the past, there is a good chance they won’t pay you, and it can take months to evict someone who doesn’t want to leave.
  • Even if you get a “good” tenant, you just never know what might happen. If you can’t roll with the punches, rental property maybe isn’t for you.

We are glad at this point that we chose property management. They really did come through. Hopefully we won’t find anything terribly wrong with the property after it has been lived in. The house has been vacant for several months, so you never know. I guess that would make another good post, but one I hope to avoid. I’ll keep you updated.

If you are a landlord, how do you screen potential renters? Would drunkeness exclude a tenant?

 

About Kim Parr

Kim Parr is a private practice optometrist, freelance writer, and personal financial blogger. You can follow her journey to 20/20 financial vision at Eyes on the Dollar.

54 comments

  1. Thanks for the really helpful tips – it couldn’t have come at a better time. My wife and I were just talking about buying a rental property to supplement our income seeing as we have paid off 2/3 of our existing mortgage.

    Let’s hope your renters turn out to be good and you don’t have any issues.
    Glen @ Monster Piggy Bank recently posted..6 easy money SAVING tipsMy Profile

  2. We have 2 rental properties and do not use a property management company. We screen all of the renters ourselves. You can get a pretty good feel for somebody by meeting them, which is why we choose to do it ourselves. As far as credit history goes, we rent almost exclusively to people with bad credit. Our philosphy is that most renters in this area rent because they have bad credit. If not, they would buy their own house because housing is relatively cheap. We ask them point blank about their credit history. We then check it to make sure that they are telling the truth. If they are and can afford our rent, then they are generally OK. If they lie to us, then we don’t rent to them.

    So far, we’ve only had one horror story. It has worked out great for us! Congrats on becoming landlords:)
    Greg@ClubThrifty recently posted..Top 5 Finance Apps to Keep Your Finances in CheckMy Profile

    • Good point about the credit history. We are not looking for the 800 credit score for sure. If they had a period of bad history or a default on a big bill, or even a foreclosure, I think that would be OK. As long as it isn’t a continuing pattern of not paying bills. I’m sure you run into everything if you do it long enough.

  3. We personally screened our first renter, but it was easy for us because it is someone that we know. There were a couple other friends that were interested so we didn’t have to plunge into the unknown. Our rental is a bit different as you know since it is in the basement of our house, so I personally would have higher standards of who rents here than if it was a detached property somewhere else like yours. I would not have taken the drunk tenant.
    DC @ Young Adult Money recently posted..What I Care About In This ElectionMy Profile

    • No, I would not want a drunk tenant in my basement! I hope your tenant is a good one. It would be bad if your friend didn’t pay the rent or was too messy.

  4. Mandy - Money Master Mom

    Renting kind of scares me. We want to invest in Real Estate but we’re hoping to use a Rent to Own approach to remove most of the negative renting risks.
    Mandy – Money Master Mom recently posted..Prepping for a group cook!My Profile

  5. I have let my tenants screen their roommates for the past three years (I have a 3 bedroom flat) and it has worked ok for me, since they have always paid rent in time, but not so well for the tenants, who had to ask two or three to leave. Too loud, too dirty, were the main excuses. I have had a drunk roommate too, she came back so drunk one night she lit the oven and put a burrito there, then fell asleep, I woke up in smoke and avoided a fire just because I had a flight at 5am. Drunk is a no go for me.
    Pauline recently posted..Little house in Guatemala, week 1My Profile

    • Wow, that would be really bad to have your house burned down! Hopefully we won’t have to deal with that issue.

    • Wow… That sounds terrible! So far, I’ve been very lucky. No fires and no drunk tenants. I think basic screening questions is a great way to help avoid the worst candidates. The questions shouldn’t be too invasive but can be turned into a simple 2 minute chat… Do you drink? How much? etc, etc. Some people’s social cycles are just not compatible!

  6. Glad you got the rental filled. I can understand that if you can’t stomach the risks, then you probably should not be a landlord…which is pretty much like any investing you may be in. If I were to be a landlord, I think I’d have to go with a property management company as well.
    John S @ Frugal Rules recently posted..You Won’t Reach Retirement Without Saving for ItMy Profile

  7. Great tips! We are starting to think about buying our first place (probably within the next year) and want to make sure that it is somewhere that we’ll be able to rent out in the future.
    SWR recently posted..November goalsMy Profile

  8. LOL. What the heck is wrong with people? How can one even think it’s a good idea to show up drunk when you’re about to move into a new place. haha. Some people crack me up.

    Thanks so much for this series and these stories; we’re not close to being land lords, but I have a feeling it will be in our future! Will be looking forward to the experiences and stories!
    Jason @ WorkSaveLive recently posted..Our Journey Out of Debt – October 2012My Profile

    • We will hopefully be looking for a second property next year if the rates stay so low. You can buy houses for nothing here now. To me, a little hard work and drama are well worth it.

  9. Congrats! I was waiting to hear that you rented it out.

    Their craziness made for a good post to read! I think using a management company is wise. As time goes on hopefully they will be good a pre-screening any calls from the tenants in regard to maintenance issues too.

    Are you allowed to randomly inspect the property during the rental term? In Canada I don’t think landlords are allowed to, but back when we were looking into buying rental properties I kinda thought that might be a good way to see how things are going.
    Tackling Our Debt recently posted..Friday’s Circle of Friends and Random Facts About Some of ThemMy Profile

    • I drive by every day on my way home, but no, you have to give 24 hours notice before going in. One thing I liked about our property management company is that in their leases it is specified that they will go in four times a year to do seasonal maintenance, but that also gives them a chance to look around and make sure nothing detrimental is going on.

  10. Its been really interesting to follow your progress with your rental. I hope your tenants turn out to be really responsible drunks :) so that they make their payments and don’t destroy the place. (I’m sure they’ll be fine). Best of luck in the future, reading your posts has made me interested in rental income…
    Jason Clayton | frugal habits recently posted..What’s with all the Closing Costs and Fees when getting a MortgageMy Profile

    • Hopefully they are happy drunks! I just think they probably work hard and play hard, but get up too early to damage too much. I’m crossing my fingers anyway!

  11. I thought you were supposed to get drunk AFTER moving in!

    I do have one question for you as a landlord, something I’ve never really understood. Why criminal background checks? One in seven(!) Americans have been arrested at some time in their lives. That seems like an awful lot of people to exclude.
    Edward Antrobus recently posted..Is the Fiscal Cliff Really That Bad?My Profile

  12. “Renters don’t like to look at a place that isn’t fully renovated.”

    I can’t tell you how true this is. I was floored when our last renter wanted to look at the place before I’d made some major changes. When I told him he could have the choice on many of the changes, he nearly backed out because he didn’t think it was going to get done. In fact, he was surprised by how well it turned out, and is a fantastic renter….but he almost didn’t go with us because I let him tour “early.”
    AverageJoe recently posted..Special Skyfall Release Episode–2 Guys & Your Money 017: What if James Bond Needed Financial Advice?My Profile

  13. Hopefully these guys work out for you. When we rented out our first unit, we got nervous that there were no takers after a couple of weeks, and ended up renting to a couple that wasn’t ideal. They didn’t trash the place, but they were always trying to pay a few days late (they had a grace period in their lease…) and complained a ton about their electric bill even though they kept the AC on 65 ALL THE TIME. They said it was our fault the house wasn’t insulated correctly.
    We ended up letting them out of their lease a month early because we were done dealing with them, and letting them out a month early opened the unit up for students to move in more in line with their semester schedule.
    Now we don’t get nervous, and know to wait for the right tenants. They’ll come.
    Mrs. Pop @ Planting Our Pennies recently posted..How To Recover From A Bad Budget MonthMy Profile

  14. This is exactly my problem with becoming a landlord – I would want my tenant to be Mother Theresa! YES, drunkenness would discourage me from renting to someone. But hopefully these two guys give you no trouble and pay on time each month!
    My Money Design recently posted..My Money Design for Achieving Financial Freedom – November 2012 UpdateMy Profile

  15. A scary start, but I hope nothing goes wrong for you. I know I’d be worried as heck if that happened to me. I know there is an entire community online (I think a forum) dedicated to landlord/tenant issues. You may try checking that out to learn up on some things in case you ever want to drop the management company in the future. Here is one such forum, but I think there are many others: http://absoluteca.websitetoolbox.com/ Keep us posted, this is definitely helpful information when the time comes for us to do the same.
    Veronica @ Pelican on Money recently posted..Sure, I’ll Take That $23 MillionMy Profile

  16. Wow – I could never handle renting. I just read a recent story about how hard it is to evict tenants. I’d highly recommend getting familiar with the process ahead of time – just in case!
    Cat recently posted..Negotiating a better finance deal on a used carMy Profile

    • Thankfully or sadly, our property management has done that. That was a first question I asked. That would really be bad, but I guess something to prepare for.

  17. Kim – some great tips here. It has certainly made me think twice about being my own landlord. I think you are right in giving them the benefit of the doubt… if they still have the same jobs after so long, they must be semi-reliable! :)
    Savvy Scot recently posted..The Benefits and Risks of ContractingMy Profile

  18. Kim,

    I really agree with your point about never showing a property that is not completely ready to show. I’ve lost potential tenants that way too.

    My technique for checking out tenants is to use a fairly extensive application form. I call all of their references, and almost everyone listed on the form. I do an internet check for run ins with the law. I require proof of income. And, intuition still plays a part in the final selection.

    I think you did the right thing in giving those two guys a second chance.
    Terry recently posted..5 Keys to Sell Books Like Hotcakes with YouTubeMy Profile

  19. I’ll probably be renting out my place soon and I’ll need to decide whether to do it myself or hire a management company. I would have thought they would have taken care of everything though? Did you ask to be kept in the loop or do you have the final say on who moves in?
    Harry @ PF Pro recently posted..Do You Invest in Expensive Kitchen Knives? A Review of my Shun Chef’s KnifeMy Profile

    • Our company is run by a lady I’ve gotten to know quite well over the last couple of years, to the point where I’d call her a friend. So, we are kept in the loop and get final say. I like to know what’s going on, so that works for me. I imagine some people don’t ever want to know anything as long as they get a check every month.

  20. Congrats! When we rented out our condo, we opted to do it all ourselves. We were very selective and also had our prospective tenants go through a credit check. Personally, I’m happy to do that sort of thing myself, because I want to be able to judge who I rent to. But if we ever manage to accumulate more than 2 or 3 rentals, I would probably go with a management company as well.
    CF recently posted..Paying off $27,000 in student loansMy Profile

    • We are probably the opposite. If we get several, we are more likely to do it ourselves and make it more of a job. Right now, we just don’t have the extra time, but I expect that to improve over the next few years, hopefully anyway!

  21. Hmm, sounds like you might have an alcoholic on your hands, which could be a disaster just waiting to happen. I’d be concerned about liability as well as nonpayment, you never know what this character will get into.
    Weasel recently posted..What is Yield on Cost?My Profile

  22. Kim, rental properties are such a great forced savings plan. I for one, would like to invest in a few more, but my wife is apprehensive. We have 2, a four family and a small single family home on 14 acres. Working diligently on paying off the mortgages!
    Jim recently posted..How New Zealand Turned It’s Economy Around | America Take NotesMy Profile

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