Have you ever had a tenant damage your property? If not, count yourself lucky.
As a landlord, the more important question is “How can I prevent tenant property damage?” And, if the worst happens, how do I handle tenant damage to property?
How to Prevent Tenant Damage to Property
The best way to deal with tenant damage to property is to prevent it before it happens.
But how do you do that?
First, choose your tenants very carefully. The most important thing you do as a profitable landlord is to choose the right tenants. And no matter how good you are at it, sometimes you will fail.
If you have good tenants, particularly in an apartment building, let them know when a unit is available and ask them to refer their friends. Tell them “I would like more good tenants like you! Do you have friends who are also responsible and financially capable of renting my unit? Someone you would like to have as a neighbor?”
Even if they don’t know anyone to suggest, you have given them the blessing of appreciation.
But referrals alone don’t guarantee good tenants. Always run a full tenant credit report, criminal background check, and eviction history report on all rental applications. I have found that the worst people sometimes make the best talkers. They know how to fleece you because they have been doing it for years.
Once I had a prospective tenant who made a deposit on a single-family house, and I thought it was rented to a good tenant. When I did a background check, however, I learned he was a month behind on his rent with his current landlord. The amount he owed closely corresponded with what he paid me. As it happened I knew the landlord. He was a banker I had dealt with. I called and learned the tenant had not paid his last month’s rent.
When I confronted the prospective tenant he admitted he used his next month’s rent to pay the deposit to me. He didn’t have the money. I returned his holding deposit but not the cost of the background check.
That background check and a call to his current landlord saved me so I did not rent to an obviously problem tenant. Would he also have trashed the property? There is no way to know except to look at past behavior. If they were bad tenants with their current landlord I would be foolish to expect anything different.
Charge a High Security Deposit
Security and pet deposits protect you in several ways. Most obviously, they offer a cash reserve you can use to repair tenant damage to the property.
But they also serve as an indications of an applicant’s financial fitness. If your prospective tenant can’t afford a security deposit plus the first month’s rent (and possibly the last), they aren’t financially secure. They are living on the edge financially, and the first problem they run into will put them underwater. And for financially troubled tenants, the rent is often the easiest place to cut.
I have occasionally made exceptions and allowed tenants to pay the damage deposit in installments after moving in. It always worked out badly. I had to learn the hard way that you have to operate your rental business like a business, with strict rules in place.
Charge for Pets
The same logic applies to pet deposits. I formerly charged a $100 non-refundable pet deposit and an additional $30 monthly rent per pet. (Some states and cities don’t allow additional rent for pets, so double check your local laws.)
My daughter, a pet lover and real estate investor, taught me an important lesson. When she learned I only charged a $100 pet deposit she said,
“Dad, that’s not enough. Responsible pet owners appreciate being able to rent where their pets are welcome. They are glad to pay pet rent and a higher pet deposit and it tells you they will be good tenants. You should charge at least $300.”
I changed immediately and it worked out exactly as she said. Previous to the $300 pet deposit I often had problems of pet damage. It was so bad I almost quit accepting pets at all. After raising the non-refundable pet-deposit I have seldom had pet damage problems.
Add a Cosigner
If you consider renting to applicants with no credit, bad credit, or borderline income, ask for a cosigner on the lease agreement.
For instance, many college students and grad students haven’t had time to build sufficient credit. The same goes for recent immigrants to the US. By asking for a lease cosigner, you add another layer or security against them defaulting on the rent payment — or leaving rental property damage.
Because if the tenant damages your property, you can not only go after them for the cost, but also the cosigner.