Property Management Blog

The Downsides of Placing Unqualified Tenants

Property Management Blog

What is the downside of signing a lease with an unqualified tenant? It’s a lot more than you might think. Depending on how financially secure you are, placing a tenant in your home who is unqualified can lead to not only stress and headaches for you as a landlord but also heavy financial losses that cause some landlords to foreclose on their investment properties.

What makes a tenant qualified or unqualified?

Tenants come in a range from excellent to the biggest mistake you’ll ever make in your investment career. An excellent tenant is someone who not only pays rent on time and in full monthly when it’s due but also maintains the property well and notifies you or your property manager when maintenance is needed. 

Unqualified tenants on the other hand are consistently behind, have excuses for why they can’t pay rent (sometimes blaming it on the property condition), and don’t want to call when they have maintenance issues when they owe money to the landlord which can lead to bigger maintenance issues down the road.

What can poor tenant placement cost you as the landlord?

Depending on where your rental is located, evictions can take weeks to months, and in extreme circumstances, even years! Here are some of the possible expenses you’re looking at when you need to evict a tenant:

  • Court fees/eviction fees
  • Property manager fees 
  • Attorney fees
  • Junk haul away
  • Handyman repairs
  • Painting
  • Cleaning
  • Carpet cleaning
  • Appliance or fixture replacement if items are stolen

Not to mention your time trying to deal with coordinating everything and going to court.

An eviction can easily cost a landlord $5,000-$10,000 or more when you add up all the expenses. Are you able to pay your mortgage for months without any rental income and pay for the costs for an eviction, repairs and cleaning, and another leasing fee to replace the tenants you must evict? Many landlords don’t have the financially stability to do this and run into trouble with their mortgage company.

If you have a professional property manager, they may offer services like eviction or rent protection or something similar, which, for a low monthly fee will help you recoup and pay for some of the costs involved with the eviction. These services also help to cover some of the lost rental income. 

If your property manager offers this type of program, make sure you read the fine print since they may not cover you if it’s a tenant that you placed in the home. Most property management companies have strict screening criteria to protect their owner/landlord clients and avoid going through the eviction process. Unfortunately, many homeowners who place tenants themselves do not have strict (or any) tenant screening criteria and are more likely to have placed an unqualified tenant in their rental.

If you’re not getting qualified tenants applying for your rental property, it’s typically better to drop the price, be more flexible on your lease terms, and/or make some improvements or renovations to attract more interest than accept tenants who aren’t qualified and cost you more money.

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