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Home · Property Management · Tenant Screening : Tenant Turnover Doesn’t Add Up
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Rent it Right

by Janet Portman, Inman News

Q: We hired a management company to find tenants and collect rent at our rental in a nearby town.

Over the past two years we’ve had four sets of tenants; one broke the lease and we had to file evictions on two of Abacusthem. The property is nice though the market is cool now.

We’re tired of the fast turnover — are we or the management company doing anything wrong? –Jose M.

A: It sounds like the company is filling your property too quickly, perhaps without taking the time to properly screen applicants. A management company will be tempted to find tenants fast because it gets a cut of every monthly rent check: The sooner it’s rented, the sooner the checks come rolling in.

In addition, the company gets a fee every time it has to show and rent the property. It doesn’t take a genius to see that frequent turnovers and minimal vacant months are in the management company’s best interests. If an eviction is necessary, you’ll pay the company extra to handle it (of course, you’ll pay a lawyer, too, but the management company won’t usually have any legal expenses).

Balance those interests against yours. You want minimal turnover and you want stable tenants whom you won’t have to evict. Those needs translate into patient, thorough tenant screening and the willingness to go without a tenant for a month or two or three until the right prospect comes along.

True, you’ll be losing rent, but that lost rent will pale when compared to another round of turnover costs a few months down the line, let alone the cost of an eviction. But your management company has no incentive to wait it out — instead, they’ll be anxious to place a tenant and begin taking a cut of your rent.

Truly professional companies recognize that the temptation to quickly rent a place with minimal screening is not ethical. Practically speaking, too, such practices will not enhance their reputation. In the long run, they’ll become known as outfits that don’t deliver quality tenants for their owners. Maybe it’s time that you switched management companies.

Talk to other landlords and find out who has had a good experience. The number of evictions they’ve had to file and whether they’ve had hassle-free tenants will tell the whole story.

Janet Portman is an attorney and managing editor at Nolo. She specializes in landlord/tenant law and is co-author of “Every Landlord’s Legal Guide” and “Every Tenant’s Legal Guide.” She can be reached at 2009 Janet Portman

See Janet Portman’s feature,  How to Negotiate a Lease Buyout.
American Apartment Owners Association offers discounts on products and services for landlords related to your real estate investment including REAL ESTATE FORMS, tenant debt collection, tenant background checks, insurance and financing. Find out more at joinaaoa.To subscribe to our blog, click here.

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  • Diane Roy

    I couldn’t agree with this article more. I am the managing partner of a rental property business that offers management services to rental property owners in addition to managing our own properties. If you look out for the long-term best interest of the property owner by thoroughly screening rental applicants, they will come to trust your judgment. You can’t always get it right, but you can avoid some obvious problems by declining applicants that do not meet your standards.

  • Joseph Holland

    I say, cut out the middleman. My wife and I have been running our own Property Management business for the last 5 years on the four homes we own. It is not difficult. Set up a P.O. Box for the rent checks so the tenants do not know where you live. Join your local AAOA for forms/agreements, if you do not know how to create them. Present yourselves to the new tenant as the Property Managers (not the owners). We also perform most of the maintenance for the property (plumbing, electrical, landscaping, painting, etc….) Enroll in a Property Management course at your local community college for great information and knowledge on new laws, and meet other Property Mangers/Owners. Good Luck !

  • James Scott

    I agree with Joseph and offer one modification.
    Set up a bank account specifically for deposits. The tenants deposit to your account when the rent is due. No fees for P.O. boxes, don’t need to go get the deposits. No excuses for the checks in the mail. Log-in to this tenant bank account via Internet and “bill pay” the amount out to yourself each month.

  • joan

    it is best to manage your own properties but distance could be a factor or time. If using a mgt co. ask to see the tenant application before they rent to them. Make sure they hve ckd the references and past landlords, Some do not bother. I had a co. rent some apt. when I was out of the area. they put in smokers which I did not want and a drug addict. Next time I looked at the applications and found out they were trying to rent a studio to a person with 4 kids. I went back to doing it myself.

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