Few things can ruin a property manager’s life faster than having awful tenants. They will waste your time, cause headaches, and can drastically affect your bottom line.
Why You Should Worry About Bad Tenants
A bad tenant isn’t just a minor nuisance—they can literally destroy your business as a property owner and landlord.
Here are the two main reasons bad tenants are such a detriment:
1. Bad Tenants Drive Owners to Sell
Tenants that lie to you, skip rent, destroy property, sue you, or need to be evicted are incredibly difficult to deal with on a day-to-day basis. They’ll waste your time and stress you out.
You might think that it’s all worth it in order to have cash flow and growing equity in a property, but there’s a reason fix & flippers target rental property owners so heavily—they are often vulnerable to sell fast when they’re in the middle of an awful situation. That’s how bad it can (and often does) get for rental owners.
2. Bad Tenants Destroy Profit
Your very best tenants will stay for years, renewing their lease with you over and over again. That being said, a bad tenant is one who doesn’t stay very long (assuming you want them to stay).
When you have tenant turnover, you incur vacancy costs. Every month that you don’t have a tenant is a month that you have to pay the mortgage yourself, or if the property is paid off, you miss out on a rental payment.
With average rents surpassing $2,000 in the U.S., each month that you don’t have a tenant destroys your profit margin. If you’re looking at cash flow of $200 per month, a single month of vacancy essentially erases that income for an entire year.
Tenants don’t have to actively destroy your property to be awful—not reporting maintenance issues that turn into larger headaches and costs can be just as damaging as someone who spray paints your walls.
What Does a Bad Tenant Look Like?
A bad tenant is someone who:
- Communicates poorly or not at all
- Acts put out and annoyed with any requests
- Leaves without notice
- Can’t make rent every month
- Breaks the rules
In general, they disrespect you and the property. They wonder how they can take advantage of the situation as opposed to working with you. You don’t know when they’re leaving and they don’t try to help you out.
A top-level tenant will be someone who:
- Stays a long time
- Communicates important messages to you ASAP
- Pays rent on time each month
- Treats the property as if it were their own
In other words, you want people who are hassle-free and easy to work with. You want tenants who don’t treat you like their employee.
Now, perhaps the most important job of a property manager is to weed out potentially bad tenants in the screening process! If one slips past, you’ll then want to quickly identify that you’ve got a bad tenant and don’t allow them to renew when their lease is up. You may even have to evict them if the situation grows dire.
21 Signs of a Nightmare Tenant
Here’s how you can identify those worst tenants before you rent to them:
- Poor Debt-to-Income Ratio
- Unverifiable Income
- Poor Credit History
- History of Late Rent
- Poor/Inconsistent Job History
- Lies on Their Application
- Prior Evictions
- Prior Convictions
- Illegal Behavior
- Prior Bankruptcy
- Breaks Lease Agreement Rules
- Avoids Tenant Responsibilities
- Smokes
- High Maintenance
- Never Requests Maintenance
- Bad or Disrespectful Communication
- Doesn’t Keep House Clean
- Refuses Renters Insurance
- Weak References
- Scoffs at Price Hikes
- Disrupts the Neighbors
1. Poor Debt-to-Income Ratio
This is the first thing to look at on an application, and the top reason you should be disqualifying candidates. If it seems like they’re going to struggle each month to pay rent, then the rest of their application doesn’t matter.
In addition to looking at income, you’ll want to know their debt situation as well. Someone who earns $75k with no debts is likely a better candidate than a $100k earner who has two car payments, medical debts, and back taxes to pay.
A standard rule of thumb is to shoot for candidates who have no more than a 36% debt-to-income ratio, including the rent they’ll pay you. With rents increasing faster than ever, that 36% benchmark may become unattainable for most—but someone in that ballpark who seems responsible is likely a good candidate.
Even if they have a good income, be on the lookout if they ask a lot of questions about paying rent. If they seem unduly interested in your late policy or reporting non-payments to credit bureaus, another applicant might be a better option.
Most landlords use the simpler rent-to-income ratio when calculating a tenant’s ability to pay rent. This is shortsighted, as debt plays a massive role in how much real income a tenant has available to spend on rent.
2. Unverifiable Income
Because debt-to-income ratio is such an important indicator of their ability to pay your rent, move on to another candidate if they won’t tell you what their income is or you’re unable to verify with their employer.
The same goes for their monthly debt obligations—if you can’t find out that number, move along even if their income appears to be enough.
3. Poor Credit History
You should always be running a credit check before bringing on a tenant! This will give you great insight into their ability to pay rent moving forward. If they have frequent late payments and maxed out credit cards, you can be relatively certain they’ll have trouble with the rent at some point. Move on.
Running a credit check is too easy not to do it. Here’s how.
4. History of Late Rent
Unfortunately for property managers, late payments on rent are often not reported to credit bureaus. This is because federal law prohibits landlords from reporting late payments to credit bureaus until 30 days have passed.
Furthermore, the landlord isn’t required to report the late payment to the credit bureau. Many will, especially if it’s a property management company managing the payments, but it’s not a guarantee.
To discover a history of late rent, be sure to talk to prior landlords whenever possible.
5. Poor/Inconsistent Job History
Again, we’re looking for people who are likely to stay long-term and consistently make their payments on time. If they have a spotty job history, they’re more likely than other candidates to have issues making rent.
Look out for these signs:
- Jumping from job to job
- Large unexplained gaps in employment
- Jobs in differing fields (someone with a set career is likely to have more stability and better earning potential)
- Jobs in different cities (do they move a lot?)
6. Lies on Their Application
Ideally, you’ll be able to find this out before you select them to move in, but that’s not always the case.
For example, they may say that they only have one car, and then later you find out they have three. Or perhaps that they do indeed smoke.
When someone flat-out lies on their application, that’s someone you shouldn’t allow in your unit (or to re-up their lease).
7. Prior Evictions
This is a pretty simple one. If they have prior evictions, you shouldn’t consider their application in the vast majority of cases. If they are an otherwise perfect candidate, you could ask them to explain what happened.
However, with the cost of an eviction running at least $3,500—as well as the extra headache for you—you’re well justified to simply move on to the next applicant.
Evictions are public record and you can run an eviction check in five minutes.
8. Prior Convictions
Under federal law, it is illegal to deny an application for a tenant that has a felony drug use conviction. This is because drug addiction is considered a handicap, which is a protected class under the Fair Housing Act.
In virtually all other cases, you can deny an application based on a prior conviction—but as laws change, this would be a good one to consult with a lawyer about.
You cannot deny an applicant for an arrest, as in the U.S. that does not imply guilt. If you find out about an arrest, it’s your responsibility to ignore that information when deciding who to give the lease to.
On a practical level, many landlords choose to overlook prior conviction history if it’s for a nonviolent misdemeanor, especially if it occurred many years ago.
Running a criminal background check is simple. Just be sure to collect the necessary information on the application, such as full name, date of birth, and recent addresses.
9. Illegal Behavior
Obviously illegal behavior at your property should not be tolerated.
It is worth noting that addiction to illicit drugs is considered a protected class and you can’t discriminate based on that. For example, if your tenant mentions they’re going through a program to help them overcome a cocaine addiction, you cannot deny their application based on that statement.
You can still deny them tenancy for manufacturing or selling illegal drugs, or for using those drugs on your property. Be sure that you have clear evidence of drug use or drug selling before taking any further steps.
While laws vary from state to state, the landlord can even be charged with a felony for having tenants who use, manufacture, sell, or even keep illicit drugs on the property. Be sure to act swiftly if you find evidence, or you may find yourself legal trouble.
10. Prior Bankruptcy
Bankruptcy is a clear and obvious sign that your potential tenant has mismanaged money in the past. It’s possible for them to rebuild their credit to a respectable level (in fact, someone with a bankruptcy can secure a mortgage within 18 to 24 months), so if you plan to be a stickler about prior bankruptcies, be sure to dig deeper then just their credit score.
You’ll generally be able to discover prior bankruptcies on the credit check if they’ve happened in the past seven to ten years, depending on the type of bankruptcy.
11. Breaks Lease Agreement Rules
Someone who’s not willing to agree to your rules, or breaks them after becoming a tenant, is not the kind of person you want in your property long term.
Make sure that your application and lease agreement clearly state whatever your rules are so you can have that expectation set.
A few examples of lease agreement rules are:
- No pets
- No extra roommates not named on the lease
- Too many vehicles
- Keep property clean
- No smoking
12. Avoids Tenant Responsibilities
Each property manager will have their own expectations, and whatever yours are, be sure they’re laid out clearly and your tenant understands them.
A few common examples are:
- Pay utilities
- Pay internet and/or cable bill
- Maintain landscaping
- Change HVAC air filters
- Change batteries in smoke detectors
Some of those are clearly more harmful than others, but disregarding any responsibility you set out is a sign you’ve got an irresponsible tenant.
13. Smokes
You are legally allowed to deny an application (or not renew a lease) for smoking. It’s not considered to be addictive, so therefore not considered a handicap, which is a protected class.
(It’s a little strange that smoking isn’t considered addictive, but that’s mostly because cigarette companies will do everything in their power to keep their products from being considered addictive).
You shouldn’t allow smoking on your property as the average smoking-related costs to rental properties runs $4,935. Ask the question on your application and also be on the lookout for signs of smoking when you visit the property.
14. High Maintenance
Does your tenant:
- Call you for every small issue, especially if you’ve established that phone calls are only for emergencies?
- Constantly ask if you’re going to change out carpets or appliances?
- Want you to repaint the whole house?
When it comes to high maintenance, it’s something you’ll be able to recognize. Great tenants can ask those same questions above, but it’s more about frequency and tone.
15. Never Requests Maintenance
On the other hand, it should be a red flag if someone never requests maintenance.
This means one of two things:
- They’re making fixes themselves, which can lead to plenty of unwanted issues.
- They’re ignoring issues in the property and potentially allowing them to get worse.
Either way, it’s something you’ll need to look into and rectify.
16. Bad or Disrespectful Communication
These are the tenants who you feel like are actively working against you. They’re not accommodating, they’re rude, and they don’t respect timelines.
A few example are:
- Don’t let you know in a timely manner if they’re renewing the lease.
- Don’t text you back when you ask for a good time to stop by.
- Respond with one word answers that don’t answer your questions.
- Are flat-out rude or mean to you.
- Move out without notification.
It’s not hard to recognize these types of tenants, and it’s better if they’re another property manager’s problem.
17. Doesn’t Keep House Clean
While it’s unreasonable to ask them to keep the house spotless at all times, there should be a reasonable expectation set for cleanliness.
If you give them notice you’re coming by later, and the house is still a complete disaster, there’s a good chance it’s even worse when you’re not there.
Truly dirty houses can lead to unwanted stains, odors, water damage, and more.
18. Refuses Renters Insurance
Requiring renters insurance should be a requirement on any lease agreement you put together. Landlord’s cannot buy a renters insurance policy in their tenants’ name, but you are within your rights to require them to have it.
Renters insurance protects a tenant against any loss or damage to personal belongings. Some landlords may see that as not their problem, however, many tenants will try to blame you for damages.
For example, if there was a break-in or a flood, many tenants may blame the landlord and try to recover any losses via court. If they can prove negligence on your side, they may have a case.
Requiring renters insurance helps keep your tenants happier and less likely to pursue legal action against you.
With renters insurance running about $12 – $35 per month (depending on location), it’s not a prohibitive cost to your tenants. It’s a no-brainer requirement to add to your lease agreements.
19. Weak References
A poor applicant will provide only one or two references, and they will be close family or friends.
Ideally, your best applicants and future tenants will provide references from employers, prior landlords, or community leaders. Also, this allows you to gather other information such as income, history of late payments, and more.
20. Scoffs at Price Hikes
Reasonable tenants understand that rental prices can’t stay the same forever. Perhaps the best way to handle this issue is to be clear with your tenants during the application process that you plan to raise the rents regularly.
Since 1980, rental prices have increased at a rate of 8.86% per year. With average rental prices surpassing $2,000, that equates to a $172 price hike per year.
$172 hikes per year might be a little tough to swallow up front, but you can let your tenants know that, as a rule, you raise rent by $50 per year. Also mention that you reserve the right to raise the price by more than that as dictated by the market, but that you’ll do your best to keep rents at or below local rates (if that’s your policy).
This way, your renters won’t be blindsided when it comes time to renew their lease. Bad tenants will still try to negotiate, gain your sympathy, or manipulate you to keep you from raising rent. However, it’s your property and your business, so find tenants who won’t scoff.
Keeping rent $25-$50 less than going market rates builds goodwill with your tenants and often keeps them in your property longer. In the end, this can make you more money by having fewer vacancies.
21. Disrupts the Neighbors
The last thing a property manager wants is to have to deal with complaints from neighbors, especially if the police have been notified.
Late-night disruptions could also be a sign of other unwanted activities on your property, such as parties or drug use.
How to Keep Bad Tenants Away
If you already have a bad tenant in your property, then your best option will likely be to wait until their lease is up and notify them you won’t be renewing with them.
Of course, if things are bad enough, you may need to go the eviction route, but that’s costly and time consuming. That would be for more extreme cases such as illegal activity, destruction of property, or non-payment.
Your best-case scenario is to find and filter out bad tenants during the application phase. Here’s how you can do that:
- Be very specific in your marketing materials – In your online listings, mention some of your more stringent qualifications up front. These could be no smoking, no pets, background checks required, and more.
- Create an in-depth application – You’ll weed out more bad tenants if you have a detailed application process. Don’t be afraid to ask for income, job history, prior landlords’ contact information, if they smoke, and what you will find upon running a criminal background check, credit check, and eviction history.
- Take your time with your tour – When showing your applicants the property, make sure to take the time to get a feel for them. This is a great time to find out how needy/high maintenance they are, learn if they’re respectful, and to make sure they understand what you’re going to expect of them.
