Every time you have a tenant move out, you run the risk of losing a portion of your revenue. That’s why it is essential when managing a rental property to know exactly how to mitigate your potential losses at tenant turnover.
You can make these moves before and after tenant move-out to keep your losses at a minimum and your property protected:
Protecting Against Potential Losses
Start by creating a plan to avoid unnecessary tenant turnover and irresponsible tenants wherever possible. Keeping lost revenue at a minimum is why the following items are so important, so ensure you have effective strategies in place:
Thoroughly Screen Tenants
Tenant screening is a must in keeping your revenues up. You don’t want there to be any surprises when it comes time for move-out—and while no tenant screening can guarantee that, it can massively reduce your lost revenue. Check credit, backgrounds, and rental history. Call references and past landlords. If there is a history of irresponsible behavior from a tenant, you want to know about it before they sign a lease.
Charge Appropriate Security Deposits
You want to be covered thoroughly in case of damages. Of course, you want to be cognizant of your local ordinances and norms when determining a fair security deposit amount. However, you can also charge last month’s rent at lease-signing for the added protection you might need against potential damages or lost revenue. Consider all your options when it comes to deposits, from cleaning to pet fees.
Then, make sure the tenants clearly understand what will come due at move-out. Even consider providing them with an invoice for each month of their lease, including move-out.
Conduct Regular and Move-Out Inspections
The best way to keep unpleasant surprises away from your rental property is to conduct regular inspections and inform your tenant of when they are to be held. This knowledge incentivizes your tenant to keep the property in good condition, as they don’t want to be financially responsible for any damages.
Also, provide them with a detailed rubric for how they can receive the majority of their deposit and watch them repair any minor damages to the property themselves or contact your maintenance team whenever required.
A move-out inspection where you can walk the tenant through any damages and let them know directly what to expect from a security deposit will also be immensely helpful for both you and the tenant. Keep a record of this inspection—including pictures and even audio—that your tenant can take a copy of. Clarity in the process will show your tenant that you are fair and transparent, making them more agreeable and encouraging them to pay whatever extra damages might be due.
Finally, take forwarding addresses and valid phone numbers at the move-out inspection as an added precaution.
Disposition a Deposit for an Overly Damaged Property
For a property that is damaged beyond normal wear, you’ll want to disposition a deposit. This will itemize the amount due, including any past due rent and damages that will be taken out of the security deposit.
Providing this itemized disposition in clearly broken-down amounts is a must. Look up your local laws for the time-frame needed to send this disposition to the moved-out tenants.
At that point, good record-keeping is especially useful. Your former tenant will not be able to refute compelling video and photographic evidence and will not want the disposition to escalate into costly court proceedings.
However, if the request for payment still goes ignored and you’ve done all of the above, proceed with the following:
Escalate Your Request for Repayment of Damages
No one wants to engage in a legal dispute—even the fear of this may be enough for your former tenants to respond to requests for payment of damages due.
Consider these steps in recovering your lost revenue:
Be Persistent with Attempts to Contact
If your requests for payment are going ignored, don’t stop. Send intermittent, notarized letters that let your former tenant know they have to make amends for inordinate damage or improper behavior with your property that has left you with a loss. Have a letter sent from a paralegal or a lawyer—that should get you tenant’s attention that you mean business and repayment is necessary.
Look into Insurance or Tax Deductions
Another essential step in recovering lost revenue is contacting your insurance company. You might be able to make up for any damages through an insurance claim, depending on your coverage.
In addition, you may be eligible for tax deductions and write-offs that can help you net back what you spend on repairs and maintenance. Contact a financial advisor to find out exactly what might be possible in your situation.
Proceed to Arbitration
Before you engage in costly legal disputes, reach out to your former tenant with the offer of an arbitration meeting. The tenant might jump at the chance to have their side of the story heard, and a resolution could be made without further time and labor spent on attempting to see the matter through a court hearing.
Hire a Debt Collector Service
If nothing else has worked and you still cannot get your former tenant to pay the fair amount due to you in damages, look into hiring a debt collector that specializes in rent recovery. Debt collectors can be efficient and will put in the time and effort you may not have to proceed in your own collection efforts. Consult some debt collectors to determine if this route is right for you.
Resort to Small Claims Court
This may be your least preferred option, but it is an option nonetheless in recovering losses due. If you’ve kept excellent records of the damages done to your property through misuse that is outlined in the lease agreement, you have a good chance of winning a civil settlement. You can then potentially recover your losses through the added power of the law.
However, this can be timely and may cost a lot more in the short term due to legal fees.
By following these steps, you can take every possible action in recovering unexpected losses in a fair and legal manner. Thorough tenant screenings, lease agreements, and inspections will keep damages to a minimum, but the best method against damage protection is always to attract the ideal tenants to ideal properties.
For more information on this and other property management issues, contact 208.properties today.