By RPM Central Valley
Tenants are the lifeblood of any rental property because when the property is rented the cash flow from that tenant is used for paying the mortgage and other expenses associated with the rental property.
Sadly, every year many owners inadvertently choose bad tenants that create problems for them and make owning rental property a huge problem.
The good news is owning rental property can be easy and fun once again if you use the right screening tools to find tenants.
Finding the right resident, asset protection a growing concern
Finding the right balance of quality tenants while minimizing risk and exposure with limited impact to leasing agents and consumers is a growing concern in rental housing today. Not all screening tools paint a true picture of the applicant, and of those who are approved only 40 percent purchase renter’s insurance policies, according to RealPage, Inc.
Recent demand has provided PMCs a great opportunity to maintain high occupancies. In a good market, properties typically don’t have to lower screening thresholds and take on more risk just to fill assets.
But not all applicants are desirable tenants, even if they possess good credit scores. Rental payment history that includes late payments, whether or not deposits have been paid and damage-related charges may not always show up on a credit report. Such information can be just as big of a red flag as a questionable credit report.
Rental payment histories tell more about applicants
Good rental payment histories often are an indicator of applicants who are less likely to cause damage and purchase a renter’s insurance policy, McIntosh said. A property is most vulnerable when damage occurs by an uninsured resident, and, unfortunately, damages like fire, smoke, water and even pet damages may be unrecoverable or require the expense of a collection agency or attorney to resolve.
McIntosh says a quality screening tool enables management companies to better mitigate risk in a fast-paced rental housing environment.
A robust screening tool that includes rental payment history profiles helps properties identify higher quality tenants and keeps pace with applicants who are calling just as quickly as properties are available. Ideally, McIntosh says, property managers should rely on a tool that returns thorough results in just seconds so the application process continues to flow. Along the way, screening should focus on identity, transactional identification and renter history.
Anything less may not deliver the best paying renter to the property.
Asset Protection Plan can fill the gap when tenant-caused damage occurs
While screening offers big protection, it’s not the only line of defense against unwanted property damage that may not be fully covered by liability insurance.
Damage from kitchen fires, water and smoke from a patio grill require costly repairs, but these expenses typically fall below a policy deductible and are paid directly out of a property’s operating budget.
Propertyware Asset Protection is a new offering from Propertyware that provides a win-win for property managers and owners by providing up to $100,000 in coverage for owner’s assets. It includes guaranteed acceptance coverage against accidental tenant-caused damage that avoids costly out-of-pocket expenses, can protect tenants against owner claims and is integrated with Propertyware for compliance tracking.
It’s just another way that property managers can ensure that their assets are protected.
Higher resident quality should correlate to fewer losses
Still, attempting to head off damage down the road is good business.
Online leasing has helped by streamlining screening so properties can choose better tenants. PMCs learn what kind of applicant is knocking at the door and whether he or she will enable the property to add to or maintain its value.
“It’s about the overall credit quality of the tenants, which drives bottom-line revenue because they have better folks in there,” McIntosh said. “Higher resident quality should correlate to fewer losses. Overall it, it Improves the asset quality and value.”
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