Real Estate Investing Tips - Choosing a Responsible Tenant

Good investments are difficult to find right now. It's a little too late to jump into the stock market, which is unusually high considering the anemic job market. Likewise, gold has skyrocketed over the past few years. Buying high is always a bad idea because there's little upside. Bonds have such a low rate of return that they're not worthwhile. But there is one place where it's possible to cover all of the best investment practices--buying low, investing for the long term, and investing in assets that provide value and generate revenue. That sector is real estate - an area of investment that many people might not think is the best place to put their money. With the foreclosure rate still high, there are lots of cheap properties investors can buy with little risk. Because many markets have higher rental prices, it may even be possible to find houses that can be rented for a positive cash flow. The tenant pays the note, taxes, insurance and a little extra. The investor builds equity that can be cashed in several years down the road and may even want to take a depreciation write-off on the building.

If the local market conditions are right, this can be one of the most lucrative investment strategies. Unfortunately, there is one major pitfall. A bad tenant can destroy the investment plan and cost the landlord thousands of dollars on multiple fronts. The worst case scenario is a tenant who stubbornly occupies the property without paying rent, vandalizes it and uses legal tricks to delay the eviction process for as long as possible. This can be even worse if state and local laws offer little protection for the landlord. At the end of the day, bad tenants can cost a landlord thousands of dollars.

Tenant screening is one way to minimize this risk. The key is to keep bad tenants from ever occupying the property in the first place. Fortunately for property management investors, tenant background checks are available. Before entering into a rental contract, a landlord has the opportunity to find out if the potential tenant has a history of problematic behaviors such as not paying bills, causing excessive property damage, or being evicted. Other information is available as well such as a criminal background check, which can tell a landlord whether the applicant is a possible danger to other tenants or poses a risk of bringing criminal activity to the property.

A tenant background check can range from approximately twenty dollars to forty, depending on how extensive it is. Even if such checks are run on several applicants, it's still a worthwhile expense. That little bit of money now can save thousands of dollars in the future, as well as a long of aggravation, if it keeps a bad tenant from renting the property. Click here to order a background check now.

Investing in Real Estate

One of the best investments you can make right now is real estate. Many people might not think of real estate as a good place to put their money because real estate (and specifically foreclosures) was a huge contributing factor in the recent recession. Foreclosures are still occurring at a high rate and in some parts of the country prices are still falling. This makes investing in real estate seem counter intuitive; however, it might be the right move, especially in markets with low selling prices and high rental prices. Low interest rates make bonds less than ideal, and the stock market is risky. Gold is currently priced too high to have much of an upside. Real estate is the way to go, as long as investors avoid get rich quick thinking.

Successful investing often means sticking with your investments for the long haul, rather than a quick flip. In the case of real estate, the best strategy is usually to buy cheap properties and rent them for a steady income. The real estate market collapse has provided many opportunities for investors to acquire cheap houses, and depending on the local market the rent can pay the mortgage and provide a profit. Investors might also consider depreciating the building to help with taxes.

Residential property can be lucrative, but a bad tenant can ruin your business model. A particularly bad tenant can leave a house or apartment in need of thousands of dollars in repairs. Even worse, some tenants refuse to pay the rent. This forces the landlord to go through an eviction process, incurring expensive legal fees. Depending on state and local laws, this can be a very time consuming process as a bad tenant may use every procedural trick possible to drag out the dispute. Meanwhile, the tenant is occupying the property rent free and you lose money.

The best way to avoid that scenario is tenant screening. As part of the rental application, a landlord can run a tenant background check. This may include a tenant credit check to make sure the applicant doesn't have a history of delinquency or default. It may also include a criminal background check and a public records search for evictions (which would obviously be a huge red flag). There are no federal fair housing issues with such a background check because doing so judges the applicant as an individual. People with criminal records, bad credit or a bad rental history are not covered by the Fair Housing Act.

A basic tenant background check report can be completed for fewer than twenty dollars, and a more extensive one can be run for less than forty. This is a small price to pay for security when compared to the thousands of dollars that can be lost on property damage, unpaid rent and legal fees that can come with a bad tenant. A tenant background check is one of the best ways for property managers to protect their investment.

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