Blogs & Comment

Avoiding tenants from hell

One of the drawbacks of buying and owning rental properties is the time spent dealing with tenant problems, like leaky taps at night. Then there are the tenants who dont pay their rent and knock holes in the wall. The Money Smarts blog had a post recently about a real-life horror story from a landlord, intriguingly entitled, The Stripper with Dirty Feet. Financial Uproar had a similar horror story, entitled: My Worst Tenant: The Guy who tried to Fight Me.
Im not landlord, partly to avoid situations like those mentioned in the above posts. But a publisher sent mea book on real estate investing that has even me mildly piqued in taking the plunge.
The title is: Investing in Rent-to-Own Property,written by Mark Loeffler. He claims investing in rental properties does not have to be time consuming or stressful when you rentjust to tenants who agree to purchase the place at the end of their lease. There are apparently many people who are willing to do this.
Examples are the guy in his twenties with bad credit as a result of a bankruptcy — but who has since gotten a job and is now married with a baby on the way. Other examples are people without credit (including new immigrants to Canada), small business owners with a track record under two years and victims of identity theft.
In other words, these people need another year or two to establish their credit rating for the purposes of taking out a mortgage. They can be found in various ways, such as advertising through online classified sites. Once found and qualified, a rent-to-own contract is signed. A 2% to 5% deposit is required (applied to the downpayment when the house is purchased). Clauses in the contract stipulate that the tenant has responsibility for maintaining the property.
So, the tenants have an incentive to take care of the place and wont bother the landlord with requests to fix things up. Once the contract is signed, the tenants are set up with a real estate agent to find a property. Once chosen, the landlord buys the property and rents it to the tenants for a year or two until they purchase the property.