How can you prevent tenant default during difficult economic times?

A thorough screening of tenants is crucial. Credit, track record in their business, good income on tax returns and assets. And I always go the extra step and visit their existing space, if it is a retail space. All this is not fool proof doing all this but it can definitely help weed out tenants who may default. I rarely recommend start ups to my clients because of the risk. I also have pretty good intuition about people when I meet them.

The most important part of the leasing your property is screening your potential tenants. Getting someone in the property who won't be able to pay the rent, is not going to help you or them. When screening, I use the same process for each applicant: Confirm current income - I don't take past tax returns, I want to know what their earnings are when they are applying for the property. I have the applicant provide recent paystubs with their name, employer, and as much information about their wages. Each applicant as part of the screening process signs a Tenant Selection Criteria form, letting them know what information we will be verifying, and what they may have to provide.

Covid had an impact on how landlords are not writing lease agreements. I personally had always been a fan of long term leases - max 24 months, but after what happened to many landlords with tenants not paying rents, I now advocate for shorter lease terms, and do often initiate a six month lease, that can be renewed if the tenant abides by the terms and conditions of the lease agreement.

Uma coisa que aprendi, sempre que possível investir em imóveis de aluguel. A valorização de mercado e a renda constante fazem com que este seja um dos formatos mais certeiro de investimento a médio e longo prazo.

Communication and setting expectations up front with a tenant is a great way to stave off future problems. A landlord needs to clearly communicate the terms of the lease agreement and specifically include language on rent payments, repair requests and after hours contact information. When a landlord sets the expectations up front, it is easier when problems arise.

When we have had tenant who are struggling financially or habitually late with rent we communicate with them, and go over the expectations set forth at the lease signing. With each lease signing, tenants are given their welcome packet and an additional form that breaks down the basics of the rental agreement. Sometimes the tenant needs to be let out of the lease, and rather than charge a re-letting fee, or other charges, the landlord may in the long run be better off just letting the tenant break the lease. Landlords can maintain communication with tenants, be timely in late notices and when the situation is financially not feasible for the tenant, agree to let the tenant vacate the property without having a fee to break the lease.

Landlords need to adopt a process where they enforce the terms of the lease the same way with each and every tenant. If the lease states the rent is due on the first and late by the third, the landlord needs to be timely in their delivery of the breach of lease. Landlords who fail to enforce consistently and timely their lease terms, may find that it will be difficult to remove a tenant, if the landlord has not been consistent with their enforcement.