Can’t Sell? Why Renting Doesn't Have to Be a Scary 'Plan B'

Bad tenants

Worry over problematic residents is why many homeowners decide against renting, but we’re here to reassure you: leasing to bad residents isn’t the norm. Sure, residents can cause issues in many ways. Perhaps they don’t pay rent on time, cause property damage, or engage in illegal activities. We’ve seen it all and can tell you that a thorough screening process is your best protection.

Your resident screening process should include credit checks, references, and background checks to minimize the risk of renting to unreliable or risky individuals. We also highly recommend using a tool that helps protect against fraud. Once you’ve established a procedure, never make exceptions. While an application can’t predict future behavior, positive rental references, adequate income, and solid credit history are good signs that you’re leasing to a resident who will follow the rules and be a good neighbor.

Pro-tip: Make sure your process is in line with fair housing regulations. You can check out our video on ethical resident screening and fair housing here.

Property damage

Even with responsible residents, accidents happen, and property damage can occur. From minor repairs to major structural issues, unexpected expenses can eat into your rental income. Before moving in a new resident, we recommend having a professional inspect your home or at the very least, that you take care of repairs that you may have put off. It’s much easier to replace an old appliance before residents move in and ask for discounts when their refrigerator breaks. Next, line up preventative maintenance. This could be monthly pest control, landscaping, seasonal HVAC checks, or even setting up automatic deliveries for air filters.

Before your resident moves in, be sure to collect a security deposit and thoroughly document the condition of the space. During the residency, it’s smart to perform regular inspections to catch any maintenance items your residents may not be aware of and to let them know you are keeping an eye on the property and how well they are maintaining it. Preventive maintenance will always be more cost-effective. For unforeseen situations, set aside a portion of your rental income for maintenance and repairs.

Once you find those great neighbors, you want to keep them. Read our guide on how to keep good residents here.

Legal disputes

Renting a property involves adhering to various legal regulations and obligations. Disputes may arise regarding lease agreements, security deposits, eviction processes, or resident rights. Make sure you understand the applicable sections of the DC code. You may even wish to consult with an attorney before finalizing your lease to ensure proper contracts are in place.

If legal issues arise during the residency, do not discourage your resident from seeking resources. At Nest, we often suggest residents contact the Office of the Tenant Advocate (OTA) for advice. If you are secure in your understanding of the law and your lease, a second opinion from OTA will help your resident understand that they may be interpreting the situation incorrectly. We even have a video deep dive into tenant rights here. Of course, don’t delay hiring legal counsel if there are consistent breaches of lease or nonpayment of rent occurs. Nest DC retains in-house counsel to advise owners on these more serious matters.

Vacancy and loss of income

Ideally, your property should have a steady stream of residents to generate consistent income. However, extended vacancies can occur for a multitude of reasons. Look at your home as a business. Is it attractive to the current market with the appropriate upgrades? Be realistic about the market. Washington, DC is unique in being highly transient and impacted by election cycles. It's also unique in that specific neighborhoods compete with new construction that depresses that submarket. Budget for vacancy periods and have a contingency plan to cover mortgage payments and other expenses when the property is unoccupied.

Market downturn

The real estate market can experience fluctuations, impacting rental demand and prices. An economic downturn could result in reduced rental rates or difficulty finding residents. Knowing market conditions and having a contingency plan will help you navigate such situations.

While the worst-case scenarios are scary, we find that prepared property owners rarely experience them. Understanding your budget, implementing a thorough screening process, scheduling regular maintenance, and having a solid understanding of residency laws can help mitigate risks associated with renting your home. Consider consulting with a property management company to guide you through the challenges and ensure a successful rental experience.

For more happy home content, we suggest checking out the rest of our blog!