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How Property Management Software Can Help Landlords Increase Their Revenue and Avoid 'Nightmare' Tenants Find out how modern property management software can make your life easier (and boost your bottom line) by helping you identify and avoid "nightmare" tenants.

By Dave Spooner Edited by Chelsea Brown

Key Takeaways

  • Nightmare tenants, like those who don't pay rent, overstay their lease or damage property can significantly hurt your profits, and legal action is often necessary to resolve these issues.
  • Property management software helps increase your revenue and reduces tenant issues by automating rent collection, late fees and reminders, as well as conducting background checks to filter out problematic tenants.

Opinions expressed by Entrepreneur contributors are their own.

Property management software is a fantastic way to increase revenue, not only by automatically instating late fees and allowing tenants to pay the way they choose but also by providing a method of preventing certain types of nightmare tenants.

A nightmare tenant is one who directly impacts your ability to make a profit. Here are some common types of nightmare tenants and the steps you can take to avoid them.

Related: Looking for the Perfect Tenant? Seek out These 6 Traits!

The types of nightmare tenants to avoid

Some of the most common landlord nightmares are those that involve some kind of bad tenant who is eating into your potential profits. We aren't talking about an upstairs neighbor who tap dances or someone who is constantly doing construction next door — real nightmare tenants are those who cut into your bottom line.

Here are a few nightmare tenants to keep an eye on.

Tenants who don't pay rent:

The first and most dangerous of the nightmare tenant types is the tenant who does not pay their rent. This tenant directly impacts your ability to collect rental income and makes meeting your monetary goals much more difficult.

Nonpaying tenants are occupying your property while in direct violation of your lease agreement. While it seems like it should be easy to evict someone who refuses to fulfill their rental agreement obligations, it is not always so black and white.

States vary in regard to their eviction proceedings, and it's crucial that you do not take steps to evict the tenant on your own by turning off utilities or changing the locks. Doing any of these tactics will prolong the legally complicated eviction process and could make you partially liable.

The best course of action (besides prevention) is to contact a trusted attorney and follow their advice carefully.

Tenants who don't leave:

Going hand in hand with tenants who never pay rent are holdover tenants, or those who had a lease agreement and simply overstay their welcome.

If you notice that Sally Mae in Unit A has not moved out the day after she was supposed to, don't jump to conclusions. Mistakes happen all the time, and it's possible that Ms. Mae just got her move-out date confused. It's a good idea to send reminders to tenants who have a move-out date coming up so these good-natured mix-ups don't occur often.

However, if the tenant refuses to move out and their move-out date has come and gone, it's time to contact an attorney. As with tenants who don't pay their rent, holdover tenants are a serious matter and require strict adherence to your state's eviction laws in order to properly enforce judgments against them and get them out of your unit.

Tenants who damage your property:

Commercial tenants have certain rights to modify and change the space to suit their business needs. However, the parameters of what is allowed should already be written in your lease. Any modification or renovation that goes beyond what is allowed in your rental agreement can be considered damage, and the tenant could lose their security deposit or, potentially, be sued.

Any type of tenant who damages the property beyond normal wear-and-tear is a nightmare tenant. You expect your renters to treat your units with respect. Anyone who blatantly damages floors, walls, windows or appliances is liable to lose their security deposit. However, you will still need to arrange for repairs to take place, and it's possible that the tenant's deposit will not cover the fixes necessary to restore your unit back to its original state.

Related: Increase Your Rental Property Revenue by Making This One Simple Change

How to avoid nightmare tenants

The best way to not have to deal with nightmare tenants in the first place is prevention. Prevention methods will drastically reduce the likelihood that a nightmare tenant will darken your doorstep.

The number one prevention method is using property management software. Quality property management software will conduct all necessary criminal, credit and rental history background checks automatically, and your applicants can input their payment information straight into the software without having to burden you with handling checks or credit card payments.

Many property management sites will also automate certain reminders to tenants, like reminders to pay rent, move out or renew when their lease term ends. By having all these reminders automated, you can cut down on tenants who simply forget to pay rent on time or those who misunderstood their move-out date.

Automating your day-to-day rental management activities is a great way to give yourself more time to work on improving your business instead of getting carried away with its tedious daily tasks. Property management software is also a strong deterrent for nightmare tenants who most likely have a poor previous rental history, saving you from costly issues.

With quality property management software, you can avoid nightmare tenants, streamline your operations and effectively protect your rental profits.

Dave Spooner

Entrepreneur Leadership Network® Contributor

Co-founder of Innago

Dave Spooner is a co-founder of Innago, property management software designed to simplify life for small to mid-sized landlords. He has been involved in the real estate technology space since 2013, working to enhance the way landlords and tenants communicate.

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