The Security Deposit Takes Care of it in Selected Cases.
I have been saying for many years that property investments are your best bet for what I call “remote control riches.” You take a loan to buy a house, rent it out, and then sit back and earn rent that helps repay that loan – creating wealth for you in the long run. Whether you invest in one house or ten houses, you have the pride of ownership and you want your property to be well looked after and in good shape. However, a lot of investors wonder – what if the tenant damages the property?
Difference between damage and regular wear and tear.
Let me just clarify here, that the various states in the United States do have different laws and regulations pertaining to tenancy. However, some things are more or less uniform. Regular wear and tear is something that is recognized in most states and is permitted as being a part of day to day use of a property. So, if a tenant hammered a few nails to hang up some pictures, for instance, this is usually OK. Everyday use and such reasonable modifications are generally not considered ‘damage’.
However, if there is damage that results out of unreasonable actions of a tenant, or some extreme modifications made to the property, the tenant is bound to pay for these. Typically, tenants will ensure that the house is in decent shape when they vacate it, because of something called the security deposit. When the landlord and tenant enter into the lease agreement, the tenant is required to put down a security deposit for exactly this reason – possible damage to the property. If there is substantial damage, this can be paid for from the security deposit amount. The tenant will receive their deposit amount minus the costs incurred towards repairing the damage.
Legal recourse available to landlords.
However, what if the damage is extensive and the costs incurred are higher than the security deposit? Well, in that case the property owner has recourse to the small claims court. Typically, the court will award damages in favor of the landlord. In cases, it can happen that the damage is significant – more than the security deposit amount will pay for and then the tenant goes missing. When the tenant absconds, the court can award suitable compensation to the landlord, in cases even ordering the garnishing of wages.
So, if you are a real estate investor and landlord (or are planning to assume this role), you don’t have to worry about tenants causing damage to your property. A vast majority of tenants would rather not endanger their security deposit or blot their copybook as a tenant, and will keep the premises in good condition. If they do not, there is always legal recourse available. In the end, these are just minor speed bumps on your road to retirement riches.