Many people see real estate investing as a way to generate passive income. Being a landlord can be hard work, however, and a bad tenant can cost you tens of thousands of dollars. If you are a new landlord, you must screen tenants carefully and understand that rental markets fluctuate, which can make it difficult to keep your rental units occupied.

Be careful about who you accept as a tenant

Make sure you properly look into anyone you’re considering as a tenant. It’s never a good idea to act out of desperation and just let anybody stay in a property you own. The costs may vastly outweigh the gains, if they end up trashing the place, for instance. The cost of repairs from an irresponsible tenant can quickly outstrip any profit you might have made from their rent payments.

Then there’s the issue in real estate and landlord/tenant law if the tenant isn’t able to make rent. That’s why you mustn’t skip the credit report to find out if they have a history of making late payments or any delinquent accounts. Also, don’t forget to verify their former landlords, employers and anyone else they have listed as references.

Don’t always count on having tenants

It’s nice to believe that you’ll always be able to keep every room in every piece of property you own occupied by paying tenants, but sadly, that’s not always the case. For that reason, you should be prepared to pay the mortgage or any other applicable payments if you’re not generating income from the property.

Being a landlord is a business, and it’s necessary to treat it as such to do it successfully. Analyze your cash flow, do your due diligence, and make sure your payments are covered before getting in over your head.