Aside from negotiating and sales, tenant screening is the most profitable skill a landlord can have. Why do I say that? Because if you don’t screen tenants you won’t have a profit. This month we are going to discuss how to properly screen a tenant. I have purchased several homes from beat up and tired landlords and it almost always was because they did not screen the people they put into their homes. It is important to understand that as a landlord you are providing a significant amount of credit and you need to protect yourself like any other creditor would.
It all starts with a good application. The one I use is not the best but is really simple, I try to get the vital information while keeping it really short and easy for my prospects. I also use my application as a marketing tool for people who may want to turn into buyers or may qualify as buyers. These are good leads for mortgage brokers, real estate agents or for your own rent to own properties. I also want to know what skills they have and what tools they own. If they don’t check the box for owning a vacuum we may have a problem!
The screening really starts on the first phone call which we talked about and continues with them showing up on time to the property. I always try to sneak a peek inside their car either when they first get there or when I walk them out. If their car is a disaster what do you think your unit will turn into? I also ask a lot of questions once I get the application. This really accomplishes two things; it puts you in control and makes your unit a scarcity increasing their desire to have it AND allows them to talk about themselves. Some of the things I am listening for include:
- Do not get along with previous/current landlord
- Did not get along with neighbors
- Landlord does not take care of anything (I will call the landlord and ask about this but I don’t want a needy tenant)
- New jobs
- New relationships
- Bad relationships (domestic issues)
You will be surprised at what prospects will tell you. They will say things like drug addictions, criminal history, problems with kids or others and much, much more. I also hate it when they tell me how good of a tenant they are and how clean they are because that normally means they are messy and a pain in the ass.
I have a pretty good feeling about a tenant before I get back to my office. When I get back I pull credit and criminal back ground. Almost all tenants have bad credit so I am not overly concerned with that. What I will deny an application for is past due rent to other landlords. I also don’t like to see small collection accounts like utility bills and cell phones. The service I use also pulls a check writing and an eviction report. If there are confirmed evictions in the last three years I will not rent to them. I also don’t like to see bad check writing history although I normally will rent to them if they set up an auto pay service or only pay by money order. Finally when it comes to criminal records, drugs or domestic violence is an automatic denial. I have had a drug house once before and do not ever want that again. I don’t care if the drug offence is very minor, if they got caught with it there may be a bigger issue there. Other offenses I can look past with good explanations. I rented to a man that got in trouble for assaulting a police officer and he has actually turned out to be a great tenant. He is still in one of my duplexes today. I decided to rent to him because he told me the story and I believed him. He did make a mistake but is not a bad guy.
The most important part of the screening process is the past landlords. They will tell you how it really is. I want to know if they have a lot of people in and out of the unit, if they pay on time and if they have ever had a problem. My final question is always “would you rent to them again?” If you don’t believe that it is really their landlord (i.e. they are writing a friend’s name down to act as the landlord) you may want to ask them to confirm the rent amount but mention a different number than what is on the application. If it is a phony landlord they will agree with you but a real landlord will correct your mistake. I always check county records to see who actually owns the house they are moving from.
Finally, it is not a bad idea to call the previous two landlords, which is why I require it on my application. Occasionally a landlord will want a tenant out so bad they will tell you anything just so you will rent to them. This has not been my experience but I have heard of this type of thing going on. If you call the last two landlords you should not encounter this problem. Stay on top of tenant screening and stay on top of your profits.