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Ghosts Applicants and What To Look For When Screening Prospective Tenants

Sunday, April 01



I don't believe in ghosts.



I especially don't believe in ghosts who apply to live in one of my two-bedroom apartments (I hear they are more attracted to creepy mansions). This is why when poor Miss Abileen's name came forth on the background check I ran this week, despite her death in 1987, I didn't immediately call the Ghostbusters. While there are a number of "protected classes" that are illegal to discriminate against, I'm fairly sure being dead is not one of them. Clearly something was wrong with the social security number provided. It was fake, probably purchased by the applicant who was lacking a social security number.



This event has made me revisit just how important screening a prospective tenant truly is. As a young investor, it is easy to want to just let a tenant move in based solely on impressions. After all, throughout high school and college we are accustomed to gauging the integrity of a person based entirely on conversations. However, properly screening tenants is the most important step in decreasing the headaches you will get while investing in Real Estate. I would even be as bold as to say 90% of all management headaches could be avoided by adequately screening. The following is a list of the top six things to research before allowing a tenant to move into your property.





1.) Valid Social Security Number: I'll start with this, as it relates to the story above. There a number of reasons a tenant might have a fake social security number, such as immigration issues or trying to hide their shady history. While you might be tempted to allow a fake or non-existent social security number to slide - this is a terrible idea. Instead, just take all the money from your bank account and just mail it to me. Why? You are almost guaranteeing future financial problems. If they refuse to pay, trash the place, and skip town - you can't garnish wages. If they hurt someone on your property, you can't find them. Finally, without a social security number, you have no way of knowing who they really are and what they have done in the past. Do they have several evictions? Do they have seventeen felonies in the past year? Simply put, the risk taken when renting to tenants without valid social security numbers far outweighs the reward.



2.) Job Verification
: Tenants may tell you they have an excellent job, but without verifying it from their employer, you have no way of ensuring that they are telling the truth. Even if they bring current pay stubs to you, it is still a good idea to call their place of employment because the job could be just a temporary position ending soon. Renting to tenants without a proper job is just asking for future evictions.



3.) Income Verification:
I recommend setting a minimum income level for your property at 30% of the tenant's gross income - and make this number visible from the start to avoid wasting time. I cannot tell you the number of times I have driven to a property to show a unit, only to find out that the tenant only makes $500 per month in social security and is looking to rent a $495 apartment. It is ludicrous, but it happens all too often. Tenants do not know how much they can afford, which is why you must. I now tell prospective tenants over the phone exactly our qualifications to minimize unnecessary trips to show units.



4.) Previous Landlord References: You do not want another landlord's trash. Calling a previous landlord is vital to knowing the kind of tenant you might be soon renting your property to. However, do not simply just call the most recent landlord, because more likely than not, this landlord will give a positive review even if the tenant was terrible - simply because they want them gone! Instead, go back to other previous landlords and find out the quality through them. Additionally, a proper background check will include previous addresses for the prospective tenant. Make sure these addresses line up with the addresses they give you. Often times tenants will conveniently "forget" to include landlord information for the property they were evicted from.



5.) Credit - While understanding a prospective tenant's credit is important, this is the only item on this list that is only necessary depending on the type of tenant you are looking for. Credit checks often just tell you one thing - they have bad credit. However, if you are renting higher income properties - by all means check credit. The way a person has paid their debts in the past is a huge indication of how they will pay you.



6.) Living Style: This includes a number of specific items of note about your perspective tenants that are pertinent to know before renting to the tenant. This includes items such as number of pets, other people who will be living with them, smoking status, and "how much cash do you have". These questions will help you better determine the type of renter this prospect will be and how they will affect the condition of your home.



Screening tenants does not have to be a scary task, and can easily be subcontracted out to either a screening company or simply a trustworthy college student looking to make a little bit of money. I also strongly believe in charging a tenant for the cost of the background check.




If you are interested in learning more about getting started investing in real estate, check out my website, RealEstateInYourTwenties.com. And yes, will still be allowed in even if you aren't in your twenties!



Happy Investing!



Comments

  1. Colleague_thumb_avatar-jonk

    Jon Klaus Reply
    about 2 years ago

    Great screening tips. Screening tenants may well be the landlord's most important job.

  2. Colleague_thumb_avatar-mycapblue

    Kevin Kaczmarek Reply
    about 2 years ago

    wow! quite interesting to hear the lengths people go to. The ease of accessibility of public information makes screening more important than ever.

  3. Colleague_thumb_avatar-mikeytm

    Mike Morrison Reply
    about 2 years ago

    Way to go Brandon. looks like you have found the formula for quality tenants.

  4. Reply
    about 2 years ago

    Just as important, if not more so, is requiring the applicant to provide you with a drivers license. Make a copy for the file! Confirm the name and date of birth with that which has been provided on the application. Make sure they match. Public records are stored on name and date of birth match only - for the most part has NOTHING to do with SSN. If the numbers are transposed OR your screening company is not checking public records on ALL other AKA's (alias'), I can assure you that records are being missed! Rule of thumb .....ALWAYS check some valid form of identification (that includes DOB and name). Alias' also show up on the applicants credit report too...so if they haven't provided them, you should be covered, so long as your screening company is checking on those as well as the name on the application.

  5. Colleague_thumb_1378943776-avatar-propertysolved

    Tiffany H. Reply
    almost 2 years ago

    Checking Twitter, Facebook, and other social media apps may give a clue about their character and how they carry themselves. Also, if a tenant can't jump through a couple small hoops in my screening process, then they don't meet my written screening policy requirement of "reliability."

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