How Effective Tenant Screening Can Lead to Higher Profitability

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This is my first post as an author at BiggerPockets.com. I have written a few smaller articles on the BiggerPockets Member Blogs here about effective tenant screening, and my approach to the process.

I have 24 renters, in two duplexes and five 4-plexes.  I also screen for a large (120 unit) apartment complex, and approve or reject tenants.  I make the call as to when a tenant is no longer an asset to our HOA community, and force other landlords to get rid of their tenants.

Through these experiences, I have seen many tenants’ backgrounds, and see how a background report can predict future tenant behaviors.

The following post contains a few random thoughts; I will focus in more detail on tenant screening topics in future articles.  Be sure to follow my articles to get solid, no nonsense information on getting and keeping great tenants.

If you have questions on specific topics, please comment and I will respond or post an article on the topic.

Know Your Tenant Goals

If you are considering buying a rental property, or have some of your own already, you need to know what to look for in a tenant to predict their behaviors, and risks of non-payment.  You need to know what a tenant looks like on paper, BEFORE you advertise for a renter.  You need to be able to reject, or accept them, before you ever meet them.  I do it all the time, and am very successful.

Not everyone will subscribe to my philosophy.  I want only the cream of the crop tenants; I mostly only take tenants in the upper fifty percentile of the entire tenant population. I want a low maintenance, high profit tenant.  I am not concerned about the highest rent; I am not concerned about their dire financial or housing condition, I am only concerned about the highest profitability for me.

Section 8 Tenants

I cut my teeth on Section 8 tenants; I have rented to the lowest of the low in terms of tenants.  I have rented to tenants that were murderers, stranglers, people that bit off other peoples fingers in my apartment, tenants in a duplex that filed restraining order s against each other, drug dealers, prostitutes and the like.

I have fought bedbugs, roaches, extra pets and extra felon tenants.  I have seen my fair share broken windows, holes in walls, doors punched, and dirty beyond recognition appliances.  I have had tenant turnovers that wipe out several years of rental profits.  I know what I am talking about in terms of low quality renters, I do not want them.

The interesting thing about Section 8 tenants, is that only experienced landlords should be allowed to take them. Yet experienced landlords typically do not want Section 8 tenants.

It is usually first time landlords that take them, or a housing project that specializes in that type of tenant.  In MN, only about one in three landlords accept Section 8.

With today’s great rental market, more and more landlords are giving up on Section 8.  Renting to Section 8 tenants, or any low-income, low credit score tenant, is a high risk proposition.  Perhaps those types of renters with great credit scores would be OK, but that is hard to find.

RelatedAre Your a Real Estate Pioneer? How to Be a Section 8 Landlord

My Current Tenant Base

I now rent exclusively to a class B or better tenants; in the same neighborhood that I previously rented to the Section 8 and low income tenants.  You can re-position your property to a better grade, if you want to.

You can have 100% of your rents collected by the second of the month, every month.  You can have apartment turns that are easy, and have a minimal turnover cost.

Most of my tenants are actually class’ A’ tenants; they are professional white collar, college educated, high household income (80K – 160K+), high credit score (700+) tenants.

These types of people pay rent, on time, all the time.  When they leave the apartment, the apartment is nearly ready for the next tenant, without any additional work.  I have recently re-taken my RE license test, so I will be selling homes to them when they leave.  Try that with a low-income, low credit score, tenant.

Related7 Tips for Holding On To Amazing Tenants

If you have multifamily buildings, like I do, you need to be doubly concerned about a tenant’s personal behaviors.  When you own a multifamily building, a single bad tenant can poison your entire building.  You have to be on top of your game.

In a single family home, even if all of the neighbors move out of the neighborhood, as long as you get your rent you are fine.  In a multifamily you have increased turnover, and higher expenses, with a poisonous tenant.

Most Landlords Do Not Have a Clue

Many landlords will say “I have had great tenants with low credit scores”.  Sure, and every time I go to Las Vegas I win.  And I never wear a seat belt because if I go over a bridge in my car and land in a deep river, I want to be able to get out of my car quickly.  Go with the odds, wear a seat belt.

The truth is, most landlords generally have no clue to what an ‘average’ tenant looks like on paper.  They see one or two tenants every year, at best, and they get lucky.

They have no idea what the median credit score of the area is.  They don’t know what the median income of the area is.

They have no idea how many criminal events the average person has.  If you do not know what an average person’s background is, how can you identify an above average, or even below average, tenant?

Landlording is a game of probabilities, taking in a low credit score tenant is a large gamble.  You have a higher risk of non-payment, a higher risk of an insurance claims, a higher risk of damage, a higher risk that they do not have their own insurance, and a higher risk of police incidents.

If you take in a lower grade of tenant, either you have a Class C- property or below, and that’s all you can get in, or you are a lazy property manager.

Credit score is a much better tenant predictor of tenant success than criminal record. A credit score requires a positive behavior by the tenant, a clean criminal record only requires not getting caught. 

And most landlords do not even know how to run a proper criminal check.  They are still focused on a ‘National’ criminal check.  Use Google and save your money.

If you still insist on taking the risk, make sure you are not only aware of the increased risk, but are compensated for it.

Evaluate all of Your Past Tenants

If you are already a landlord, look back at the good and bad tenants.  Grade them by credit score.  You will probably find your lower score tenants had late payments, non-payments, adverse behaviors and other detractors that you would rather not have.

They probably called you more, had more pest issues, and more police incidents in one year than you have had in your entire life.  They put more holes in doors and walls, and broke more items than you or your parents have ever broke – together.  Odds are, the problems could have been prevented with a better upfront method of selecting tenants.

So, be prepared to challenge me on my philosophy, and I will say you are wrong, and deposit my rent money in the bank while you are still chasing your rent or in the middle of an eviction.

I will outline, in specific detail in upcoming posts, what you can use as a criterion to screen tenants.  Follow me Grasshopper, and you will learn to make money in landlording without having to lose money first.

It’s May 2, 2014 as I write this.  I have 25 of 25 rents in the bank.  The same as I did last month, and the month before that, and so on….  If you have a challenge, be prepared to discuss your rent collections too.

Remember, a tenant’s income will tell you their ability to pay rent, the credit score will tell you’re their desire to pay rent.  You need both to have the highest profitability.

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About Author

Eric is a 54 year old, soon to be former, computer professional. He started several years ago to replace his “work income”, with other alternate streams. He is well on his way to retirement at age 56, and is currently making more money at extracurricular activities, than he is working at his full time job. Whether that is Financially Independent, or just old fashioned entrepreneurial spirit, is in the eyes of the beholder.

61 Comments

  1. Sharon Tzib on

    “A credit score requires a positive behavior by the tenant, a clean criminal record only requires not getting caught.” – Ha! Quote of the day!

    Welcome to the BP blogging world, and as a property manager myself, I look forward to your future articles.

    • Thanks for the comment and kind words Sharon!

      I hear all the stories about why people’s credit score is bad. Even the one “Our credit is bad, but we always make it a priority to pay rent”. Yep, until the car breaks down, or the bar is open.

  2. Mohammad Asaduddin on

    Eric, I am one of those landlords with late paying and non paying tenants. I try to hang on because I am scared of make readys and vacaancy. Tell me if I get grade A or B tenant they move on and I have to replace them. Asad.

    • Thank you for the comment Mohammad!

      If you have a multifamily, at some point you will have to “bite the bullet”. Get rid of the worst tenants first. You may suffer in terms of price as you re-position, and rents will probably drop, as great tenants can find a place anywhere. They will not pay a market based rent to live next door to a subpar tenant. You may have to spend some money on upgrades to attract them. You will have turnover costs, but in the end, you will make more money.

      By definition, if you are renting to a high-risk tenant, you need a higher rent and/or a higher deposit. A low income or low credit score tenant is a high risk.

      Once you get good tenants, you have to keep them. Continually improve the property.
      When you buy a property, you should be analyzing these things before you purchase. What does it take to reposition it? How much does it cost?

      The most money is made when you can reposition a lower class apartment (C/D) into a higher class apartment (B/A)

  3. Eric, great first article. I know that you know what you are talking about, because I am an analytical person too and started doing exactly what you suggested a few years ago…i.e. looking back on all of my tenants using their credit score as an indicator to the outcome of their tenancy in my property. My worst tenants all had low to average credit scores! I look forward to your future posts.

    • Thank you for the comment James!

      I was a project manager for a while, and that is a basic item, look at the project after it completes and analyze the positives and negatives.

      Low score tenants can be great people, and some can be grate tenants, but I don’t have a lot of time to babysit subpar tenants. I do not have enough money to give housing away either. I am in this for the money, not because I want to provide the world free housing.

  4. Good post, is there a one stop source that you use to check, “rental history, criminal and credit history?

    • I use MCC group, but there are a lot of places that do the complete background check. Some companies require an on-site inspection.

      • Jake Jefferies on

        on-site.com is a good source. They pull past rental history, public records, credit, income-to-rent ratio and give you a score out of 10.

  5. Brandon Turner

    Hey Eric,

    Awesome post! I am one of those landlords who hardly ever checks credit because I assume everyone has terrible credit… but I wonder if I’m shooting myself in the foot? I think you just single-handedly changed my mind on this with that one quote:

    Credit score is a much better tenant predictor of tenant success than criminal record. A credit score requires a positive behavior by the tenant, a clean criminal record only requires not getting caught.

    Smart stuff! I’m looking forward to reading more from you in the future!

    • Thank you for the comment Brandon!

      At some point, you will get burned and wish you spent the few dollars to get a background check…

      Not everyone has bad credit. Do some searches on credit score distribution. The average renter credit score is 658. Only 2% of the population has a credit score below 500.

      Credit score and income have nothing to do with each other; only financial behavior is used to calculate credit score. Insurance companies have done a lot of research for you, all you have to do is find it. I have posted a lot of information on my own blog too.

    • I check credit mostly because people lie about their previous addresses. I’ve caught several who left addresses off the application because they were about to be evicted, but those addresses show up on the credit report. I’ve also found money judgments from previous landlords. I don’t look for a specific credit score (hope that doesn’t get me in trouble!) because so many have low scores from student loans, health care bills, and phone companies. However, if people have a history of never paying any of their bills, I’ve rejected for that. I’ve also rented to people without enough history to score. I have small apartments in a poor area so not a lot of tenants to choose from sometimes.

      I’ve lost potential tenants who thought it was unfair to pay $25 for a report, but I think it’s worth it. All the rents are in the bank and very little drama lately.

      • Thank you for the comment Amy!

        You should have a demarcation line, if only to avoid a chance of discrimination. A 600+ score is a decent line, that is where mortgage statistics say there a ~50% default rate. I prefer 620+, and sometimes I advertise 650+, depending on the rental market and the quality of my apartment.

        Sometimes, I waive an application fee, if the tenants put down a holding deposit of at least $1,000. Most of my rents are in that range and the total move in costs are above that. If the tenants do not pass, I deduct the application fee, and send the rest back.

        So, good tenants are free, bad tenants get charged. I let them know up front what my credit score, criminal and rental history requirements are. A good tenant is worth the $25, a PM would charge a full month’s rent…

        • Kimberly H. on

          Good idea on the holding fee waiving the credit report for tenants that pass.

  6. Hi Eric,

    Great article. I wonder if you can share a few other screening techniques besides credit score.
    Do you visit prospective tenants in their current homes unannounced to see how they take care of that property?
    Do you judge their character by the way they dress, what car they drive (clean or dirty)?
    Do you call previous landlords?
    There was a story on BP about a traveling nurse who was a drug dealer but used a stolen identity with a great credit score. Have you ever encountered a clean as a whistle professional tenant who would later got you in trouble?

    Thanks
    Nick

    • Thank you for the comment Nick!

      I have used excuses to visit the applicant’s current residence. That takes too much time. I have also rented to great tenants from out of state; an inspection could never be done in that case.

      I generally do not care how people dress, but tattoos are a turn off if they look like jail house tattoos. I am in my landlord clothes mostly when I show apartments, so I probably look like I am nearly homeless myself…

      I use a background check company, MCC Group, that does all of the checking for me, including calling past landlords. They actually call past property owners, as evidenced on the credit report, not the application itself. Once again, they can do it for $10, for a total back ground check cost of ~$40, which the tenant pays. They are experts at getting the information, a landlord could get fooled.

      There will never be a fool proof way to screen tenants, and you will have issues with ‘good’ tenants too. But the odds are in your favor with a higher scoring tenant. Typically, a stolen identity would have no credit, or bad credit, very soon after it was stolen. You will have a lot more stories about bad tenants continuing to be bad.

      • Thank you for your answer, Eric!
        Could you please elaborate on tattoos? Do you tell them that you are rejecting because of tattoos or do you give a more general reason (low credit score, etc.)? Is that OK to have “no visible tattoos” written in your application policy?
        Would this prompt some creative minds to sue you for discrimination (e.g. “he turned me down because of my religion that requires me to wear a tattoo”)?

        Thanks
        Nick

        • I have had bad experiences when the tenant had a have visible tattoos, which looked like jail house tattoos. No color, a bit blurry, a full forearm tattoo. There is probably no correlation between tattoos and bad behaviors, but it sticks in my head. He had a bad credit score too…. Of course gang tattoos would be a good reason to skip the tenants, but I would venture to say they do not have great credit either.

          I would not put that as policy, just something I observed. I have approved many tenants without ever looking at them, so use other indicators first. Of course I have had great tenants with visible tattoos too.

          I do not have tattoos myself, maybe that is a reason. If you have too many tattoos, you can’t get a good job. And even the bad jobs are out. The cashier would just say “all I saw was the gun and the tattoo that said “….”, and you are out of a job again. (lol)

  7. Kimberly H. on

    Thanks for posting; I look forward to your future posts. I would like to request that you post how to find good section 8 tenants since I am in Cook County, and they passed a law last August no longer allowing landlords to “discriminate” against Section 8 tenants in all of Cook County.

    • Thank you for the comment Kimberly!

      A Section 8 tenant, by definition, is a high risk tenant. Having said that, credit score is unrelated to whatever program that they are on. A 600+ credit score should still be attainable. Get a larger deposit, if you can. Get a larger deposit for lower credit scores. Charge the Section 8 max, always, or higher if you can. Only do month-to-month leases, HUD generally does not allow a month-to-month lease.

      The other way is to manage for low income, high maintenance tenants. Everything must be industrial strength, but cheap. Paint floors, rather than carpet. Use commercial grade loop back carpet, stapled around the edges, no pad. Paint all white, walls ceilings and baseboards, so you do not have to ‘cut in’ when you paint. Just roll the paint baseboard to baseboard.

      Start evictions as soon as you can, send the cure/quit on the second of the month, and cc the Section 8 office. Move them in, move them out. I know in IL, it is a lengthy process to get rid of deadbeats, make sure you do the work upfront.

      • Sharon Tzib on

        Wow, Kimberly! Cook County is so landlord unfriendly. First you have to pay interest on security deposits. Then I heard they were trying to outlaw collecting S/D’s altogether. And now you can’t discriminate against Section 8. Not a place I would want to invest.

        • In Mn, we have to pay 1% interest. Our evictions are generally faast, but they are the most expensive in the nation. $320 just to file. If you are an LLC or Corp, you need an attorney. Plus you need to serve papers, and a Writ ($55 plus sheriff service of ~$125).

          I always figure about $5K for an eviction in lost rent, vacancy expense and repairs.

          Landlords have to make money, or there will not be any housing.

        • Kimberly H. on

          What’s crazy about the Section 8 thing is that you have to sign a contract with the Section 8 office that no landlord in their right mind would ever want to sign. Like you have to allow tenants to run home based businesses and some other things a knowledgable landlord would never normally agree to. And I have heard from reliable sources that they do have “testers” out there to make sure you are not discriminating. And then the eviction process here is bad compared to other places. On the interest on S/D thing, at least with that you only have to pay it if you have like a 25 unit or over building which we do not. But since I live here, Cook County is huge, and long distance investing is not appealing to us it’s something everyone here has to deal with. And I think everywhere there are always politicians trying to pass some new rule that screws over landlords just to get votes from tenants.

        • Low income folks just know how to have a eventful weekend. Literally on my first rental property I was a fool and took on a tenant supplied by a Pastor (another word for lying sack of #@#) who’s congregation offered to pay the first 6 months of rent. The story was this young ex every bad thing you could do to yourself was only going to live for 4 months tops.

          Well she lived two months too long, and one morning at 2:50 am to be precise, two of her suitors came calling at the same time. One of these fellows fired 6 bullets at the other unarmed fellow, one hit the young man in his scrotum, the others shots riddled the bathroom. One bullet however passed through the tub surround and through the wall into the next apartments bathroom, through their tub and hitting a hot water pipe.
          The pipe did not like being hit by a bullet and flooded the newly renovated apartment below. The police decided it was ok the next morning to block my entrance into the building to shut the water off. $8000 later in damages I told my wife maybe we should buy a carwash instead of these apartments. However when the check from the insurance company came for $10k, and the carpenter handed me his bill for $4500, I decided to keep the place and buy a whole lot of others.

          To tell you the truth I wishes looking back I had bought the carwash.

  8. Eric,

    Thank you for this article. We are currently revamping our requirements for our property managers. Obviously tenant screening is the #1 item. This helps us formulate our training.

    Jason

    • Thank you for the comment Bilgefisher!

      That is the number one reason why landlords go broke, poor tenants. I have a post on the “Landlord Trap” on my blog that I ran a while ago. An under capitalized landlord only has so many chances to give, and then another investor owns their property.

  9. Great article. One of my recent turn-overs had a great credit score and income of $205K. However, he was a giant PITA… I think another good thing to inquire about is their reason for renting. He was going through a divorce and it caused issues with late rent, he was used to living in his own home and did not adjust well to being a tenant. Also, he wound up leaving after 12 months because he wound up reconciling with his wife.

    So, Credit score, Background Check, Income, Bank Statements, and Reason for Renting are the main ones that I routinely inquire about.

    J

    • You can always have issues, but typically high income, high credit score people you will get rent. They are sometimes more demanding, as they have gotten to their place in life by being that way.

      At least of they cause damages, you can sue and get a garnishment. With low credit score people, you are just another creditor in the list…

  10. “A credit score requires a positive behavior by the tenant, a clean criminal record only requires not getting caught.” I don’t have a twitter account but considered opening one just to tweet this! LOL!

    Come on with your screening tenant post! Good stuff!

  11. Eric,

    What would you say about the area where you have your rentals? Is the area getting better or has nothing changed? I have 12 units on one block, and I agree one bad tenant will run the good ones off. I have this same issue as we speak 6 vacancies out of 12 units. I finally evicted the bad tenant, and the landlord next door rents to this gang of misfits (drug dealers).

    I refuse to rent these to low life’s better they are vacant then run the 6 good tenant left out of the buildings. I know you are right each and every bad tenant I have rented to had smoke and mirrors income, or SSI and welfare, out of these most were pulling some scam to get a government check.

    • I started with a couple of duplexes in a class C neighborhood. I went to Section 8 rentals, and had a lot of issues.

      I bought five 4-plexes in a class D neighborhood, and re-positioned it to a Class B neighborhood. I wrote a post about it on my blog. The Cops would not come into the area without double or triple backup. Forget about getting a pizza delivered. I even bought a bullet proof vest.

      You can always increase demand by lowering price. Try that to fill the rental.

  12. My husband was the property manager for a condo my parents owned for many years. He only rented to retired folks so had no real issues even though he had to make some on site plumbing type repairs a couple of times. In addition, twice the apartment was flooded from floors above. Not sure if the whole building was filled with seniors who were just forgetful or what, but I guess my point is that even suitable renters can do damage. I guess you need to be protected through insurance or damage deposits etc.

    Good info. We are planning to get into property management once our mortgage is paid off and as part of our semi-passive retirement income.

  13. Thanks for the comment deb! Glad to see you here!

    Suitable renters can do damage, but it is MUCH more prevalent with low income and low credit score renters. Insurance companies have done a lot of studies on it too.

    I hate water issues and I have has my fair share. I have had dishwashers leaking, kids throwing water out of the tub, tub overflow drain issues, cracked toilet tanks, kitchen faucet issues all leak water from upstairs to downstairs. Some were good tenants, and some maintenance needed to be done.

    You may want to start now with managing rental property. Find out what it takes to be a property manager, and see if you can get a gig managing a property or two. It may help prepare for the day you are ready.

  14. Awesome post Eric! As a newbie to the whole renting thing this was really useful. This is hard to believe -> “people that bit off other peoples fingers in my apartment” but I know you are an honest man so I believe it. That’s insane! I lived in a duplex in frogtown during college and you’d get a wide range of tenants. I had to call 911 once when the guy next door (really, more accurately described as the baby daddy) was stabbed by his cousin. I have no idea how this went down, but I know it would be a nightmare to be the landlord. I really felt bad for the kids who were home at the time, too.

    • Thank you for the comment David! It’s great to see you here!

      I wrote about the finger biting incident on my blog, Renter Horror Story #1. I should post the criminal complaint up there too, to give it more authenticity. An ex-cop did the biting; you would think he would have known better.

  15. Once I screen tenants and find what, at the time, is the best choice to rent one of my units, I tell them that I absolutely DO NOT want their security deposit and if the apartment is in the same condition at move-out, all of their SD will be returned. I also tell tenants that I write recommendations for stellar tenants that they can use for job hunting (character reference), finding another apartment, applying for a mortgage (it can only help) etc. The result: When tenants move out, I have very little to do. The last apartment I turned over with only a $25 cost to steam clean the carpet.

    One of my recommendations was used by a previous tenant to get hired as a city firefighter. He followed up with me to let me know that he got the job! When tenants know that they have some skin in the game, they will be willing to do what you ask. I have increased my cash flow by having minimal costs during turnover and my tenants stay longer to build up a history with me.

    • Thank you for the comment!

      Good points! I have a booklet (35 pages or so) that has basic renter information that I hand out. One page I got from Trulia (I think) is “How to get 100% of your deposit back”. I also give a move out letter, and a C/D with their move in pictures to reference what the place looked like upon moving in.

      I love to give the entire deposit back. I would rather do than than the work it takes to turn the unit when it is in shambles. I even have a few “renter Horror Stories” on my blog, they are never fun.

        • Contact me through either this site, or my blog, and I can send you what I have. It includes school disrict information, utility companies, fire department information, etc.

          A lot of it is generic, but it also gives the tenants a place to store the lease.

    • Sharon Tzib on

      James, I think it’s great you work so hard to make sure your tenants understand how to get back their S/D (I have the same feeling on late fees – I don’t want them, just your on time rent check).

      According to a Rent.com survey last year, 26% of tenants do not get their deposits returned,and of those, 36% are given no reason why by their landlord. That is just a bad rap for landlords, since it’s probably safe to say most states require you to explain why you aren’t returning it. The biggest reasons for not returning a S/D – breaking the lease early and pet damage.

      • Sharon, thanks for the compliment and for the stats on security deposit refunds.

        Where I live (WI) the law states that if any portion of the SD is kept, a detailed letter (often with copies of receipts to prove the repairs) is required itemizing the deductions. If the deposit is kept in full, you better have a very detailed letter explaining why, or prepare to appear in court. Landlords have 21 days to return the security deposit in full or partial with a letter of explanation. I think that tenants who know the law here want you to “try” and keep their deposit, because then they can take you to court and sue for triple the security deposit, which is well worth their time to do. So, knowing the law here is extremely important. I think because most landlords look for reasons to keep security deposits, tenants assume that they will have to take you to court to get it back, so that is why I make it very clear and remind them often, that I don’t want it and want to return every penny to them. It seems to be working well for me. Oh, and normal “wear and tear” has a broad definition, so you have to be pretty generous when it comes to that. I have heard that landlords who rented to people with children and the children took crayons to the walls were ordered to return the withheld damages, because the damages were deemed normal wear and tear (for children).

        • In MN, we have 21 days too. I always give a letter, unless I am refunding in full (plus 1% interest).

          I am pretty hard on cleaning charges, as my places are spotless when they move in. If they move out a few days early, I go pretty easy on them. People buying houses, or moving out of the area, will generally be able to move out early.

  16. Sounds like you are in neighborhoods I wouldn’t invest in…I’d take the same money, find another unit in another city at the same price, but not such a low demographic!

    However, as my experience as a landlord has grown, even for a low income neighborhood: You need to make 2.5x the monthly rent between yourself (or spouses), and if you have more than 1 charge off, I get double the deposit. These income requirements I have in all the areas and have been working fine. I allow for some bad credit marks, but not more than 1, maybe 2 before you have to pay more. I didnt do that when I was starting off, and I paid the consequences!

    It also comes down to your rental area. You can have two low end properties at the same price, and one is simply a disaster, and the other is just fine, in the same city (for instance, one is on the outskirts of a gentrified part of town, etc). Something to keep in mind when choosing where to purchase.

    I can’t say I agree with all of your conclusions, but I definitely agree with the credit report being one of the most important indicators of payment behavior. Thanks,

    • Thank you for the comment Lisa!

      Actually, the apartment complex where I own most of my properties is in a class B or even A area. Too many previous ‘investors’ turned it into a D area.

      I have since changed it, and it is a B area once again. I wrote a post on my blog, “How I turned a Class ‘D’ Apartment Classification complex into a Class ‘B’ complex.”. It is a great read.

  17. Eric, I always enjoy articles about management because that’s what I do as well. I have worked in both market rate and LIHTC, sec 8, project based voucher. I personally prefer market rate and quality property/quality tenants for myself. Working in affordable housing can be very challenging. The paperwork and compliance paperwork for eligibility programs is always different by state and program. I’ve had good sec 8 tenants. And I do enjoy seeing help go to a deserving person that is working their butt off. But I will not go that route for my own investments. Not unless my property could no longer compete in the market. I look forward to reading your future posts!

    • Thank you for the comment!

      You have some great experience. Until you have had a chance to work in low income housing, you should not be able to be a landlord, but that is a catch 22. Low income people will really make you wonder sometimes. It makes you appreciate good neighborhoods, and understand that the location everyone talks about is more about your neighbors than any particular geographic area.

  18. Erik,

    Welcome to the BP blog – we will benefit from your perspective for sure.
    As a syndicator, I never look to do the management – don’t have any idea what it entails. As an individual investor I do manage 28 units in my own portfolio, which I understand is a fraction of yours, and thus I defer to your judgment.

    I do have to say that I’ve had a different experience with Section 8. I hold B Class and only have a few Section 8 people currently. But, they all work and they all pay the lion’s share of the rent. They have been good to me. I am of the mindset that just because one makes $12/hr doesn’t mean that they should expect to live in slum. I know what you are saying, but my perspective has served me well thus far – I’ve never had to evict a Section 8 tenant yet.

    I am young though so the jury is still out :) By and large, I agree that the unit, where it is and what it is does the most to tee up ease of management by attracting the right kind of tenant. I’ve been preaching this for a long time, and though Brandon Turner may not agree, you and I know best lol

    Thank you for joining the blog – I don’t feel so alone now :)

  19. Thank you the comment Ben!

    You are an inspiration to me. I have only 24 renters of my own, manage another one, and screen for our complex. I see quite a bit of backgrounds, and that helps identify what is ‘normal’. in addition, I have done quite a bit of research on credit scores.

  20. Hello:

    I enjoyed your article and look forward to the others, thank you.

    Can you tell us more about the ‘use Google and save money’ on doing a criminal search. Are you just doing a search for the name and criminal history or arrests?

    • Thank you for the comment!

      A national criminal check is so far out of date, and many criminal events are not shown in it. Often, states do not report misdemeanors, or take 2+ years to deliver information. Google search will have newspaper articles and mugshots. So, rather than spend $10 for a national check, that does not find important things, use Google for free,

      Google will also give you information that is non-criminal. Search the name, phone number, past addresses, etc. You may find the tenant is having a big party on his last day at the old place, sells things you do not want in your apartment (snakes, puppies, etc.), works out of the home (repairs cars, installs stereos, etc.),

      Use a county level check of all counties the applicant has lived in in the past 7 years, as evidenced on the credit report. That will get you much information. Many states have a court site search you can search for things for free, before you spend any money on a credit check.

      • Kimberly H. on

        Ditto on the county courthouse check, my background check found nothing on one applicant but when I looked her up in the online docket in all the counties she lived in, she had a criminal track record going back over 20 yrs to when she turned 18. Probably a sealed juvie record before that. Of course this works best with uncommon names.

  21. Arthur Banks on

    What do you do if a potential tenant say they don’t have current or previous rental history? For instance, the current residence shows on their credit report but actually IS a rental and their previous home was a home they ‘owned’ but sold it or was lost due to short sale? How would you know the current home is a rental?

    • If they owned a home, odds are, they had decent credit at one time, and have a 650+ score now. You can look up property records to see who is the owner of the property. If it is them, they are the owner. If it is sold already, it is more difficult.

      I really would rely more on a credit score, than some past landlord that wants to get rid of a tenant, or is afraid to say anything negative.

    • Kimberly H. on

      The application should ask for the current landlord of where they live now, so depending on how they answer you will know what they want you to think (either they give contact info or say they own/owned the home). If you find out otherwise, that means they lied and I think most landlords reject someone if found outright trying to hide the truth. I also ask if they’ve ever short saled, foreclosed or are in the process….again if I find out they lie, they are done and I wait for another applicant.

  22. Arthur Banks on

    Got it. Go the extra step and look up who the owner of the property is. Didn’t think of that.

    And @Eric, thanks again for the booklet. Good stuff!

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