What’s up guys. I just bought my first rental and I’m almost done getting it rent ready. How do I screen tenants? and what’s the best software for managing the property?
Hey Aiman, congrats on your new property! Screening tenants is definitely tricky, bit I can offer you a few ideas:
Check current credit score
Contact previous landlords for rental history
Income verification(get a copy of their w2 or 1099 depending on source of income)
There is lots more that you can do here, but that's a start. The most important thing I'd mention is - don't be afraid to hold to a high standard, especially if you have a nice home to rent out. It's far better to wait a bit longer to find a great tenant then to take the first person who is interested. The market is pretty hot right now, so you will more than likely find a very qualified tenant in a short period of time.
Have you considered professional property management? They typically charge between 6-12% of rent as payment. For me, this is well worth it. They already have access to all the screening tools as well.
When someone uses their own bad experience to tell me why being a landlord is a bad idea, they are always the ones who decided to self-manage.
As for screening tenants:
Credit Check, rental history, income check, require a decent sized deposit, and then perform quarterly walkthroughs
Good luck and have fun!
@Aiman Bennroua Congratulations! Big purchase requires big thinking. Now it’s time to turn a profit soon. I am not sure what your end goal is but I would agree with @Billy Daniel with hiring a property manager. However, please be careful on choosing cheaper property managers. I am not saying the most expensive is the best but I am sure telling you cheaper is not always the best. You get what you pay for – some would say. The average property management fee is somewhere around 10%. Property management bring value – if you have the right team.
If you decide not to hire a property manager then I would suggest doing your research! Please, please, please learn from those who have been down this rabbit hole once before. The residents who you place in your property must be vetted with great due diligence.
Best of Luck!
@Benjamin Serven thank you for the insight much appreciated.
@Billy Daniel I’m just starting out so is would like to manage a couple of properties before I get a property manager I’ve done a lot of educating but it’s different when it gets real but thank you for the insight.
@Davartay Miller my goal is to scale I bought a single family now I’m looking for a duplex to house hack. Thanks for the insight.
With their permission and SSN you can do a criminal background check from the state police. In PA it's only $20.
Income is 3x the rent, check w2 or pay stub for steady job. Check for stability, make sure that they arent someone that moves often.
@Aiman Bennroua My wife and I are in the same boat as you. I would suggest reading/audio book from Brandon and his wife Heather.
“Managing Rental Properties.”
It outlines the systems you should put in place to go from start to finish. The book also comes with pdf downloads of many of the forms/contracts you will need.
The next steps at this point for us...
Forming a new LLC umbrella company and then each property will be placed in its own LLC under the main Company.
Get a goggle phone number.
Multiple Insurance policies in place covering the property and ourselves.
Take good photos and start writing the adds.
Get the new website up and the add out on as many sites as possible.
It may seem a bit over kill for only one house but we currently have a 5 unit under contract and looking to add more. So get your ducks in a row now. Its better to over-plan and set a date you would like the property to go up for rent. This puts a little fire under you to get things done sooner.
Best of Luck!!
You may want to read our series here on BP:
You might want to read our series about “How to Screen Applicants like a Pro”:
Given your lack of experience though, you may want to hire a PMC and read our series about “How to Screen a PMC Better than a Tenant”, since selecting the wrong PMC is usually more harmful than selecting a bad tenant:
You are asking in three sentences how to do something that entire books are written about. One bad tenant can do thousands of dollars in damage and make your life living hell. I would recommend hiring a local PM company just to do tenant screening, then take on the monthly management yourself. Screening is where most problems occur. As they advertise and screen, ask them questions and learn their process. At the same time read books and get educated yourself. Read this guide:
Read this book:
If you do plan to screen tenants yourself, there are services that will pull credit report and background check. Still, you need to understand how to analyze and select. Both Apartments.com and Zillow.com allow you to advertise, screen tenants and collect rent. I would use one of those as your "one stop shop" for screening and rent collection. Although there are probably 50 or more different screening or collection websites, these are the only two with advertising integrated. Zillow has digital lease singing, which is a nice bonus. BiggerPockets also has tenant screening services:
Get a good lease document that is attorney drafted and state specific. Every state has different laws, so it is important that it is state specific. People make the mistake of getting a lease for free on the internet, only to find out it contains clauses illegal in their state. BiggerPockets sells lease packages that have state specific leases and rental forms. They are all attorney drafted:
One thing people don't consider early enough is tax strategy. I would also talk to a good tax strategist as soon as possible. They will tell you what expenses are deductible and how to track expenses. For example, your property is not yet rent-ready, so none of your expenses up until now are deductible. If you didn't know that, all the more reason to hire a tax strategist. They will help you determine basis for depreciation, which is usually your largest tax savings.
Again, there is so much more too it. Take this seriously and put the time into educating yourself. If you are not willing to read books and spend hours learning, hire a professional.
For a single property, you could use www.avail.co. It's free(for 1 property) and allows you to request credit and background checks, collect rent online, and post your property to multiple sites at once. It's a great way to get started and keep costs low. As your grow you might keep it or look at something like Tenant Cloud along with Stessa to help with accounting and overall financial performance of your portfolio.
@Aiman Bennroua : I’m in a similar spot. My wife and I closed our first on Friday. Spent the weekend touching things up and cleaning. It should be listed for rent in the next day. I plan to screen, do lease signing, and collect rent through Zillow. The realtor that helped me buy the property is listing it and showing it for me. I am in Florida so I’ll use the standard Florida Bar lease agreement.