In invest in Pittsburgh and for the past 1.5-2 years i have had a horrendous track record of NON Paying tenants. They either aren't paying on time, don't pay or just leave. That is the one thing I didn't factor in. I just got hit with a few maintenance issues and even a recent fine, but I factored things like that into my calculations. What i hadn't figured in was the high amount of NON Paying tenants or ones that just leave mid-lease because i thought the PM screening would factor most (not all) of these tenants out. I use a PM and I'm wondering if they aren't being diligent enough about following up with tenants as they should be and its costing me big time. I invest in B/C areas as well. Any thoughts on what I might be missing? Or do most of you have similar issues with your properties? I will say I have another rental in Cleveland that I have VERY few problems with in that same regard.
Are you setting the screening criteria for the PM? Do they collect the rent in person each month to see how things are going? That is a good way to gather information and be warned of anything out of the ordinary.
The subject line is an oxymoron. Good screening, by definition, doesn't result in a lot of non-paying tenants.
It doesn't sound like you are getting "good" screening from this PM, it sounds like they are just renting the place out to whomever.
@Eddie Werner I would agree, but i don't know any management company that would do that given the volume of properties they would have to visit each month.
Put them all on autopay. Enforce late fees and make the PM enforce them. Have you seen the applications? look at what your non-paying tenants have submitted. See if you can identify additional criteria that might be associated with non-payment. Your PM may overlook items to fill a unit more quickly
My sister has 22 properties in the Pitt area but does her own CC and asks for Proof of income (meet 3x rent). Odds are you will have a couple bad apples but learn from your mistakes and strengthen your standards. Make sure you follow the eviction process to the end so it will show up on further reports and you can still stick them with a bad report since they stuck you with not fulfilling their part of the lease agreement.
Ask the PM to send you their documentation on potential tenants so you can have final approval. That way you can tell how well they are screening applicants.
Better screening helps..Maybe review all applicants before PM accept..Turnover can tear into profits...
1. Good rental history(proof of current address and utility at that address)
2. Stable job/income..3X rent...otherwise it's a constant struggle to pay..basically set them up to fail
3. Pull credit..I spend time reviewing it to find out what's not paid and why not..mostly medical and school loan stuff will accept..utilities and lot of charge offs not paid is usually bad sign(recent)...this is totally subjective
4. I use 6th sense, intuition!!!..Of course a good tenant can still go rogue!!!
I meet every tenant and call references(sometimes they will tell you the dirt)
All tenants pay until they don't.
You have to do your best to mitigate risk. Will you still run into problems? YES. But it should NOT be commonplace.
Look for 2.5-3x rent. no evictions. no felonies. decent history of paying their bills. no owed money to utility companies.
If the tenant pool you are getting for your particular rental is not attracting tenants that meet those standards then you need to improve the property or lower the rent, or both.
That will open the tenant pool up wider and allow you your "pick of the litter"
Perhaps enhance your application with questions that will discourage questionable renters. Questions like:
- What is your attorney's name?
- Have you ever broken a lease?
- How many evictions have been filed on you?
- What might interrupt your income or ability to pay rent?
When questionable renters see difficult to answer (for them) questions, they may just move on, saving you future headaches.
One more thing. Beside contacting their current landlord, contract the landlord before that. The current landlord may want to be rid of them and may not give you the complete truth.
Thanks everyone. Just for background - we do 2.5-3 x monthly rent, credit check (650+); i will go down to 600, but only with a double deposit, landlord checks (mainly previous to the current one to avoid the issues @Mike Russo mentioned). I'm starting to wonder if its the areas and tenant base that my current PM/realtor put me in and that this is part of the MO for those areas. Admittedly, i could get more involved in the initial screening with some of the questions (i invest out of state so thats going to be difficult), though i am starting to wonder what a PM is for then. Again, i appreciate the responses.
Originally posted by @Ian M.:
I just got hit with a few maintenance issues and even a recent fine, but I factored things like that into my calculations.
You got a fine? From the city? For what? Can you see if what you did or did not do could piss off tenants, and become non-paying?
Is your PM actually taking the time to verify the information on the application?
@Yiv L. for not fixing the sidewalk (which the inspector didn't initially think needed fixed) fast enough. Tenants wouldn't have anything to do with that. i always fix the property when something needs its so there is nothing i would have done to warrant non payment
@Kimberly H. unless they are bold faced lying to me (i don't think they are, i have good rapport with the leasing agent) - yes they are verifying.
Typically these days when employers verify income, it's in writing. Your PM sends the required documentation, and they fax something back. Ask your PM to see that documentation. If they try to tell you it's all over the phone or they don't have it anymore I would highly doubt that. Another trend is bigger companies outsourcing income verification to The Worknumber. There are extra charges and work involved then...which could lead to it not happening on the part of the PM. Do they have 2 mo. paystubs on hand? We ask for that first from the applicants...and then verify with employers since their are fake paystub websites out there. Trust...but verify. With our first rental, before I was an agent, we had a real estate agent placing tenant twice in one rental. We just went through the documentation the other day and saw they placed someone with a collection FROM AN APARTMENT COMPLEX in our property. Never came up. I doubt they read it. Not that the person had a great score, it was 500-550, something like that. I would ask for that and the credit reports the PM pulled; they should have no problem doing so if they did everything they were supposed to. I hate to say it but I have run into a lot of people in the real estate industry who will bold face lie to your face no problem. They keep trying to add more ethics classes to no avail...
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing