Screening Tenants/My 1st time-Need Help

OP

Baltimore, MD · Member since 2014 · 146 posts · 63 votes

10y

Of course @Cal C..... I totally get it. This is such a touch thing for us newbies. I'm so emotional its crazy. I looked at her birthday and it's on me and my husbands anniversary day. Isn't that the stupidest thing you've heard. Lord knows, I want to succeed.

I used bigger pockets smartmove just FYI. I didn't talk to her currently landlord yet, but judging by the caps in your post. I need to move on.

Thanks for responding

Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes

10y

Originally posted by @Kimberly H.:

I have a long story to tell you guys. I was the person that purchase a baltimore city duplex from FNMA, that had my copper pipes cut a day before closing back in August. I will document my journey in a few weeks. It's been so crazy! Long story and I can't wait to share.

But, I do need you guys right now. I have one apartment completed and I've had several showings. Well, one person actually finished the tenant screening in record time. Lovely family, well manner children, excellent job..... but hear this. My minimum credit score is 600. Her's is 556, due to a bankruptcy 3 years ago. Everything else since then has been just OK. A few 30/60 days late. Only on her job for 9 months. That's when the lates happened. She meets the income requirements 3x the rent plus she gets child support. What should I do....... see, now I'm getting emotional instead of being smart!

Can I wait to give her an answer until a few more potential renters complete their paper work. Sad to say, I really like her.

Hello Kimberly,

This seems like a hard situation! On one hand the applicant is below your limit, and on another they may turn out to be a good tenant. Just because they have a lower score doesn't mean they can't make the bills. You have to remember to take EVERYTHING in account.

Some guidelines I like to follow are:

have them sign an authorization form, which allows you to look up their credit report and do a background check. Never simply look at a credit SCORE, but make sure you look at the whole REPORT. Someone could have a good score, but owe a lot of money on collections. (I know, but it happens)

Analyze their credit report and if you feel comfortable, do a background check and make sure their criminal history checks out.

Another key factor is employment history. Make sure they have a job of course! You also want to make sure they have had the job for more than a few days. Remember their ability to keep their job (or have a steady income) will directly effect their ability to pay the rent.

We always have them submit pay-stubs. 2 - 3 most recently ones give us the information we need. You want to use that information to check to make sure they have enough money to pay their bills, including the rent. We don't normally ask for a license until they are signing documents, but that might be different depending on your state.

Please let me know if you have any questions!

OP

Baltimore, MD · Member since 2014 · 146 posts · 63 votes

10y

@Tom Ott - I used smartmove. I have a copy of the credit report. She filed for bankruptcy in 2013. Has a few late (auto), back when she was out of work 9 months ago. I have the pay stubs, all checks out.

No criminal (Maryland has criminal & civil search) nothing. Smartmove indicated no prior eviction. I will call her current landlord, but that can be a friend. So, I take that with a grain of salt if is totally glowing.

Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes

10y

Originally posted by @Kimberly H.:

@Tom Ott - I used smartmove. I have a copy of the credit report. She filed for bankruptcy in 2013. Has a few late (auto), back when she was out of work 9 months ago. I have the pay stubs, all checks out.

No criminal (Maryland has criminal & civil search) nothing. Smartmove indicated no prior eviction. I will call her current landlord, but that can be a friend. So, I take that with a grain of salt if is totally glowing.

Yes, doing a rental verification should help. Of course always be aware it could be a friend, you are right.

Well it sounds like this person should be able to check out as a decent tenant. Just make sure you feel okay about it!

Tyrus Shivers

Investor · Jessup, MD · Member since 2013 · 437 posts · 180 votes

10y

Not sure where the property is in Baltimore, but it can be difficult to find 600+ especially in the city. Seems a lot of applicants I get have ruined their credit, but hold good stable jobs. I do a point system based on the whole picture. Credit Score, Report information, criminal history, evictions, past landlord (I use a verification form) and employment verification (form as well). If an applicant lacks one thing, but everything else is strong and they take the time to submit the ENTIRE application packet then the point system will determine qualification.

No evictions last 7 years, no bankruptcies last 10 years, No felonies. Also has to show a BGE bill or some letter of explanation if they do not have power in their name. To many horror stories of Tenants not able to get the power in their name.

3 Reply

Jeremy Paschedag

Rental Property Investor · Saint Louis, MO · Member since 2016 · 162 posts · 53 votes

10y

Talking to the current landlord is not the source of truth. They'll tell you she's good regardless. If she's good, they'll say she's good. If she's bad, they'll tell you she's good so they get her out of their hair.

You might talk to her landlord from two places ago. Does she have car loan(s)? Student debt? MAYBE she has learned from her past mistakes. Such a judgement call.

OP

Baltimore, MD · Member since 2014 · 146 posts · 63 votes

10y

Ummmm.... @Tyrus Shivers - You have a good point there. I can be honest something is giving me pause. I think I will give her the option on paying 2 months security.

OP

Baltimore, MD · Member since 2014 · 146 posts · 63 votes

10y

@Jeremy Paschedag - yes, she has a car loan and no late payments. Wait, looking at her report she co-signed for another car. She has two active car loans. She has student debt and she's almost paid those off. This is way up in the air.

Jeremy Paschedag

Rental Property Investor · Saint Louis, MO · Member since 2016 · 162 posts · 53 votes

10y

Two car loans and student debt. Plus bankruptcy... I'd say walk away.

Account Closed

Investor · Baltimore, MD · Member since 2014 · 1k+ posts · 688 votes

10y

double deposit solves many problems.

Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes

10y

Originally posted by @Jeremy Paschedag:

Talking to the current landlord is not the source of truth. They'll tell you she's good regardless. If she's good, they'll say she's good. If she's bad, they'll tell you she's good so they get her out of their hair.

You might talk to her landlord from two places ago. Does she have car loan(s)? Student debt? MAYBE she has learned from her past mistakes. Such a judgement call.

Jeremy makes a great point I forgot to mention. Always do a check from not just the current place, but the place before that. If they remember, then they should be pretty honest with you.

Also, a double deposit or maybe a cosigner could really help you out here.

Kevin Yeats

Lender · Fort Pierce, FL · Member since 2009 · 825 posts · 486 votes

10y

@Kimberly H. I think you will learn a lot by reading Eric Drenkhahn's blog No Nonsense Landlord. He give a lot of tips from his years of experience

3 Reply

Scott Titus

Saint Peters, MO · Member since 2015 · 27 posts · 2 votes

10y

Everyone here nailed it. Qualifying the rental is the most important step. Always remember, they need to move into your property more than you need them. Another red flag is reachability.. Is it hard to get ahold of them? Chances are this will be the same during your collection calls. I find it hard to be objective if I have become to personal BEFORE the checks. I catch myself going against better judgement or trying to play hero. "Your interested in the property, great. Fill out the application, I'll email you the link to complete the verification process. If we are a good match, I will call you immediately with more information if we are not a good match I will email you the reasons so you can come up with a plan before shelling out more app fees to others. The key is to lay out all expectations upfront.

OP

Baltimore, MD · Member since 2014 · 146 posts · 63 votes

10y

@Scott Titus - Thanks a lot. You are so right. Gotta take the emotions out of it. Thumbs up!

@Kevin Yeats - Thank. I will read that.

Well, looks like I'm going to keep looking. It might take me a few weeks/months, but quality and success is what I want in the long run.

Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes

10y

Originally posted by @Scott Titus:

Everyone here nailed it. Qualifying the rental is the most important step. Always remember, they need to move into your property more than you need them. Another red flag is reachability.. Is it hard to get ahold of them? Chances are this will be the same during your collection calls. I find it hard to be objective if I have become to personal BEFORE the checks. I catch myself going against better judgement or trying to play hero. "Your interested in the property, great. Fill out the application, I'll email you the link to complete the verification process. If we are a good match, I will call you immediately with more information if we are not a good match I will email you the reasons so you can come up with a plan before shelling out more app fees to others. The key is to lay out all expectations upfront.

Scott, I agree! Always give as much information as possible up front. No sense on hiding anything. This way if you do need to deny them, they know why. Always have your procedures laid out either on a website or on your application. Maybe just tell them when you meet. That always works.

OP

Baltimore, MD · Member since 2014 · 146 posts · 63 votes

10y

Should I do an adverse decline letter based on credit. That's probably the legal way to decline. Your thoughts?

Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes

10y

Originally posted by @Kimberly H.:

Should I do an adverse decline letter based on credit. That's probably the legal way to decline. Your thoughts?

Yes, a decline letter is best. You may give them their score, the company you used, and the reason for their score being the way it is (ex. collections, delinquent accounts, too many accounts, etc.) Tell them if they have any problems with the score/report to contact the company you used. It is not your fault the company came up with that report.

If they wish to dispute it, they need to take it to the source.

Lenzy Ruffin

Washington, DC · Member since 2015 · 139 posts · 102 votes

10y

@Kimberly H., I don't own any properties, but buy and hold is my end game, so I've been studying it on BP quite a bit while I work to master wholesaling. I'd like to offer a couple of things I've learned:

1) Define your criteria and stick to them. Period. Whether it's your criteria for buying a property or your criteria for screening tenants, you defined those criteria for a reason: to protect yourself from making bad decisions.

2) From what I've read, if you were to make an exception to your credit score criteria for this person, then you'd be setting yourself up for someone down the road to be able to make a discrimination case because you are not screening all applicants uniformly. If you let her slide with a 556, how then do you reject someone down the road with a 580? If I'm wrong on this point, someone please correct me.

3 Reply

Nuhan Demirkan

Rental Property Investor · La Plata, MD · Member since 2011 · 216 posts · 117 votes

10y

Kimberly,

I have rentals and here are my criteria for accepting applicants:

1- Ability to pay: Do they earn enough money (rent x 3)? if yes continue...

2- What do the past landlords say? Positive? move to 3...

3- What does the recent credit history (past 12 mos) look like?

4- Ask for a copy of recent utility/cell phone bill. Any past due balances?

if everything checks out accept the tenant

if the results are mixed and you are on the fence, you have options:

1- Ask for more deposit

2- Ask for payroll deduction/direct deposit for rent payments

3- Have a "Come to Jesus" meeting up front with them. Tell them this is a business and they have to remember three dates. Rent is due on the 1st, 5% late fee is added after the 5th and you will be filing for eviction after the 10th. They have to understand that the rent is the most important payment in their lives.

I just accepted a tenant who is working on credit issues with 2 mos of security deposit and bi-weekly payroll deduction for rent payment.

Good luck

Nuhan Demirkan

Rental Property Investor · La Plata, MD · Member since 2011 · 216 posts · 117 votes

10y

Kimberly, to avoid calling a friend as if the landlord scam (happened to me twice but I caught it) first you can check the tax records of the address where they currently live to make sure the person you are calling is actually the owner. If not do a google search of the supposed landlord, check facebook and linked-in. So many times they give their colleagues from work as landlords...

Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes

10y

Originally posted by @Nuhan Demirkan:

Kimberly, to avoid calling a friend as if the landlord scam (happened to me twice but I caught it) first you can check the tax records of the address where they currently live to make sure the person you are calling is actually the owner. If not do a google search of the supposed landlord, check facebook and linked-in. So many times they give their colleagues from work as landlords...

Nuhan is correct! You should always check property records to make sure it's not a friend. I've caught a few trying to act as LLs before.

Mike Huang

Rental Property Investor · Astoria, NY · Member since 2014 · 87 posts · 18 votes

10y

Another trick to counter the "friend as a landlord" trick is to call first and pretend to a potential tenant and watch them get flustered as you ask about technical lease terms.

And to play devil's advocate, you also have to take the rental market into consideration. Is it hard to find high quality tenants in your area? You want only the best of the best but that standard isn't going to be same in every market.

Michael Noto

Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes

10y

Ask for 2 months deposit. If the income is there and she really wants the place she will pay it.

If she doesn't just move on.

Fred Dray

Professional · Glendale, CA · Member since 2013 · 105 posts · 47 votes

10y

I agree with Lenzy. In CA, we have to use the same qualification criteria for each applicant or it is considered discrimination. I would advise you not to accept anyone with a bankruptcy in their credit history. While 1 in 10 with bankruptcy may have a legitimate reason (medical hardship or whatever) the others likely have issues because they made bad financial decisions. How do you know if you got the 1 or one of the other nine? Also you may consider not using credit score as a criteria. We go by instances of bad credit. If someone only has one late payment or one minimal issue and the pass all other requirements then we would consider them. However, more than one instance of bad credit and we pass. The stricter your requirements are the less likely it is you will have issues with tenants. If most applicants in Baltimore are not ideal, you may have lower your qualifications somewhat...but I would draw the line at evictions, bankruptcy, bad rental history. Good luck!!