Advice for Screening and Securing Tenants

[Ryan Montbleau]

Hi everyone, 

My wife and I are closing on a multifamily (2 family) in the coming weeks and both units will be delivered vacant. We will be owner-occupants and are planning to rent out the second unit in early January. 

What is your best advice for a new investor looking to find and secure tenants for the first time? Are there any red flags to keep an eye out for during the screening and interviewing process? 

Thanks!
 

[Chase Busick]

@Ryan Montbleau congrats on making the deal happen! It's a big feat & learning experience for y'all to go through!

For being an owner/occupant, I'd ensure many things are squared away prior to listing the other side for rent.

- Structure - closing in business or personal. 

- Insurance - ensure general liability is good. (So much more on this subject can be talked about)

- Leasing 

- Marketing - Take or have great pictures taken to include video walkthrough! Marketing will greatly help the ability to get the duplex rented. Due to the timing of the year - it may be slow, & your Realtor or yourself can look into leasing comps of the area (which should be considered in deal analysis), look at active competition, if they are doing any incentives for move in, etc. Marketing - make sure you list out all details, qualifications, in each online posting (Facebook marketplace, Zillow, apartments .com, homes .com, etc.) you do so can refer them to this & answer their own questions (filters out some people from calling), having a cheap sign in the yard too can help. Allow pets (this may increase amount of people interested)?

Showings -Vet people before scheduling showings (have they seen pictures, looked at qualifications/details, look up to see who they are as person, etc.). If living in one side, I'd probably disclose ownership interest. For interested applicants get pictures of DL's & either get your own application or state's real estate commissions application to have them fill out in person (tell them to be as honest as possible), collect application fees. Consider applications complete when: seen property, completed applications for all adults, & application fees paid.

Tenant Screening -Ensure that you learn about tenant screening, local pre-screening platforms, true people search, state court network, etc. Recommend to go 1st come 1st serve on screening to avoid fair housing complaints. Pet screening if they have pets (are they up to date on shots, do you charge a fee, pet rent, etc. - each of these things can help you lease & get better qualified tenants or equally slow down). Have them submit employment (2 years, current & previous) & landlord references (5 years, current & past - get addresses then skip trace to see if legit people they put on applications are legit owner's/managers). Call all, if have reference authorization forms - they may ask for the applicants signed approval before releasing any info (can have e-signed). Have them submit copies of at least 2 paystubs to verify proof of employment & if they meet your qualifications (3x rent or whatever prefer), do you want to check they have the proof of funds available for move in (security deposit, 1st months rent, pet fees, etc. or do they not have enough). There are some security deposit insurance companies can consider (as incentive if want. Final reports - pay for final reports (I like my smart move because a little more detailed) various other sites have varying reports on how well they are or not. Do they have any background, criminal, eviction or credit issues - if so are you ok with those to approve in general, approve with conditions, or deny (if deny provide adverse action letter). 

After Approval - Collect Security deposit (follow state's laws/rules) within 3 days + have form signed stating you received, get lease signed within this time frame. Can hold place up to 30 days with deposit, have lease signed within these days. Whatever the lease start date is - is when they gain possession(keys) & they need to bring 1st months rent + pet fees, do a move in inspection & notate anything wrong (give them some time afterwards to report things too). The following month after move in on the 1st - prorate based on how many days of month they lived in home. Set up online platform, for rent payments online, maintenance requests, upload docs, etc. 

Ongoing Operations - be proactive with upkeep & maintenance. Maintain communication & empathy with them as neighbors too. Keep happy & treat with respect.

Some red flags to look at during screening - did they lie? do they meet qualification? bad credit (be reasonable if have medical debt & if their debts may impact their ability to pay rent on time), Evictions (probably not within last 5 years & get official reports from mangers/owners - pay rent on time, damaged property, gave 30 day notice, complaints, etc.) Screening process can take anywhere from 1-3 days depending on how responsive people are, if get all requested docs up front, etc. Don't rush process & if people are trying to hurry, that may be a red flag where may take advantage of inexperience. Be careful when replying online.

Overall these are all suggestions & is your responsibility to learn & decide what want to do for self. The things mentioned above can be edited/changed based on your goals & what you want to make your qualifications to be. Most things are straightforward, but you have flexibility in how you handle things as an owner-occupant. Feel free to message me if want more help! Ton's of great info & material online for free.