Screening Tenants

40 Replies

Hi there,

I'm am brand new to the BiggerPockets site and love all the information here! Thank you so much! I have a few questions regarding tenant screenings...

1) Does anyone have suggestions on screening for "good" tenants? (I.e good questions to ask, rules of thumb, avoiding legal issues with questions you may want answers to, etc.)

2) Is there an application / screening template that someone would like to share or reference?

Thank you,
Carlo Santarelli

Look into your local landlord/tenant law which may have a handbook for the locality in which the rental property is located & fair housing laws

Regarding applications look at the top tab click Resources>file place, lots of templates/documents which you can download.

There is this article: http://www.biggerpockets.com/renewsblog/2013/01/27... which really helped me a lot. 

Plus there have been several discussions (some heated) here on BP, just do a search for "tenant screening" in the search bar in the upper right. It's good to hear the different opinions.

I used MySmartMove.com to do the background check and was very happy with it.

Good luck.

Hi @Carlo Santarelli , check out The Ultimate Guide to Screening Tenants here...

http://www.biggerpockets.com/renewsblog/2013/01/27/tenant-screening/

@Brandon Turner did an excellent job!

Welcome to BP @Carlo Santarelli  ! I'm sure will get a ton of varying answers on this.

I am a landlord and a realtor who assists people with rentals on a regular basis. I'm not sure if you will be using the services of a realtor or renting it on your own. If you do use a realtor they can help you with the screening process. They also will assist you with showings, negotiating and drawing up the lease. You asked about avoiding legal issues, that's what a good lease is for, to protect you! Either way you will still ultimately be responsible for choosing your tenants. My offices use National Tenant Network (NTN) to run credit and criminal background checks (we only have them run the criminal if they meet the credit criteria). They have a simple one page application we have the tenant fill out. We charge for the application to cover our costs from NTN. This tends to discourage some potential tenants that know they have criminal history and/or bad credit. NTN scores the tenant (0-100) for you based on the information they get back. I still advise all my landlord clients to judge for themselves. 

So learn how to read credit report and background check. Ask for pay stubs especially if they are salaried employees. Check out what they make and what kind of monthly payments they have on their credit report.  Definitely call and verify they are in fact employed. I always encourage my renters to save their cancelled rent checks and never pay in cash. If someone can show you a year or more of rent paid on time, I take that as a good indicator they pay their landlord first! Any way they can show a paper trail to prove they pay in full and on time is great! Sometimes their credit may even be a little dinged up. I just want to know as a landlord or the landlord's representative, that the rent is getting paid first!!! Personally think that is one of the best indicators. You can also check references but I don't think that is the most reliable.

It sounds like it's your first time as a landlord. It may not be such a bad idea to have a realtor assist you. Just make sure you ask questions about what you don't know and that they keep you in the loop as you move through the process. Yes, it will cost you a little money, but there is value in having the help of a professional. In real estate, mistakes are costly, there is no shame in paying someone to help you avoid them.  The next time around if you feel confident, then give it a shot by yourself.

Good luck!

One of the main things you want to find out is why someone is moving. Also, the timing of their move is important to. Someone who wants to move into a place tommorow is unlikely to be an ideal tenant. There are definitely exceptions, especially with the military where they may be in town viewing properties and want to lock one in for when they return with all their stuff in a week or so. Play it by ear and don't get greedy by just moving someone who is a toss up in.

No matter how much you screen a tenant, there is always room for error. The important thing checks criminal history, check income. Check evictions and credit are not a big deal.


Joe Gore

Yep, don't get hung up on a lower credit score, alot of American's have low credit scores. If they had higher scores, they might buy a house, so them having a low credit score works in your favor sometimes. Where it could be a problem is if they have three new cars and can't pay rent because they have three new cars at 7% interest.

You can always offset low credit scores with a higher security deposit (where legally allowed). Do look into evictions though. Bankruptcy means that they no longer have financial obligations and won't be able to get into debt as easily, so I'd say they're likely to pay you the rent. Also, factor in that it could take 2-3 days to get your screening back from any prior landlords/management companies. Factor in that screening time. All that I've dealt with wanted the form emailed or faxed to them with a copy of the application that the prospect signed saying they consent to you checking into their prior living places.

One questionnaire I sent to a prior landlord showed a tenant had several late payments and my last question on the form "Would you rent to this person again?" was left blank. He basically answered my question and played it safe from a legal perspective.

Wow! Thanks for all of the advice. There are lots of components to this topic and is a little overwhelming I must say. If the rent is $1,000/month how much should the tenant make to minimize my risk?

Do you think a minimum of $3,000/month renter income is too conservative or too risky?

Can I eliminate someone because I thought their car was a sloppy mess?

Can I eliminate smokers' applications legally?

What does a sloppy car have to do with paying rent?


Joe Gore

Hey @Joe Gore,

I wouldn't use that as a means to evaluate whether they can pay the rent on time; however, I do believe a sloppy trashed car could serve as an indicator as to how they live. 

Carlo

Originally posted by @Carlo Santarelli :

Wow! Thanks for all of the advice. There are lots of components to this topic and is a little overwhelming I must say. If the rent is $1,000/month how much should the tenant make to minimize my risk?

Do you think a minimum of $3,000/month renter income is too conservative or too risky?

Can I eliminate someone because I thought their car was a sloppy mess?

Can I eliminate smokers' applications legally?

 Many landlords require income to be 3x rent.  I look really hard at rental history. I want strong previous landlord references, and not just from the most recent landlord. Long tenancies are good.  Job stability is good. 2 earners in a household is good. Tenant screening is very important. Don't be afraid to go overboard on it.  A bad tenant not only can cost you a lot of time/money, but also make your experience miserable.  

Thank you @Jon Klaus  

I am hearing that a lot so I know it's important. I want to have selection criteria systems in place so I can eliminate bad  tenants. 

Effective screening begins by establishing good rental criteria. Put your criteria in writing. Also, put your screening questions in writing. Use the same questions with every inquiry, so you are treating all equally and fairly. Be careful not to ask questions that are against the law or can be considered to be illegally "steering" tenants. A housing discrimination lawsuit, whether well founded or not, is a bear. Protect yourself.

Be sure to learn about the protected classes and fair housing laws. Learn how to rent to people with qualified disabilities and how to make reasonable accommodations. Be aware of the people who try to sneak in a pet as a service animal, emotional support animal or companion animal pretending to have a qualified disability or pretending the animal is a qualified to provide a necessary function related to their disability. Tread carefully.

Yes, you can turn down an applicant because they are a smoker. Smokers are not a protected class. We do not rent to smokers and we let people know that upfront in our advertising. We do not allow smoking anywhere on our properties. We charge a $50 fee each time a person violates that rule; it's in our rental agreement and we enforce it. Smoking can cause significant property damage and is also a health risk we will not tolerate. Establish a clear "no smoking policy" and stick to it!

If you are interested, private message me and I will share with you our rental criteria and screening questions. The world of residential real estate investing and landlording can be profitable, fulfilling and exciting! Welcome to our world!

Marcia Maynard, Fischer Properties | Podcast Guest on Show #83

You have received a lot of good responses. I would ignore Joe Gores post, I doubt if he has any landlord experience. I learned a long time ago to play percentages and a prospects car is a factor for me. A prospect with a messy car will be the one most likely to leave a mess when they vacate. Of course I have had a few professional deadbeats drive up in a newer spic and span car, not theirs, or a recent purchase, soon to be followed by a repo man looking for them.

There are also many classes not protected that I wouldn't rent to, one was law students and lawyers. Boy did they like to get upset when I gave them he reason. But experience again said send them somewhere else. One lawyer who took a shot at suing me for discrimination had the the judge tell him you just proved the defendants case that lawyers are likely to sue over anything and are a pain in the *** and he doesn't want to deal with them. Can you explain to me where you even got the idea that you are a protected class?

@Brian P.,


I see you are new here so only bash someone when you have the facts. Brian it would help in people taking you seriously if you include a picture and a full name in your profile.


Joe Gore

@Joe Gore  The beauty of this site is that I'm able to get all of your unique perspectives and use that to make educated and informed decisions. 

Joe

I call them as I see them. And no landlord with plenty of experience would ignore a prospects car as a clue to the prospects situation and character. The car doesn't even need to be messy, It can be brand new and those new payments are going to reduce their ability to pay the rent on time,and the down payment reduced or eliminated their cushion money, etc. Ask me how I know..

My investing experience dates back to 1955 and I probably did more deals in that one year then you have done in your lifetime. So if I can save one new landlord a future problem with a tenant with one post I will. As a matter of fact why did you post such a statement, are you in fact a very young person who likes adopting a persona on sites like this?

@Brian P.,

You are right just carried on my 15 years as an apartment owner don't count among the uneducated new comers. Is there a reason you are hiding your profile on BP?


Joe Gore

Originally posted by @Joe Gore:
@Brian P.,

I see you are new here so only bash someone when you have the facts.

...

Joe, it's time for YOU to get your facts straight. Brian has been a BP member since 2009, while you have only been a member since 2013. How do I know? I checked the facts by visiting the user's profile and observing the detail there named "member since".

@Brian P. you might not have gotten tagged in that last post.

Carlo - I'm also new on here, and own one property that I'm renting out. All I can say is take all the advice here and screen your tenants thoroughly! Trust the numbers, facts and history and don't let emotion play a part in selecting a tenant. I learned this the hard way.

Chances are if they have jobs, good credit and no previous issues with rentals or foreclosures, they're going to be trustworthy. Sloppy car or not. ;) 

Best of luck!

@Carlo Santarelli there are already a ton of great responses on this so I'll just reiterate the need have a standard way of running applications and have that process documented. That way you and your staff (should you employ staff in the future) make sure to run every application for every prospective applicant the same way.

Medium logo1Joe Fairless, Best Real Estate Investing Advice Ever | http://www.apartmentsyndication.com | Podcast Guest on Show #227