How do you screen prospective tenants?
Real Estate Agent · Minneapolis, MN · Member since 2008 · 193 posts · 7 votes
I thought I would throw out a topic for discussion....Tell me about the process that you go through to screen tenants.
I do everything MikeOH does except for #3 and #6
I don't do 3 because I'm not sure of the process in my local yet. I will be researching this soon though.
I don't do 6 because anyone they put down on their app is going to paint a rosey picture for them.
Things I do in addition.
I scope out their car to see how well it's maintained and how clean it is inside. (does it look like a mcdonalds dumpster and have bald tires?)
I check their current landlord and also their previous one. The previous one is more important. When I call I always say:
"Hi, I'm calling in regards to Jane Doe. She is interested in renting an apartment from me and put your name down on the application. How do you know Jane?"
You can tell immediately if the person is a fake because they will be stumbling to figure out what role they are supposed to be playing (are they the friend, former landlord, employer)
Forgetting a form for them to fill out is sometimes good to, it gives you an excuse to go to their current apartment to knock on the door and peer inside to see how their housekeeping skills are. Better to see it in someone else's apt than in your own.
-Michael
CT,
If you can provide the plastic wrap, I think we're ready. We won't need a board, the scumbag tenants undoubtedly left one in the front yard!!!
Mike
Has a great list of local tenants. Most of the people who are on it are baddies, but some put their good ex-tenants on, so you have to ask. Local landlord groups are great for this sort of thing. But the tenant list cannot be in anyway a blacklist - good and bad people both have to be on it.
Regarding landlord references: I find it best to ask very specific questions. How long was the tenant in your unit? How often did they pay on time/late? Did the police ever come? Etc.
Credit check: my wife's cousin has a clever way of doing this. He tells the prospect he will do a credit check and waits for the reaction. If he gets an "oh, fine", that's usually okay. If the prospect starts hemming and hawing...
But I think credit is the least important check. Many good people have had their credit ruined through divorce or medical bills. As long as they know you are their second most important bill (after taxes, 'cause we can't jail them) because you can put them in the street, they will make paying a priority.
I have written criteria that I use to screen every applicant. Every applicant gets screened exactly the same with the same criteria (that is federal law)
On the first contact, I write down what they tell me and note any problems like screaming or barking or breakage in the background.
I give information about the property and my criteria and ask them to do a drive-by and then call for an appointment. Most won;t call back as soon as they learn I check references and credit. That saves me the time wasted by no-shows.
I show. I will accept an application from anyone and everyone. I never reject without a filled in application. There is always a written record of my legal reason to reject.
The very first thing I do is to compare what they have said in person to what they said over the phone and what they have written on the application. I find that the number of pets and the number of residents has a way of changing.
At the viewing I find out when they expect to move and whether or not they have all the move-in money.
Then I look up the owners of all addresses and do reverse directory on every phone number that the applicant has provided. Sometimes I have to look up a phone number for the real owner of the rental unit when applicants have lied about who their landlord is.
Then I go down the line and start making phone calls. I verify rental history, check references, check their employment. I don't usually call their personal references. I get those as a method to track my tenants down if they skip.
If all references check out OK, I run the credit report and criminal background check.
Normaly, I stop as soon as I find a legal reason to reject the applicant. I make a note of the reason for rejection and I am done.
Occassionally, I will continue the process, just for practice and amazement at the sort of lies that applicants tell.
My writtten criteria is quite thorough and I can legal reject people that experience has taught me are going to be trouble, based on the fact that they don't meet my written criteria.
One thing I've done is visit the applicant in their current place. It's like a visit to the Ghost of Christmas Future.
The other thing I advise -- especially in rougher areas -- is to be patient. The quality of applicants you get is likely to be in a sort of "bell curve." Wait it out until an applicant comes along that's well above average for the area.
It's false to generalize that either the tenants or the landlords are responsible for the condition of the properties. There are "bad apples" among both. But I do think a majority of slums are made that way by filthy tenants whose landlords tolerate them because the rent comes in, and have given up on repairing what the tenants trash.
All it took to see the light -- or rather, the filth blocking the light -- was one lot of tenants who came with a property I bought for less than a year's rent who destroyed every repair I made to the property. So what I did was slum hunt and find them a slumlord.
It was a match made in cockroach heaven: the slumlord got the rent from the state every month without having to lift a finger, the tenants got to live in the filth in which they were comfortable, and I got to fix the place up, put in clean tenants, refi it at a profit of over $15K after rehab and closing costs, and rent it at a positive cash flow until eventually selling it to a first-time buyer. It ended up win-win-win all around. And with that I developed an appreciation for the slumlord's place in the picture, funny as that may look.
Please Advise,
James
I used Real Chek America, Inc., based in Michigan. Dunno if they serve your area, but I was satisfied with their screening services. But I got one very bad bit of legal advice, so take any of the legal advice with a 2 ton mound of salt.
[[[[[[....How often do you guys get trouble(cost you money) tenants....]]]]]
Almost never, and then it is job loss or divorce that sends them over the edge.
It takes a lot of hard screening to keep the trouble-makers out. I reject at least 95% of the people who call me.
I am evicting about 1% of the tenants per month. However, that may be skewed on the high side because a lot of these tenants have been inherited tenants from buildings I bought. I'm guessing that I'm evicting a less than .5% (1/2 of a percent) of tenants I picked each month, but I haven't been keeping accurate data on that aspect yet.
Good Luck,
Mike
You had mentioned that you do a criminal check on line for free - may I ask where???? This is not restricted to Mike - but I'd like and/all sources - Thanks - Ken
:help:
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I don't care who did it. It is still the owners responsiblity to get it cleaned up and fixed before moving in another tenant. If you own a property next to me and leave your property in that condition it is your fault. It's your business to take care of, not your customers. They don't care how your property condition reflects on your business, because its your property and your business. If you have tenants trashing your property, it's your responsiblity to take care of the problem, not your neighbors or future tenants.
Good post TC.
Similar to police zero tolerance programs and other policies used to clean up whole neighborhoods. There needs to be a standard that people meet before decent people will want to live close by. Each landlord, tenant and even owner occupants can do their part. Some tenants do not want to participate. If they are contributing to the problem then the landlord can move them out. If someone is not part of the solution they are part of the problem.
Now some landlords use PMs and the PMs might not have the same standard as the landlord. Out of sight, out of mind. Other times the PM has a better standard than the landlord wants to fund. In those cases the PM needs to terminate the client.
Everyone has great advice! Although we would like to take things on a case by case basis, you must be very careful not to violate fair housing laws of your state. This could be a nightmare! Here is my process for EVERYONE.
Complete a rental app
Provide their last 4 paystubs (all working adults)
Run credit check (this for me verifies possible rto clients)
Criminal Background Checks
Landlord verifications for last 2 years(and addresses that show on credit report)
Sex Offender check(know one wants that kind of drama)
Plus phone interview.
Im just a stickler on tenants. I understand when looking at credit, that bad things happen to good people...I just want to make sure I do everything in my power that my investors are not the good people and the tenants I place are not the bad things....
Hi All.... check out my post in Landlord Horror Stories for 'our' solution in Oklahoma. Red
APPLICATION REQUIREMENTS
Applicant must be at least 18 years old or legally emancipated, or married to a person who is at least 18 years old or legally emancipated. All adults must fill out a separate application and pay a separate processing fee.
Credit: Applicant must have acceptable credit history. No history of 30 day late pays on rent, no more than one rent late pay per year, no bad credit, followed by bankruptcy, followed by more bad credit, no evictions, and no credit history will be considered to be negative credit history.
Occupancy: Our policy is 2 people per bedroom plus 1.
Income: Legal and verifiable applicant income must equal 2.5 times the monthly rental rate; at least one applicant must qualify for the income requirement. Debt to income ratio should demonstrate the ability to pay rent.
Rental History: Applicants must have a positive verifiable rental history for the previous four years. Lack of rental history will be considered negative rental history.
Co-signers: We do not accept co-signers for bad credit or insufficient income. This Property is not a Section 8 rental.
Pets: Pets must be negotiated in writing with an increase in the security deposit of $400.00 each for cats or dogs, $300.00 for each birdcage or cage. Aquariums greater than 12 gallons must be completely insured. Service dogs are not considered pets.
Smoking: No smoking in living areas.
Application Fees: Each application must include a fee to cover the costs of obtaining information, not to exceed 30 dollars per person. This is a flow through expense.
Criminal: We have a legal responsibility to prevent or stop behavior which may present a nuisance or danger to persons or property. Criminal convictions will be evaluated in compliance with this mandate.
Screening: Manager may research applicant history for income, expenses, credit, crime, employment, and evictions. The application may be denied for any of the following reasons: charge offs or bankruptcy, prior eviction or foreclosure, insufficient income, unfavorable references, incomplete or unverifiable application information, false application information, or dangerous behavior.
_____________________________________________________________
The "incomplete or unverifiable application information" is an ace in the hole...most prospective tenants who will be problematic lie on their applications....you just need to figure out where.
You should still be able to get credit reports, but you need to have your business inspected.
You should be able to go to the county website and find out if they have been a plaintiff or defendant in criminal or civil lawsuits.
The service gives a listing of credit, criminal, and rental history via the web in about 30 seconds.
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Scott
What service do you or any of the readers use to verify tenants background/public records? I need quick online tenant screening/verification resources.
[list]Tenant Network has an excellent reputation.
AMSTies is also good.
RentingYourHome (my company) also does them.[/list:u]
It's getting more difficult for individual landlords to run credit checks on tenants because as of October 2006 the regulations changed. You are now required to be individually screened with an on-site inspection at a fee of $60-$150 per site before being allowed to run credit. Many companies on the web still allow you run credit without the inspection, in violation of those regulations.
The three companies listed above are legitimate sources that comply with the regulations.
-Jeff
I screen them like everyone else does. I also give them a very "firm" talk about how I have a zero-tolerance policy for non-payment of rent. I want to make sure I scare off professional tenants.
Professional tenants is what I want. Professional freeloaders or scam artists are another story.
Maybe that was your implication?
This is the company i just started to use. No on site inspection but i did have to fax over proof ...deeds,insurance forms etc.
http://www.citicredit.net/tenant_screening.html?wcw=google
Do MikeOH's due diligence process. Use your gut instinct. This is only going to be effective if you get to know the person. I'm very friendly with them because I'm trying to get them to let me know what's going on in their lives. That said, if I approve them, I let them know that I need my money just like they need theirs, and if they don't pay, they don't stay. No excuses. This conversation is done before they move in, and after building rapport and due diligence.
You want to be nice, but let them know you're not a pushover
Thanks,
Stephen
I agree payment history, outstanding balance and income is important, but many of you feel credit score is not as important because renters usually don't have good credit, which is true. But in my opinion, credit score is important. If you win a judgement in court, it be hard to collect from someone with bad credit, cause they would careless, but with somone with good credit, they wouldn't want a judgement on their credit and would most likely pay.
My issue, for purposes of screening tenants, is that the credit score "number" is somewhat arbitrary. The algorithms used to determine the number are HIGHLY proprietary, so at best it's true value for our purpose is minimal.
It is the underlying FACTS contained within the credit report that ARE relevant and important...slow pays, collections, lost/stolen credit cards, returned checks, former addresses and names, dates that accounts were opened, etc. etc.
These are the pieces of the puzzle that you need to study to get a useful understanding of your prospects habits, truthfulness, stability, and, to large extent, their key financial ratios. Credit "scores" are affected by old bankruptcy's, medical bills, and other factors that are, in my opinion, NOT relevant WRT tenants. If you ONLY look at the score, you simply do not get a clear picture.
There was a period that I worked with a large company that established primary screening criteria based on the score alone, and I saw many good prospects turned down, and many prospects that were heading for financial problems actually land there as a result of NOT looking past the "score".
Peoples needs and motivations vary a great deal, and, while very broad generalities may be valid, it is not reasonable to assume that the criteria for buying a home, renting a home, buying a car, and obtaining a credit card can all be optimally based on the same three digit number.
I forgot to give you my process:
[list]1. I also listen to them on the phone. Is it "busy" in the background with yelling and screaming going on?
2. Do they arrive on time (I also notice their car, which does tell you a lot).
3. Who comes with them to the appointment? I get women calling and saying the apartment is just for them and their 2 kids and then 1 man and another woman also show up.
4. They must fill out an rental application and I charge them $25 to process the application (the service charges me $17).
5. The service gives a listing of credit, criminal, and rental history via the web in about 30 seconds.
6. Just like TC, I am not as concerned about the credit as I am about their income.
7. I then call their existing landlord and employment.
8. Also, I want to know and really understand why are they leaving their current apartment. When someone says that they need to move in immediately, I get very suspicious (think eviction or just laziness).
9. If they are on public assistance, I want to personally speak to their case worker to confirm this apartment will work for the tenant.
10. If they ask for any financial payment plans or other, I am very skeptical and will probably not rent to them.
[/list:u]
Scott
Great Plan! I think I am going to start doing this.
IO meet them personally and ask them most typical ask question:
where they work?
how many of them in the family?how much their net income a month? and so on...