BiggerPockets Founder · HI · Member since 2008 · 16k+ posts · 5k+ votes
We just completed one of the more important guides for landlords and I thought it important that we make it visible here on the forums. These are both MUST-READS!
Tenant Screening: The Ultimate Guide At over 5,000+ Words -- This Ultimate Guide to Tenant Screening (plus infographic) is the perfect reference tool for both novice and experienced landlords alike.
We also recommend everyone take time to check out:
For me, my rental application has a statement that says “lease will be terminated or application disqualified if any of the information was falsified on the this application”.
Then, one of the first questions I ask is when calling their previous or current landlord is: “so, how are you related to “John smith”? or whatever the applicants name is.
If they don’t disclose a relationship (had applicant list a friend as a previous landlord who they never even rented from) and you find out later it was a friend or a relative they deceivingly used as a “previous landlord” then I have a disclosure in the application to fall back on for not disclosing or falsifying information and can either terminate the lease or disqualify the applicant.
When it comes to screening prospective tenants for income, do folks rely on a service for this or simply by calling on the phone? I am about to begin screening tenants on my first place and was planning to use TransUnion's SmartMove service for background and credit checks, but was hoping there might be a one stop shop of sorts that would include income verification as well.
the best way of knowing income, is collecting pay stubs, and then calling the buSiness manager to verify (suggested to do research if the business is real, through GOOGLE)
Mandating **renter's insurance** is a must as well! I've been adding this as a rider to the lease for the last several years until REBNY updated the standard form leases last year after NY's HSTPA of 2019. Require a copy of the policy before releasing keys/doing the walkthrough.
Especially attached housing like we have in NYC - dense vertical housing poses high risk of damage to additional units/the building as a whole, whether fire & water damage, or even personal injury claims that may occur on your property. There are strict requirements here on withholding security deposit as well, so mandating liability of at least $100,000 (if not more depending on the value of the property) makes it much easier for your own insurance company to subrogate, should the need arise. I've heard of PI claims where a pizza delivery person got into an altercation with another tenant in the lobby of the building, and the suit tried to lead back to the tenant who ordered the pizza - but was protected by their renter's insurance policy.
The guide is very helpful. We build our rental website based on the comments from the guide and we are getting real success. Just have a look at Sandora. It is a one stop solution for both tenants and landlord. We have tried to make renting as easy as getting a ride share.
Great stuff. One of the biggest things that we do is to verify the references for rental history are actually the owner of the house or the manager of the property.
Also, understand the city/county/state you're investing in. Recently Minneapolis passed a law that you cannot deny someone that has criminal history over 3 years old and felonies over 7 years. All kinds of other stuff are in there as well.
You both have greatly improved what it's like to be a landlord through all the information you provide and all the great podcasts for Buy and Hold Investors. My personal favorite regarding this topic was Marica Marynard's "landlording with Integrity". Most of what I currently do is from that podcast but I want to add a couple of gold nuggets to this forum that I've gained from others.
1. So you've completed the phone screen and you like the tenant and they want to see your apartment on Saturday at 10 am, for example. This is exactly what I say "How far do you currently live from the apartment?.....15 minutes, Great! then at 9:45, you will text me that you are coming and I'll meet you there. If you don't text me I'll assume your schedule has changed and I won't be there, is that ok?"
By doing this you prevent no shows which I haven't had since instituting this process but more importantly, you ask your tenants to do something and when they do it, they are more likely to also pay the rent each month. Those who don't text I'll never rent too as this is now part of my interview/tenant screening process.
2. A toy soldier clause in my lease. When the lease is signed and you have the deposit in hand, the last thing you do is an apartment condition walk-thru. While in the bathroom I'll flush the toilet and have the next tenant initial next to my "toy soldier" clause in my lease which stipulates that the tenant acknowledges the toilet is fully functioning and if they put something down it, which plugs it up (ie. feminine products, kids toys or whatever) that is on them, but if the toilet is broken, please call me and I'll hire a plumber to fix. However, if the plumber finds it's caused by the tenant, then they will pay. While you are at it, point at a light bulb and ask your tenant who replaces them when they burn out? You will get two answers and both will save you time. Answer 1 is the tenant will say they will do it, Answer 2 is they'll ask you to provide light bulbs which you will happily do." Both answers will save you time so do this too.
Since implementing this process into my tenant screening/education I haven't had one late night "plugged up toilet" or "my light bulb is out" call in over 6 years.
Words that I currently live by as a landlord "at a minimum, 80% if not more of anything a landlord will ever complain about is their fault so if they handle their real estate like a business, not a hobby then it can be an amazing way to build wealth for you and your family".
The guide is great and helpful! Regarding to ask the employment reference about how much the applicant earned, thought this was sensitive information that the person might not know or not appropriate to share. How did you usually ask the questions?
This is a great timely topic. Just from personal experience evictions and Landlord Tenant law is not a DYI thing, unless you are really well versed in your local laws and have the time dedicated to learn the nuances. Even when you think you know, you do not know what you do not know. If anything confer with a lawyer just to make 100% sure you are on the right track. Knowing your tenants and having a process is key. Thanks for making the guide available.
So something I've recently added to my tenant screening/information collection is getting the make, model, plate, and VIN of my tenant's automobile. Did you know you can lien a car title? Not something I prefer to do but when you are left with a mess that exceeds the deposit, sometimes desperate times cause for desperate measures. Anyhoo, hope this helps the group, Cheers, Garth
I have a question on this concerning the 3X income vs rent. What happens if the income is low but it is a high net worth individual? Like someone recently divorced or someone recently retired or working part time? But they have a lot of money in their checking / savings / retirement account? So let's say someone is working part time but have $100K + in their checking and savings account? This person has an income only 1.2-1.5X vs rent though but willing to draw money from savings / checking, etc. Would you take a chance on this type of individual?
Is it illegal to ask for their last 12 months of bank statements (how much they have in their checking, savings, and retirement accounts)? Because when you refinance or apply for a loan, the banks will also require of this from you. This would determine if they are a high-net worth individual and can pay the rent without satisfying the income requirements. Let me know your thoughts on this matter.
I hear that you can no longer just deny any one with a felony now. You must screen every tenant with a felony and it must be on a case by case basis. I hear that the only people you can deny are people who would put your tenants, yourself, or your property at risk based off of what they have done. I was at an apartment association meeting when we were informed that was going to be a new rule for the EHO. I haven't had to worry about it since because i haven't had to do tenant screening since. Anyone hear anything about this?
I have a question on this concerning the 3X income vs rent. What happens if the income is low but it is a high net worth individual? Like someone recently divorced or someone recently retired or working part time? But they have a lot of money in their checking / savings / retirement account? So let's say someone is working part time but have $100K + in their checking and savings account? This person has an income only 1.2-1.5X vs rent though but willing to draw money from savings / checking, etc. Would you take a chance on this type of individual?
Is it illegal to ask for their last 12 months of bank statements (how much they have in their checking, savings, and retirement accounts)? Because when you refinance or apply for a loan, the banks will also require of this from you. This would determine if they are a high-net worth individual and can pay the rent without satisfying the income requirements. Let me know your thoughts on this matter.
So i have a buddy who had a similar situation where he had a women who was getting out of a divorce and her credit was terrible (something about the husband maxing out credit cards and taking out tons of loans in her name prior to divorce) but she had enough to pay for the entire year in cash. He ended up changing his screening criteria (so this does carry forward for that property from now on) and it would have a clause that if you had a lower credit, it would mean X amount of months in advance, with an increased security deposit of X times. The woman has been amazing so far, and that year had past and she is still there, but that's what he did.
Whatever you do, just keep in mind that you might have to carry that new standard you have moving forward on that property. Idk how you would be able to put a clause in there about net worth, but if they have funds available like you're discribbing, then it could be something of the same? Again, this is just what my buddy did not guidance.