First time being a landlord, rate my process

First time being a landlord, rate my process

Addison, IL · Member since 2016 · 35 posts · 12 votes

Good morning all,

I believe I’m finally ready to list my first property today which is a townhouse located in Hoffman Estates, IL (Cook County). I’ll be using Cozy to help me out. I’ve been doing some research using these forums about the proper steps to take and was hoping to have a second pair of eyes on it. I have a lease that is extensive and I’m comfortable with that a kind BP member passed along, I have the accompanying documents such as lead and radon disclosures, I have great photos I took with good lighting, etc. Below are the next steps I believe I have to take, but please feel free to pick it apart or throw in advice. 

1) List the property using Cozy. In the description I’ll be sure to mention my qualification criteria in order to protect myself (650 credit score or higher, no prior evictions, 3x rent income, clean criminal background, good landlord reviews)

2) I’ll pre-screen any interested parties to make sure they qualify as I’ll just assume they did not read the full property description. Why are you moving? When’s your ideal move in date? What’s your credit score? What’s your income? How long have you been at that job? How many people will be living here? How many cars do you own? Any criminal background? How’d you find the property? Etc.

3) If the pre-screening goes well, I’ll invite all interested parties to an open house to come tour the property and ask questions.

4) Have all remaining interested and qualified parties fill out the rental application on Cozy.

5) Review applications in the order they were received and do my due diligence as in calling and verifying employment, calling previous landlords, seeing if I can find them on social media, etc.

6) If application and due diligence checks out, I’ll send over the invitation via Cozy for the tenant to pay for their own credit and background check and send that over to me. I’ll only do this one application at a time in order to save people money.

7) I’ll review the credit and background reports carefully and make sure I understand the full picture. I’m still looking for a tenant scoring system to use, if anyone has one they use that they’d be willing to pass along I’d be very grateful.

8) if the tenant does not pass the credit/background check, I’ll be sure to mail them a letter saying why they did not qualify pointing back to my initial qualification criteria.

9) If the tenant does pass the credit/background check, I’ll inform them they’ve been approved and begin the process of getting the lease signed, documenting the condition of the property,  collecting the security deposit.

10) Tenant will need to have paid the security deposit and 1st months rent and also show proof that utilities are in their name prior to handing over the keys.

I fully intend to not bend on my qualification criteria at all. I’ve read a lot of forum posts about sob stories given about why they have a lower credit score or asking if they can be flexible. These usually are red flags.

Thanks for taking the time to read this. I look forward to hearing your advice!

-Chris 

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Real Estate Agent · Nampa, ID · Member since 2017 · 439 posts · 361 votes
6y

I also require to show proof of rental insurance before handing over keys. 

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  • Rental Property Investor · Member since 2020 · 1k+ posts · 1k+ votes
    6y

    I'd say everything looks good but keep in mind that I am not familiar with the laws with Cook County but have heard on other posts that they are very specific so #1 should be learn the laws where you are renting, hopefully this was done before the purchase.  This has also caused some debate on another post but I would also switch 6&7 assuming that in Cook county you are not required to rent to the first qualified renter, if you do disregard.  I like to have a couple applications so I can select the best one and then really dive in on my due diligence, sure the first person may fit your qualifications but the 2nd may fit them plus some and I'm always looking to get the best candidate not just the one that meets my minimum qualifications.  That isn't to say I don't pre-qualify and try to weed out those that there is no chance since that isn't fair but usually I get several and filter it from there.  Again this may be specific for your area but I think most would advise against #8 I just send a simple text thanking them for their interest and saying that went with another applicant.  Less is more and the more you say the more can be used against you. 

  • Addison, IL · Member since 2016 · 35 posts · 12 votes
    6y

    @Adam Martin thank you for your notes. Appreciate it!

  • Real Estate Agent · Nampa, ID · Member since 2017 · 439 posts · 361 votes
    6y

    I also require to show proof of rental insurance before handing over keys. 

  • Addison, IL · Member since 2016 · 35 posts · 12 votes
    6y

    @Sarah Brown at what point of the process do you let the tenants/applicants know you’ll require rental insurance? Have you found it turns off some people? Just curious.

  • Real Estate Agent · Nampa, ID · Member since 2017 · 439 posts · 361 votes
    6y

    @Christopher V. if it turns them off, then I don't want them :)  That is there for their protection and mine.  If they can't afford the $10-$12/mo, how are they going to afford to care for the property?  Renters insurance is a pretty standard requirement here, so I inform them when I send them the acceptance email.  

  • Addison, IL · Member since 2016 · 35 posts · 12 votes
    6y

    @Sarah Brown makes sense to me. Thanks for the advice! Is the rental insurance language included in your rental lease agreement? If so, I’ll make sure to add it to mine.

  • Real Estate Agent · Nampa, ID · Member since 2017 · 439 posts · 361 votes
    6y

    @Christopher V. Yes it is.  I had trouble enforcing it once people got keys, which is why I changed my policy to show proof to receive keys.  It's not an offense you can evict on. 

  • Bjorn AhlbladPro Member
    Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
    6y

    @Christopher V. Really good job putting that process down and good advice as well. I have two innocuous questions I always ask: 'how many people' and 'how many animals'. Good process and don't deviate, screening is probably the most important thing we do; right up there with underwriting. All the best!

  • Addison, IL · Member since 2016 · 35 posts · 12 votes
    6y

    @Bjorn Ahlblad thanks for your notes on those additional questions, I'll definitely include those in my list. Appreciate it! 

  • Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
    6y

    Main thing is make sure you're meeting local rules - In Portland, you can't turn down someone just because they make 2x the rent or a felony record.

    Otherwise, you're asking the right questions, primary being credit record (until the cities stop allowing that :(

  • Real Estate Agent · Addison, IL · Member since 2015 · 185 posts · 88 votes
    6y

    Looks good so far. To help prescreening I would recommend google forms. That’ll save you a lot of time on the phone/emails asking all your prequalification questions

  • Member since 2020 · 404 posts · 235 votes
    6y
    Originally posted by @Sarah Brown:

    @Christopher V. if it turns them off, then I don't want them :)  That is there for their protection and mine.  If they can't afford the $10-$12/mo, how are they going to afford to care for the property?  Renters insurance is a pretty standard requirement here, so I inform them when I send them the acceptance email.  

     I never had a renter get renters insurance before. What is that? In california we just get rental property insurance on the entire property that covers the dwelling and can also cover loss rent if the tenant has to move out if a claim is filed and approved. Its typically cheaper than primary home insurance because it does not cover anything inside like home like furniture jewlery and such. 

  • Investor · South Bend, IN · Member since 2018 · 111 posts · 57 votes
    6y

    @Christopher V. Are you following any specific rules related to screening a tenant prior to doing a background/criminal check? I heard talks about a new law in Chicago so that people can’t disqualify applicants just based on a criminal history.

    Also - thanks for putting this together! I’ll be doing the same thing in a few weeks.

  • Calvin OzanickBusiness Member
    Property Manager · Janesville, WI · Member since 2017 · 708 posts · 297 votes
    6y

    I like all of this. I would say documenting rental insurance as well as documenting the utility proof is a big one. Those are things that often get slipped up on and could come back to bite you if you are not careful. Best of luck with your rental and let me know if you ever have any interest in Wisconsin as I am right on the border here!

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  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    6y

    I would not spend one minute reviewing an application without the credit report. I look at the credit report first and only call references is the credit report is good. As far as worrying about wasting their money, having people pay an application fee is a front line screening effort. If someone isn't willing to drop $40 per applicant, don't waste your time on them. An application is not complete until the credit report is there.

    I also recommend that you read a book such as The Book on Managing Rental Properties by Turner and Turner. You can read up for months on BP, but a book tells you things you didn't even know you needed to know.

    Make sure you understand local laws for rental properties (state, county, city). Does the property need to be registered with the county? Does the county offer fair housing training? Many offer this for free and every landlord should go through this training. Download any state or county or city landlord / tenant guides. Most first time landlords fail to get educated on local laws and end up violating them as a result.

    Have your acceptance process figured out ahead of time. Are you accepting first qualified or are you waiting a certain time period to accept best qualified? Some landlords take applications from several people before accepting one. I would only recommend doing that if the applicant knows that is the process. If first qualified is your process, then the first one who meets your criteria gets approved. That is what I prefer, because I believe it appears the most fair.

    Have an approval letter with deposit to hold requirements spelled out. You want some money to hold the unit and there needs to be a deadline to provide that. Like 48 hours for example (you have to give them some time to get it to you). During that time period, the property is held for them. 

    Only accept cash, money order or cashiers check for deposit and first months rent. Scammers have been known to write a bad check, which doesn't bounce until after they move in. This is how scammers can live rent free for several months.

    I may have missed it, but what is your pet policy? I didn't see that as a pre-screening question, "How many animals do you have?" Are you prepared for how to respond when someone tells you they have four pit bull that are service animals? One of the most common discussions in rental properties is regarding animals, so be ready.

    I will warn you ahead of time. Sometimes a property doesn't rent right away. Everyone says they are interested but nobody applies. There is two things to remind yourself in that situation:

    1. It takes time. I have had properties sit two weeks with no applications, then get three on the same day.

    2. Having a vacant unit is better than renting to a bad tenant.

  • Property Manager · Newport Beach · Member since 2020 · 2 posts · 2 votes
    6y

    Hi Chris!

    You’re off to an excellent start! Here are my thoughts on your process:

    1.  I verify income is 2.5x the rental amount, but I also ask for 3 months of bank statements to make sure there’s no funny business going on indicative of living paycheck-to-paycheck. (ex. Payday loans) I really like the questions you’re asking the previous landlords – you’ll learn a lot about your prospective tenants from this phone call.
    2.  In addition to your questions, I pre-qualify prospective tenants based on income and the ability to move within 30 days – I need those two criteria met at a minimum to permit a private showing of the property.
    3.  Solid.
    4.  If Cozy is your only option – Cozy it is.
    5. To reduce vacancy give priority to the prospective applicants that can move in soonest.
    6.  Thoughtful.
    7.  You’ve determined some solid quantitative benchmark’s to use – FICO over 650, earnings in excess of 3x the rent, clean criminal/background report, and a solid recommendation from their prior landlord.
    8.  ‘Letter of Adverse Decision’
    9.  Fantastic – when performing the property move-in inspection take more pictures than you need. Document everything.
    10.  You’re well on your way!
  • Paducah, KY · Member since 2016 · 75 posts · 45 votes
    6y

    @Christopher V. Thank you for posting this. As someone who has done this for ten years- I can’t tell you how ahead of the game you are. I didn’t have this great resource when I started. I have a great business partner who took the time to teach me, and together we’ve made plenty of mistakes but also learned a ton. You won’t get it all right, but never stop learning. You posted some great reminders that veterans sometimes get going too fast and forget to do. Good luck!

  • Addison, IL · Member since 2016 · 35 posts · 12 votes
    6y

    @Alex Ferraro I’m not using any specific rules in regards to prescreening. I’m trying to have it be a causal conversation to draw out the information I need. If they push back on giving info I welcome them to apply anyways knowing that 9/10 times they’ll just move on.

  • Addison, IL · Member since 2016 · 35 posts · 12 votes
    6y

    @Joe Splitrock fantastic advice, I really appreciate your insight! First question, do you typically do open houses or private showings of the property before having people apply? This is the part that’s got me a little tripped up. I feel like it’s fair for me to give them a tour before asking them to spend $40, but at the same time, I don’t want people touring my property that aren’t qualified. You never know someone’s intentions.

    Thanks for the book recommendation, I’ll definitely check it out.

    Good points on the local laws, to my knowledge, I’m only required to register the property with my village. Also, thanks for the reminder to make sure I have my acceptance process built out. I don’t have that completely locked down yet. If you have a word doc for your acceptance you’d be willing to share I’d really  appreciate that.

    Second question, are there any specific marketing tactics that have worked best for you? Any particular listing sites?

    Thank you!


  • Addison, IL · Member since 2016 · 35 posts · 12 votes
    6y

    @Account Closed thank you very much for taking the time to touch on all my points. I have a couple follow up questions.

    1) At what point of the process do you ask for 3 months of bank statements? During the prescreen or after the application and credit/background check? If it’s during prescreen, do you let people know ahead of time anywhere that you’ll be asking for this?

    2) Do you have any recommendations that make the process easy outside of Cozy? I’m all ears.

    3) Do you email or mail the letter of adverse decision?

    Thank you!


  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    6y

    Wow. If I could, I'd give you an F minus for your process. I don't even know where to start.

    😂 OK, I am midnight joking here. That's a pretty good list. Mostly what I would say is don't think too hard. You want to cover your bases but this is a process and you are going to learn what works for *you*, which may not necessarily be what works for everyone else. As an example, we recommend renter's insurance but don't bother with it if the renters don't get it, because we are not going to evict anyone for not having it and it's a 30 second phone call for a renter to cancel it right after they move in. We don't go through the massive pre-screener route, because we batch our showings such that someone is there showing the property to others anyway so you're not wasting big time going out there to show the property. We use an electronic "pre-application" that's free that we use to pre-screen anyone that's interested before we require the paid credit & background check application, that the renter pays for. We don't accept credit reports that are not generated by our actions. ETC.

    Main things:

    1. Trust your gut. If someone sounds like a pain in the *** in the beginning they are going to be double that once they have your place;

    2. Don't hand over keys until deposit + rent has cleared and utilities are verified. We call to verify they have been turned over or scheduled to be turned over.

    3. Make sure you have a good lease from the get-go. That will save you a lot of heartache. Think it through ahead of time how you want to deal with pets, smokers, satellite dishes, pest control, small repairs, large repairs, early termination, lawn care, ETC. 

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  • Addison, IL · Member since 2016 · 35 posts · 12 votes
    6y

    @Mason DeJarnett thanks for the words of encouragement!

  • Crystal SmithPro Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
    6y
    Originally posted by @Christopher V.:

    Good morning all,

    I believe I’m finally ready to list my first property today which is a townhouse located in Hoffman Estates, IL (Cook County). I’ll be using Cozy to help me out. I’ve been doing some research using these forums about the proper steps to take and was hoping to have a second pair of eyes on it. I have a lease that is extensive and I’m comfortable with that a kind BP member passed along, I have the accompanying documents such as lead and radon disclosures, I have great photos I took with good lighting, etc. Below are the next steps I believe I have to take, but please feel free to pick it apart or throw in advice. 

    1) List the property using Cozy. In the description I’ll be sure to mention my qualification criteria in order to protect myself (650 credit score or higher, no prior evictions, 3x rent income, clean criminal background, good landlord reviews)

    2) I’ll pre-screen any interested parties to make sure they qualify as I’ll just assume they did not read the full property description. Why are you moving? When’s your ideal move in date? What’s your credit score? What’s your income? How long have you been at that job? How many people will be living here? How many cars do you own? Any criminal background? How’d you find the property? Etc.

    3) If the pre-screening goes well, I’ll invite all interested parties to an open house to come tour the property and ask questions.

    4) Have all remaining interested and qualified parties fill out the rental application on Cozy.

    5) Review applications in the order they were received and do my due diligence as in calling and verifying employment, calling previous landlords, seeing if I can find them on social media, etc.

    6) If application and due diligence checks out, I’ll send over the invitation via Cozy for the tenant to pay for their own credit and background check and send that over to me. I’ll only do this one application at a time in order to save people money.

    7) I’ll review the credit and background reports carefully and make sure I understand the full picture. I’m still looking for a tenant scoring system to use, if anyone has one they use that they’d be willing to pass along I’d be very grateful.

    8) if the tenant does not pass the credit/background check, I’ll be sure to mail them a letter saying why they did not qualify pointing back to my initial qualification criteria.

    9) If the tenant does pass the credit/background check, I’ll inform them they’ve been approved and begin the process of getting the lease signed, documenting the condition of the property,  collecting the security deposit.

    10) Tenant will need to have paid the security deposit and 1st months rent and also show proof that utilities are in their name prior to handing over the keys.

    I fully intend to not bend on my qualification criteria at all. I’ve read a lot of forum posts about sob stories given about why they have a lower credit score or asking if they can be flexible. These usually are red flags.

    Thanks for taking the time to read this. I look forward to hearing your advice!

    -Chris 

    There are some new laws in Illinois regarding criminal background check. Make sure you're familiar with the law.  Here's a link Just Housing Ordanance

  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    6y
    Originally posted by @Christopher V.:

    @Joe Splitrock fantastic advice, I really appreciate your insight! First question, do you typically do open houses or private showings of the property before having people apply? This is the part that’s got me a little tripped up. I feel like it’s fair for me to give them a tour before asking them to spend $40, but at the same time, I don’t want people touring my property that aren’t qualified. You never know someone’s intentions.

    Thanks for the book recommendation, I’ll definitely check it out.

    Good points on the local laws, to my knowledge, I’m only required to register the property with my village. Also, thanks for the reminder to make sure I have my acceptance process built out. I don’t have that completely locked down yet. If you have a word doc for your acceptance you’d be willing to share I’d really  appreciate that.

    Second question, are there any specific marketing tactics that have worked best for you? Any particular listing sites?

    Thank you!


     I would never let someone apply before giving them a tour if I only had one property to show. If you are a property manager with many properties, then yes have them apply before showing properties. The point is you are doing pre-screening so they are telling you they meet the approval guidelines. Obviously you need to verify all that, but for showing purposes their word should be good enough. I do individual showings, because after my pre-screening there are not that many people to look at the property. I like having one-on-one interaction with people. In an open house it can feel impersonal and you may not get a chance to talk to them. However, an open house may be a better option if there are lots of people qualified, because it saves time. Given the current COVID situation, I would not do an open house.

    The acceptance process is important, because you can lose applicants after the application approval if you don't have a tight process.

  • Real Estate Agent · Nampa, ID · Member since 2017 · 439 posts · 361 votes
    6y
    Originally posted by @David P.:

     I never had a renter get renters insurance before. What is that? In california we just get rental property insurance on the entire property that covers the dwelling and can also cover loss rent if the tenant has to move out if a claim is filed and approved. Its typically cheaper than primary home insurance because it does not cover anything inside like home like furniture jewlery and such. 

    The renters insurance covers the renters property.  So if you have a fire at the house, and it destroys all their stuff, then their insurance policy will kick in to compensate them for that stuff.  Some also cover damage from their neglect, but that just depends on the policy. It could also cover if one of their friends gets hurt on the property up to a certain amount of damage, if their dog bit someone, etc.  It's super cheap, like $12/mo.  I would recommend calling your insurance agent and discussing it with them. 

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