Avoiding Bad Tenants

[David Vaughn]

I am new to Bigger Pockets but not to real estate. I have been in the buy hold game for over 20 years. I can honestly say I have made about every mistake humanly possible in real estate but I have always been good at screening my tenants and managing my properties. IF you can become skilled at these two aspects you can afford a bit more mistakes on the other. If you do not become skilled at these two aspects no matter how well you handle the other it will not work. Just my opinion. 

It is my personal belief that you can do the scientific side of tenant screening but there is still an art to it as well. Maybe some other buy hold guys can chime in and we can discuss and learn from one another. 

[Steve Tom]

I completely agree. I just started doing this myself without a realtor. Boy, I am getting all kind of applications, but many either are totally no qualified, or did not even read the listing and just blindly applied. 

I am slowly learning what to look for and what to ask potential tenants. 

Of course, in the mean time wife is wanting to lease the property out ASAP. But finding quality tenants and leasing a property out in a short time can hardly mixed.

[Steven Foster Wilson]

Quote from @David Vaughn:

I am new to Bigger Pockets but not to real estate. I have been in the buy hold game for over 20 years. I can honestly say I have made about every mistake humanly possible in real estate but I have always been good at screening my tenants and managing my properties. IF you can become skilled at these two aspects you can afford a bit more mistakes on the other. If you do not become skilled at these two aspects no matter how well you handle the other it will not work. Just my opinion. 

It is my personal belief that you can do the scientific side of tenant screening but there is still an art to it as well. Maybe some other buy hold guys can chime in and we can discuss and learn from one another. 

 I agree! I have turned my properties over to a PM company because I wanted to grow my team as well as I have too soft of a heart. When I hear the sad stories, I can be a sucker and give in. I think it is important to stick to your rules and not make exceptions. 

[David Vaughn]

I prefer to self manage over a property manager. Most definitely do NOT under and circumstances sacrifice instant rental to someone who doesn't meet your minimum standards to satisfy your wife. I can assure you she will not be satisfied when you are in eviction court and repairing damages. IT's worth to to be selective. I struggled with most of the same issues as everyone else when I first got into real estate. Tenants can lie, mislead, screw you over and walk away blameless because they have no investment in the deal. That is why I developed my site for us to exchange the worst of the worst tenants. www.undergroundlandlord.com . It is where we connect to one another via tenants information and gets us in touch with the landlords they didn't put on the application

[Erin Dreher]

I have a soft heart also and turned over the management of our rental property to the company I work for. I made the mistake of renting it to someone that I thought I was "helping out". At least I know our company goes through a serious process to screen them and then will back the tenant placement. 

Mistake learned! 

[Randy Gutierrez]

I agree that tenant screening is probably one of the most important aspects of real estate and there is definitely an art to it. A tenant can make or break your investment within a property. Good tenants will seldom reach out to you and most issues, typically nuisances, they will just fix on their own. In a portfolio you can have just one bad tenant that is responsible for 90% of the issues within your portfolio.

[Randy Gutierrez]

Quote from @Steve Tom:

I completely agree. I just started doing this myself without a realtor. Boy, I am getting all kind of applications, but many either are totally no qualified, or did not even read the listing and just blindly applied. 

I am slowly learning what to look for and what to ask potential tenants. 

Of course, in the mean time wife is wanting to lease the property out ASAP. But finding quality tenants and leasing a property out in a short time can hardly mixed.

I typically do a pre-screening and not make the application link publicly available, you will get bombarded with bad applications. Sites such as Zillow allow prospective tenants to apply as much as they want within a 30 day period for a fixed price, so they essentially have nothing to lose by applying limitlessly. I let them reach out via message and ask them directly if they meet requirement x, y, and z- this is usually just a copy and paste. If they do I then send them a link to apply. This will help you hone in on potential good applicants and cuts down the bad ones significantly. You will sort through less useless applications which in turn saves you time and makes your screening more efficient.

[David Vaughn]

Quote from @Randy Gutierrez:

I agree that tenant screening is probably one of the most important aspects of real estate and there is definitely an art to it. A tenant can make or break your investment within a property. Good tenants will seldom reach out to you and most issues, typically nuisances, they will just fix on their own. In a portfolio you can have just one bad tenant that is responsible for 90% of the issues within your portfolio.

 You are so correct on this. That one tenant can make it where you don't want to continue but we must push on. I prefer to self manage even with the aggravation 

[Howard Spector]

@Steve Tom hello, I am currently in the process of purchasing my first Multi Famiky property. Where do you list your properties to find renters? I was thinking Zillow and Facebook but wanted to confirm. Thank you!

[Steve Tom]

@Howard Spector I use Zillow and Avail. I added Avail because it also has connection to apartments.com. 

[Howard Spector]

@Steve Tom awesome, thank you very much!

[David Vaughn]

Quote from @Erin Dreher:

I have a soft heart also and turned over the management of our rental property to the company I work for. I made the mistake of renting it to someone that I thought I was "helping out". At least I know our company goes through a serious process to screen them and then will back the tenant placement. 

Mistake learned! 

 We have all been there and honestly the key to being a successful landlord is not a hard heart. It is being fair minded. You just have to remember to be fair to yourself also. I do hope at some point you do your hand at management again. I am not a fan of turning my properties over to someone else to manage for me. 

[David Vaughn]

Quote from @Howard Spector:

@Steve Tom hello, I am currently in the process of purchasing my first Multi Famiky property. Where do you list your properties to find renters? I was thinking Zillow and Facebook but wanted to confirm. Thank you!

 Congrats on the multi-family sir. Good luck with it. They can be a cash cow or a night mare. I wish you well and let's pray for the first. 

[Aaron Gordy]

@David Vaughn 
"We have all been there and honestly the key to being a successful landlord is not a hard heart. It is being fair minded. You just have to remember to be fair to yourself also." You are absolutely correct. Being a successful landlord doesn't require "a hard heart. It's being fair minded". That is the truth.  I realized that I wasn't being fair to myself. The highest and best use of my time was not managing my own properties. Once I realized that I had to be fair to myself I changed it up quickly and haven't looked back. The key is finding a good fair property manager that has the same ethics. 

[Tracy Streich]

@David Vaughn  I would argue that saying tenant screening as an art is an open invitation to a Fair Housing Violation.    Tenant screening should be very black and white with no creativity.    You need to decide what your screening criteria will be.   What credit score, income ratio, eviction history etc.   Then you apply that every time.   There is no thinking involved.  No crap like well their car was super dirty or super clean, how they dressed or if their shoes were shined.   If they meet the criteria.. Approve... if not Deny and move to the next app. 

[David Vaughn]

Quote from @Tracy Streich:

@David Vaughn  I would argue that saying tenant screening as an art is an open invitation to a Fair Housing Violation.    Tenant screening should be very black and white with no creativity.    You need to decide what your screening criteria will be.   What credit score, income ratio, eviction history etc.   Then you apply that every time.   There is no thinking involved.  No crap like well their car was super dirty or super clean, how they dressed or if their shoes were shined.   If they meet the criteria.. Approve... if not Deny and move to the next app. 

 The numbers are always the science. I don't know if we can base a decision on car cleanliness or clothing that may be debatable. I know we cannot discarnate due to race, gender, disability, nationality and religion. 

Below is a direct quote of what the fair housing act covers:

Fair Housing Act

The Fair Housing Act, 42 U.S.C. 3601 et seq., prohibits discrimination by direct providers of housing, such as landlords and real estate companies as well as other entities, such as municipalities, banks or other lending institutions and homeowners insurance companies whose discriminatory practices make housing unavailable to persons because of:

• familial status, or
• disability.

If it were simply a science then EVERY landlord and property manager would be successful. The numbers in this business prove that is not the case. Even by those following the exact criteria you define. This means there is obviously more to tenant selection than simply interpreting the information. I currently have an extremely strong collection percentage on tenants I have placed in my homes including through covid. In my opinion the "art" is the interpretation of the information given and even at times the information not given. For example. When I receive an application from someone who may be "qualified" by my minimum credit score. This tenant may even have the verifiable income to afford my property. However upon reviewing the application there are holes in employment. Sometimes a week, sometimes a month and lots of changes of employment. Of course I can have a minimum requirement on how long on the current job and maybe this particular person meets that but still the sporadic employment prior to the current job can be an indicator of someone with limited stability. 

In cases where I have multiple qualified tenants for the same property not only do I have the right to make a choice on whom is most qualified I have a responsibility to do so. Again I agree with everything the Fair Housing Act states and was designed to protect. I do agree with you that how someone is dressed and how their car looks is not a great indicator. Some of my better tenants still do not dress well. 

[David Vaughn]

Quote from @Aaron Gordy:

@David Vaughn 
"We have all been there and honestly the key to being a successful landlord is not a hard heart. It is being fair minded. You just have to remember to be fair to yourself also." You are absolutely correct. Being a successful landlord doesn't require "a hard heart. It's being fair minded". That is the truth.  I realized that I wasn't being fair to myself. The highest and best use of my time was not managing my own properties. Once I realized that I had to be fair to myself I changed it up quickly and haven't looked back. The key is finding a good fair property manager that has the same ethics. 

My problem is finding the property manager with ethics. I am also a licensed GC here in NC where I invest and have worked doing repairs for many of them. I have personally seen them overcharge their owners they manage homes for from what the bills were. Correct me if I am wrong but they typically get first months rent for finding a qualified tenant and then anywhere from 10 to 20 percent of monthly rent for managing them. Now we add capping on another 15% to the contractors charge for fixing problem? When I look at that first months rent, the monthly percentage, and being overcharged for repair work, thats a lot of money I can use to invest in other properties or upgrade my current ones. 

I believe that in most cases when looking at a property manager i now have 2 people to watch my backside from, my tenants and my property manager. I am sure there are great managers out there and I don't fault anyone for going that route but it has never been a good route for me. 

[Dale Johanssen]

A) All the background checks are useless unless the queries comes back with a picture. I can be Trump or Biden without picture, that may be too obvious but you get the point. This is always a problem with ID theft, without picture from authoritative source like from SSN Admin or credit bureaus or any reporting agency. Due to lack of link of face to number, victims are suffering over and over.

B) Without any other details (literally zero details) can we not post just a picture of the scumbag?

[Jonathan R McLaughlin]

Demeanor during the application process is absolutely a valid criteria, just make sure you apply your understanding equally. The ability to communicate clearly, be on time, tell the truth and treat you and the property with respect are valuable. And a landlord should exhibit the same qualities.

One thing for both tenants and landlords to remember…people will never behave better than they do in the application process.