How Are You Handling Tenant Screening?

[Rob Schwartz]

I’m a small property owner and learned this one the hard way.

I've used Zillow and it's been great for getting eyes on my listings, but I’ve stopped trusting it as a final screening step. Income is often whatever the applicant enters, and background or eviction data seems to be hit or miss depending on the state. I’ve had simple court searches turn up issues that never showed in the report.

These days I try to keep it simple. I control the application, then verify the big items before approving anyone. It adds a little friction, but it’s been cheaper than dealing with an eviction.

For those of you with more units or operating in multiple states, how are you handling screening and verification? Are you using a specific service, doing things manually, or layering multiple tools together?

Appreciate any advice or lessons learned.

[Kevin Sobilo]

@Rob Schwartz, I don't think your issue is Zillow specific. Here are a few thoughts:

1. Zillow ABSOLUTELY misses out on LOTS of background issues! However, I suspect that most services do as well. I think especially for civil cases like evictions that national services have difficulty matching up people with cases because their Social Security numbers are not part of the legal case information. For example there are many tenants named "John Smith" in your state and without a unique identifier like Social Security number they can't tell one from the other in the court records. 

2. The credit report through Zillow seems fine to me. 

3. Income documentation! Yes, that one gets hairy. I require them to upload pay stubs or possibly other docs like tax returns especially for 1099 self employed folks. 

Scrutinize those documents carefully. Look for forgeries! Look for old documents! Look for people whose stubs say they worked overtime when that may be seasonal. Many things to scrutinize there. 

4. To deal with the short comings of the background check in #1, I use the credit report to determine if there are any old addresses for the applicant in other states and then I go to each state's court website and try to search for the person by name. My state's website is very good and because I know a few key details about the applicant I can manually sort through people with the same name and determine if people have criminal convictions, evictions, etc. 

5. When looking at income, I go ABOVE AND BEYOND! Most landlords use the rule of thumb "Monthly income 3x rent" and that is good. However, keep in mind the monthly income is GROSS monthly income. This rule is roughly patterned after the ratios used when qualifying for a mortgage.

To that end, I employ a SECOND RULE. When you qualify for a mortgage they also use a second ratio that includes people's debt payments. Many times an applicant had income 3x rent BUT their monthly debts are outsized with credit cards, student loans, child support payments, car payments etc. 

So, I use this second rule: Gross Monthly Income * 45% >= Rent + Monthly Debt Payments.

I get their monthly debt payments mostly from the credit report, but sometimes they have things like child support garnished from their paycheck so those show up on pay stubs sometimes.