Tenant Screening: A Proven Approach Different from the Rest

I have been managing my portfolio of properties since 1985.  I spent the 28 years screening prospective tenants.  In the beginning I was getting my teeth bashed in just like all of those horror stories you hear and read about.  I was young, naive, and trustworthy.  If they smiled at the showing they were approved!

But after a couple of trash outs I realized I needed to make some changes.  And what started out as a "few mods" has turned into a full fledged tenant screening method which, over the past 20 years or so, has proven itself out to be "nearly" foolproof. 

There are no guarantees in life, including tenant screening.  So stop kidding yourself.  The longer you are in real estate leasing the greater the probability you run across "the bad one".  But "bad" is a relative term, and even in the occasional instance where we don't like the tenant we moved in, we still don't do "trash outs" anymore.  But back to the tenant screening.

I learned there are two key areas for good tenant screening.  Neither of these invovle a credit report.  What?  Everyone pulls a credit report.  And so do we.  But it has a very, very small role in our tenant screening.  Why?  Because credit reports say nothing about a person's ability or willingness to pay their rent.  It also says nothing about how they live.  

Sure, we pull information off the credit report to mitigate risk.  Things like: collections from utilities or housing providers, criminal records, civil eviction recrods, stuff like that.  But the credit report is tertiary in our consideration.  So what really matters?  I'm glad you asked!

Personal Interview

While many companies are touting "virtual tours" we are running away as fast as we can.  That personal inteview is critical.  We gauge the prospect's mannerisms, content and context of speech, body language, dress, vehicle they drive, all sorts of things.  We evaluate whether this is the sort of person we want to manage for the next 10 or 12 months.  The interview accounts for 60% of our weighting.  It is subjective, so experience helps.  But it is not required.

Verification of Rent

Years ago I learned the VOR has way more credibility in leasing than a silly credit report.  So now we go back a minimum of 2 years.  Professional property management companies will give us a written VOR.  But Ma and Pa Kettle will tell us all we need to know over the phone.  Sometimes we'll look up who owns the property to see if we are talking to the owner, or possibly the friend of the applicant!  This part of our screening accounts for 30% weight.

Summary

We've been using this screening method with not just good results but phenomenal results, for the past 20+ years.  We've evicted just one person in over 500 screenings.  Not a bad track record, eh?  When we do find a bad tenant we move them out before we get "too legal".  But more on that later.  So our tenant screening has 3 components with the following weighting:

• Personal Interview - 60%
• Verification of Rent - 30%
• Credit Report - 10%

Stay with it.  Be willing to make adjustments.  You'll find success!