The Importance of Screening Tenants and How to Do the Screening Process
Let's go through tenant screening. Let's say you prepared the property.
You've done all the things you've talked about. You've gone through your
marketing plan. You've advertised and done all that.
Now people are calling you and even expressing interest in terms of filling out an application. How do you go through and screen your tenants? How do you eliminate the bad ones and hopefully find good tenants?
I guarantee you if you can find a good tenant it will make your life so much easier. If you eliminate the bad tenants it will make your life a lot easier. There's no guaranteed system to figure out who's good or who's bad, but you'll find out real quick the underbelly of real estate investing that there are a lot of problems you can have. I know a gentleman that has 51 properties and I'm sure he's got stories to tell you.
Screen Out Tenants
Let's go through a screening process. You want to try to screen out tenants and do it in a way that's fair and meets the Fair Housing rules and regulations. You cannot screen out tenants based on sex, family status, or religious status. All of those things you cannot be screening tenants on.
There are two exclusions to Fair Housing rules and you need to know what they are. You can screen a tenant that has pets. You can make a decision of I will take you or I will not take you based on whether they have a pet. Pet owners are not a protected class.
The other persons that are not protected are smokers. You can refuse an applicant solely on the fact that they smoke. You are not required to accept that person. I'll be honest with you, that's about it. Other than that you cannot make decisions - except economic of course - based on other factors of sex, religion, all those types of things.
Consistency with Policy Making Decisions
Make sure you have consistency in your policy making decisions. If you want to do it in writing, that's fine. There are some people that use point systems. They have applications and then they give them points.
If your income is above this you get so many points, if your rental history is this, your job history is this you get points. They add them all up at the end and if they're over 30 points they're approved. If they're under 30 points they're not approved. That's not a bad system. It certainly is a fair system. You could do it consistently.
Exceptions
We tried it and we didn't have any luck with it because what will happen is there are always exceptions. There are exceptions to this, exceptions to that, there are explanations for this. We found we were spending more time trying to figure out people that didn't have enough points really were good because of this, this, or this. People that had enough points really weren't good because of that. I was not particularly happy with it.
In the end, whatever system you use, I guarantee you that the number one way to determine this thing is pure gut. Guys, go out and meet the people. Just go out and make sure you've met them.
If you've got somebody working for you that does a lot of the pre-screening and a lot of the sales work, that's fine. I would suggest that you go meet the final candidates. Give them your smell test. There is something about doing this business over the years that you'll develop a gut sense of when somebody is good or bad.
I guarantee I've got a pretty good gut. It's not perfect by any means. When you place 200 people in houses in a year you make some mistakes, but it's pretty good. I can smell when something doesn't quite seem right to me. You need to develop that sense as well.
I invite you to learn more about Property Management and get a free 60 minute audio titled "Learn the 10 Success Secrets of Property Management Every Real Estate Investor Must Know to Maximum Profit and Avoiding Tenant Headaches" by going to http://www.realestatewealthtoday.com/PMS.html
Mike Lautensack is the owner of Del Val Property Management LLC, a FULL service residential property management company located in Philadelphia, PA.
Now people are calling you and even expressing interest in terms of filling out an application. How do you go through and screen your tenants? How do you eliminate the bad ones and hopefully find good tenants?
I guarantee you if you can find a good tenant it will make your life so much easier. If you eliminate the bad tenants it will make your life a lot easier. There's no guaranteed system to figure out who's good or who's bad, but you'll find out real quick the underbelly of real estate investing that there are a lot of problems you can have. I know a gentleman that has 51 properties and I'm sure he's got stories to tell you.
Screen Out Tenants
Let's go through a screening process. You want to try to screen out tenants and do it in a way that's fair and meets the Fair Housing rules and regulations. You cannot screen out tenants based on sex, family status, or religious status. All of those things you cannot be screening tenants on.
There are two exclusions to Fair Housing rules and you need to know what they are. You can screen a tenant that has pets. You can make a decision of I will take you or I will not take you based on whether they have a pet. Pet owners are not a protected class.
The other persons that are not protected are smokers. You can refuse an applicant solely on the fact that they smoke. You are not required to accept that person. I'll be honest with you, that's about it. Other than that you cannot make decisions - except economic of course - based on other factors of sex, religion, all those types of things.
Consistency with Policy Making Decisions
Make sure you have consistency in your policy making decisions. If you want to do it in writing, that's fine. There are some people that use point systems. They have applications and then they give them points.
If your income is above this you get so many points, if your rental history is this, your job history is this you get points. They add them all up at the end and if they're over 30 points they're approved. If they're under 30 points they're not approved. That's not a bad system. It certainly is a fair system. You could do it consistently.
Exceptions
We tried it and we didn't have any luck with it because what will happen is there are always exceptions. There are exceptions to this, exceptions to that, there are explanations for this. We found we were spending more time trying to figure out people that didn't have enough points really were good because of this, this, or this. People that had enough points really weren't good because of that. I was not particularly happy with it.
In the end, whatever system you use, I guarantee you that the number one way to determine this thing is pure gut. Guys, go out and meet the people. Just go out and make sure you've met them.
If you've got somebody working for you that does a lot of the pre-screening and a lot of the sales work, that's fine. I would suggest that you go meet the final candidates. Give them your smell test. There is something about doing this business over the years that you'll develop a gut sense of when somebody is good or bad.
I guarantee I've got a pretty good gut. It's not perfect by any means. When you place 200 people in houses in a year you make some mistakes, but it's pretty good. I can smell when something doesn't quite seem right to me. You need to develop that sense as well.
I invite you to learn more about Property Management and get a free 60 minute audio titled "Learn the 10 Success Secrets of Property Management Every Real Estate Investor Must Know to Maximum Profit and Avoiding Tenant Headaches" by going to http://www.realestatewealthtoday.com/PMS.html
Mike Lautensack is the owner of Del Val Property Management LLC, a FULL service residential property management company located in Philadelphia, PA.
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