One of the most important aspects (and probably the biggest pain point for many landlords) istenant screening. Getting great tenants can be the difference between the successful landlord and the one who loses money, burns out and becomes a motivated seller.
BiggerPockets has created a fantastic guide for screening tenants and I recommend all landlords to read this guide. It is comprehensive and hits all aspects of screening, from pre-screening through offering the apartment to the tenant. The guide is generally in line with our screening process and I had my wife (who does our screening) review it when it was first published.
One aspect that I want to stress is what the guides describes as the “Stress Quotient”. In our business, we describe this as the “Headache Factor”, but the general concept is the same. Here is how the guide describes the “stress quotient”:
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The “Stress Quotient” – How Much Stress Will They Cause You?
The final quality of a great tenant is something I call their “stress quotient” or the amount of stress a tenant will cause you, the landlord. Some tenants are very high maintenance and constantly demand time and attention. Unless you are having a hard time finding quality tenants – these types will only cause more problems.
Our most important factor, and the final factor before offering an apartment to a prospective tenant, is the “Headache Factor”. The best way to describe it with a recent example.
We had a 3/1.5 single family for rent. This was originally going to be a flip but we have not been able to sell it. Since we planned multiple exit strategies (which you should ALWAYS do), we turned it into a rental which may eventually become a rent to own. Our most recent tenant was behind on rent and caused us a bunch of headaches (such as an $800 water bill). We finally convinced him to move out and were in the market for a new tenant. Here is how the events played out.
We ran ads for the apartment in all of our normal places. “Sarah” (name changed) calls our Google Voice number and leaves a message. Her speech is a little slurred, which we take note of. She lives in a duplex and her landlord lives upstairs. Due to medical issues, her landlord needs to move downstairs and they need to find a new place. So given this, she is motivated to get a new place quickly. Anytime someone needs to move quickly that is always a red flag, but in this case it seemed to be legitimate (but we also take note).
We called her back to schedule an appointment to see the place. She filled out an application and dropped it off at once of our businesses and we let her know that our application process is 3-5 days but we will try to escalate this for her. We review her application when we receive it and she meets our criteria. We have a few other applications in the pipeline, so we way they against each other but believe we will rent to her.
Then the calls start coming in. She calls us 3 times in the span of a few hours (11:15 AM, 3:17 PM and 3:32 PM). We let most of our calls go to voicemail and call back at pre-defined times. We call back and let her know that we are reviewing applications and that we will have a decision on 11/3 (this was on 11/1). We then receive a call from my father saying that she stopped down to his business and was asking about the application and telling his cashier (he owns a wine/liquor store) about her problems and why she needs the apartment. She then calls our number back and leaves the following message
Hi. This is “Sarah”. I came into the store yesterday and dropped off applications to be sent to someone, a Tom I guess. And I just call the father, Tom, and he gave me the number to the place in Rochester that gets the applications. I would like to get that phone number so I could give a call. Today is the first I have the money. And I’m talking about 32 Perry Ave, the 3 bedroom and Castile that we filled out the application for. I would like to speak to his son, and find out what they have found out. So if you can return my call please at xxx-xxxx I would greatly appreciate it. xxx-xxxx My name is “Sarah”. Thank you. Have a great day.
This voicemail starts to add to the red flags that we already have (slurred speech and wants an apartment quick). She has called us several times and stopped back at my father’s store. She calls my father, who directs her to our business number. She calls our business number, looking for our home number. She then reiterates that she wants to move quickly and has the money. My wife calls her back and again leaves a message letting her know for a second time that we are reviewing applications and will have a decision in 2 days. She then calls us again at 2:16 PM and again at 3:36 PM and leaves another message.
Hi this is “Sarah”. I got your message while I was out in regards to your 3 bedroom in Castile, the house for rent. And I understand you just said that you have another applicant looking at it. However, I really want to press the issue that we seriously need a place to rent immediately and we have excellent references about ourselves and the animals and um we are really in dire need to get in some place before the 4th of this month. So actually I do need to know as soon as possible. And I would appreciate the consideration that we put in the application first and that we seriously need a place to be. I can give you anything you want I have excellent references from a few people. So and we have the money we can afford it and we’re ready to make some move. ASAP. So, please please consider us. We desperately need this place. xxx-xxxx Thank you.
Even though we have told her twice that we would respond back by 11/3, she calls again and wants us to expedite the process. In the voicemail she says words like “desperately”, “serious need” and “dire need”. She also states that she put in the application first. She looked at the house first but we received 2 applications from other people between the time she looked at it and finally got us her application. She calls back a few more times on 11/1 and again on 11/2. We let all calls go to voicemail. By this point, we have 2 applicants that passed our criteria; “Sarah” and another applicant. We sit down to evaluate things.
- Both applicants pass the screening criteria.
- We let both applicants know the screening process and the timeframe for when we would let them know.
- Applicant 1 did not call us during that time while “Sarah” called us several times.
- We called applicant 1 up to get some additional information, which she provided without question and seemed friendly.
- “Sarah” seemed very desperate and was already causing me a headache with the constant calls and hand holding that she needed.
In the end we ended up renting to applicant 1, for the sole reason that her “headache factor” was much less than that of “Sarah”, even through Sarah was going to move in immediately instead of in 30 days. The funny things is, “Sarah” was our front-runner and we would have rented to her before the constant calls and voicemails.
We called applicant 1 and she accepted the apartment, so we then called Sarah. We got her voicemail and my wife let her know that we ended up going with the other applicant as she was a better fit with the place. She wished her luck on finding an apartment and her situation and told her that we would contact her if applicant 1 fell through. When then receive a call back shortly after from “Sarah”.
This is “Sarah” again. I did not receive your message, and I need you to call me back. My number is, xxx-xxxx. We have everything that you need. I need to know the answer because we will literally be made homeless as of tomorrow and I just need an answer. I see that it’s still being advertised and I know that it’s been sitting there since July. So, I’m not quite sure that I understand how suddenly there is other applicants as I was told a couple of days ago. If there is a reason that we cannot have that, then I need you can call me back and let me know what that is so that I can know for a further application because I wouldn’t be understanding why. Please call me back xxx-xxxx.
This message supports our initial decision. She says that she did not receive our message, but clearly knows that we left one and is still acting like we will rent the place to her. She pleads that she will be homeless tomorrow, like that is our fault or responsibility. She then starts to criticize us by saying that we are lying about having other applicants since it had been “available since July”. The house has been on the market, but we had a tenant in the property until a few days prior. We also (landlord tip) continue to advertise the property until we have cash in hand and a signed lease.
My wife calls her back and explains that both her and the other applicant passed our screening criteria, but we chose the other tenant because they received their application first and felt they were a better fit for the property. “Sarah” then starts to go off and berate my wife, eventually hanging up on her. And with that, the headache factor went to 10 and we knew that we have made the right decision to not rent to “Sarah”.
- Screening is important, but it is not everything. Trust your gut and use your own “headache factor” in your screening criteria.
- Tenant’s problems are not your problems, so don’t take them on. Although I personally feel bad for tenants with tough situations, I run my business from a business perspective and will not take on their problems.
- Take a few days to screen tenants. This not only gives you time to screen a few tenants, but also allows you to see how tenants act. If we had not waited a few days, we would have rented to “Sarah”.
- A better tenant is worth missing out on some rent for. We would have made an extra month’s rent by moving “Sarah” in a month earlier, but I’m not sure if her headache factor would have been worth it.
- Using something like Google Voice allows us to see who has called us and at what times. This allows us to go and search for a number and have a complete history of interactions.
Do you have great tenant screening stories (all landlords do) or your own “headache factor” criteria in your screening process? If so, lets hear them.
Photo Credit: Lynne Hand