If you’ve been a landlord long enough, you’ve had a nightmare tenant. They come in all shapes and sizes, and they cost thousands of dollars in unpaid rent, property damage, legal bills, court fees, and pulled-out hair.
I’d just as soon keep those thousands of dollars and not have a conniving professional tenant or charismatic deadbeat steal them. But can you always spot these nightmare tenants as they smile and hand you their rental applications?
An ounce of prevention is worth a metric ton of cure when it comes to tenant screening. It doesn’t even have to cost you money — have the applicant pay the costs of background checks. But it costs something many landlords are even more loath to part with: their own sweat and work.
Here are some oft-overlooked red flags in advanced tenant screening — subtle warning signs that the charming blonde applicant is actually a nightmare waiting to happen.
Download Your FREE copy of ‘How to Rent Your House!
Renting your house is a great way to enter the world of real estate investing, but most first-timers (understandably) have a lot of questions. Fortunately, the experts at BiggerPockets have put together a complimentary guide on ‘How to Rent Your House’. All the skills, tools, and confidence you need to successfully rent your house are just a mouse-click away.
Bad Employees Make Bad Tenants
When landlords bother to talk to applicants’ employers at all (which is less common than you’d think), they often simply confirm income and employment and leave it there.
But direct supervisors are a gold mine of information about prospective tenants. Do they show up to work on time every day? Or do they drag themselves in 20 minutes late, nursing a hangover and reeking of Boone’s Farm?
Do they always complete projects and tasks on time, or are they routinely behind schedule?
How proactive are they? How conscientious are they? In a word, how responsible are they?
Type of Debt
Too many landlords just glance at the FICO score on the credit report — if they bother to run a credit report at all. Forget the FICO score! It’s reductive and often deceiving. The truth is in the actual payment history and often in the type of debt the tenant has.
Lucas Hall, founder of Landlordology, sums it up: “I’d prefer someone with $200k in mortgage debt over someone with $20k in credit card debt.” Some debts are, at least conceivably, constructive debt. People go into student debt to better their career prospects. In many parts of the country, a car is unavoidable, so vehicle debt makes sense. And landlords can certainly understand a mortgage for a rental property of the tenant’s own.
But what is credit card debt used for? Consumer purchases. And sure, we’ve all been in a tight spot financially at one time or another, but do you really want someone in that kind of financial pinch as a tenant? (For the bleeding hearts out there, the correct answer is “no.” There’s nothing wrong with charity, but give to charity knowingly; don’t confuse it with a business decision.)
Some people are just dirty. Others are abusive to the property where they live. If you want a clear window into how an applicant will treat your property, look no further than how they treat their current home.
Give as little notice as possible, and call applicants to let them know you’re in the neighborhood and were hoping to swing by. If you like, bring a copy of a blank lease, and tell them you want to walk through a few points with them in person. But the point is to get inside their home to see how they treat it.
No one’s perfect; there may be a little clutter — after all, they weren’t expecting guests. But if you see trash lying around, food detritus littering the kitchen, holes punched in the walls, or any other activity you wouldn’t want in your property, you have your answer.
No Such Thing as White Lies
If you catch an applicant lying about anything, however small, shred their application. If they lie about one thing, their entire application is suspect. Lies are an indicator of other lies, and people who lie on their application have already proven they are willing to deceive in order to get what they want.
“I reject applicants if they lie about anything,” Hall goes on. “I reject anyone applying for a no-smoking unit, who arrives to the showing smelling like smoke.”
They claim they have no pets, but you see signs of pets around their apartment when you visit? They say they earn $4,150/month from their job, but their HR department says they’re paid $3,600? They’re applying by themselves, but clearly live with a significant other?
These are all bad omens that honesty is not their strong suit.
One Landlord May Lie, But Not Two
What’s the fastest way to get rid of a bad tenant? To give them a glowing recommendation to the next landlord.
But the previous landlord, from a property where the tenant no longer lives, will give you the honest scoop. You should still contact the prospect’s current landlord, they may well level with you, but take their word with a grain of salt. Dig deeper, contact not one but two of the applicant’s landlords.
As a final word on this subject, try to verify the landlord’s identity if you can. Ask how long they’ve owned the property, how long the tenant lived there. If you can easily find the public records showing the landlord’s mailing address, ask them to confirm their zip code. It’s an old trick: applicants give a friend’s name and claim they’re the landlord. But it’s a trick unlikely to work when you contact two landlords and verify both.
Type of Crime
How does their criminal background look? Don’t disqualify them simply because a record comes back on their criminal check — that’s actually illegal now nationwide, courtesy of a recent HUD ruling.
But not all crimes are created equal. Possession of a dime bag of marijuana? So what? First-degree murder? Fraud? Arson? Another story.
“I never accept anyone who committed a violent crime or one involving intentional property damage (like arson),” explains Hall. In addition to violent crimes and property damage crimes, all crimes involving fraud are major red flags. Unless the crime was decades ago, these types of crimes should disqualify an applicant instantaneously.
Eviction on Record
If someone has been evicted in the last five years, don’t rent to them. End of story.
If an applicant has been evicted within the last 10 years, think long and hard about it. Every other detail of their application and background checks had better be flawless.
Many landlords and property managers just run a credit report and criminal check, but in some ways, the eviction history report is the most important of all. It gets to the root of what you’re trying to know: Is this applicant likely to do anything that will force you to file for eviction?
If they’ve done it before, there’s a good chance they’ll do it again. Pass on this applicant — there will be better applicants with fewer risk flags.
That’s what tenant screening is ultimately about: minimizing risk. You can’t perfectly predict who will turn dark on you, but you can eliminate everyone most likely to do so.
Not only should you screen applications aggressively, but let applicants know from that start that you will do so. Tell them they are responsible for paying for screening reports, which will include credit, criminal and eviction reports, and that you will be contacting past landlords and employers. Spook off the fraudsters and bad apples, leaving you with fewer dead-end alleys to wander down as you search for a tenant who will pay on time and treat your investment well.
Have any horror stories or tales of woe, starring bad tenants? Any tips to separate the wolves from the sheep?
Sharing is caring! (That goes for social media as well.)