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10 Not-So-Obvious Ways to Thoroughly Screen Potential Tenants

Jul 20 2017

As a property manager and landlord, I have learned that screening can be the most important element in owning a rental property. Picking the right tenant on paper and in character sets the tone for the next 12-24 months for your investment. This means if you have a great tenant with a smooth system in place, you will have an easier relationship with your property manager, easier time self-managing, and/or you will stay motivated to continue to invest in more passive income generating properties.

In realizing how big the leasing/screening step is, we maximize our marketing efforts to make sure we have the exposure to reach the top tier tenants we want to attract. Once we get them through our units and they love our homes, we then swoop in with our screening process that sniffs out red flags and brings truths to the service to eliminate junk applicants fast.

Below is 10 key components to our screening process that we complete with every applicant.

10 Not-So-Obvious Ways to Thoroughly Screen Potential Tenants

1. Request cleared past rent checks.

Since applicants can put anyone down under their previous landlords contact, we came up with the idea to request the most recent three cleared rent checks, front and back. This is assuming they are currently renting.  These cleared check copies tells us the following:

  • Who they are writing their checks to.
  • If the amount matches what they say they are paying and if the amount is the same each month.
  • What day the checks are clearing in the bank. If they are clearing by the 5-8th each month, it is safe to say they paying on or close to the first.

In this day and age with paying through online tenant portals, we request an online payment history and the matching bank statements to line up.

When a tenant says they pay cash, that is a red flag and we request the bank statements that reflect the withdraws, which is usually the end of that applicant.

2. Check the tax records.

You can check the tax records to verify the records of landlord provided by the tenant. But if the tenant says that they have been writing checks, it should raise red flags.

3. Obtain an eviction report.

This is the best thing that has happened to landlords in the last decade when it comes to screening. With the help of most of the screening companies or online through the county you live in, it is now easy to see if an applicant has ever been filed on for eviction. You can find judgements on credit reports with this, but most landlords never take it that far, so that applicant’s next three landlords would not realize they were less than perfect tenants until it was too late.

4. Get pictures of pets.

Request recent, clear picture of all pets. This will prevent the 35 lb lab mix from becoming the 80 lb pit bull at move in. Pets are not always a bad thing, so seeing a picture of a pet can make you as the screener put your pet guard down a little and treat the deal fairly.

5. Obtain a copy of their driver’s license.

Requesting a clear, color copy of the applicant’s driver’s license will allow you to verify the address to check whether it matches all other documents from the application or not. It shows when the DL was issued and verifies the date of birth. It also allows you to match up the applicant online with social networking sites, such as Facebook, LinkedIn and Twitter, to learn more about them if necessary. The picture will help you make sure you have the right guy.

6. Perform online research.

The Internet has done wonders for screening, and in the world we live in today, we can learn so much just from Facebook and LinkedIn. Facebook offers a huge insight, and LinkedIn can sometimes show you people you might have in common with the applicant. This allows you to reach out the common connection as another insight to the applicant’s character and verify they work where they say they do.

7. Collect application fees.

We take application fees ($50 per person over 18) not as a profit generator, but as a means to cover the costs associated with screening reports. More importantly, the fees serve as a level of commitment to the property.

I spent the first 6 years not taking an application fee, and multiple times per year an applicant would go through the 24-48 hour process, we would approve them, and they would be gone.  Maybe they found another rental or they just realized they didn’t like our unit. An application fee makes applicants think hard before they submit the application, and if they do pay the application fees and then back out, at least your costs are covered.

On the other hand, it is important not to treat it as a revenue stream because you don’t want to build a reputation of taking application fees and not accepting time and time over. We will often refund applicants’ fees if they are not selected, to be fair. We will keep them if they lie on their application or if they back out.

8. Aim for a quick turnaround.

Moving is stressful whether you are 21, 44 or 66. It is a lot of pressure to take everything you own and move it somewhere else — sometimes far, far away. In this renters’ market, it is also stressful as an applicant going up against sometimes 5 or 6 other applicants on the same property. When a tenant submits an application, make sure you inform them of your expectations of how long your underwriting will take. Try to get your questions back to the tenant within the first 24 hours and demand a quick turnaround from them as well.

9. Understand their reasons for moving.

It is important to understand why they are moving. Are they moving because their place is too small or their work is too far from where they are now? As a screener, it is important to make sure your unit is larger and considerably closer to their work. Otherwise, they will be out looking in 11 months again because they didn’t realize they were making the same mistake again.

10. Provide verification of terms.

It is important that the tenant is on the same page with the terms you are expecting. Yes, all those terms will be in the lease, but people don’t always read leases, and you may miss something when you prepare the lease, so what we do is send out an email called “Rental Acceptance Term Email.” This email is a summary of the terms included, such as rent, deposit, term, who pays what utilities, parking, etc. In this email, we also attach the condo association rules and regulations and our tenant expectation handbook. We make the applicants reply to the email that they agree with the terms and the attachments. Even though it will all be in the lease, this email will prevent issues down the road.

Of course, there are a bunch of additional steps we take, like calling and verifying employment, calling previous landlords and looking up any other historical public records, but the 10 points above are processes that have changed our company and many others who have learned from our experience. The fact of the matter is creating passive income needs work. If you want your rental property to provide a constant cash flow, you will have to screen the tenants diligently or you might end up with a lousy tenant.

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If you’ve ever considered investing in a few rental properties in Philadelphia or Bucks County, PA now might be a good time. Prices are still low in Philadelphia, but have been on the upswing. According to the National Association of Realtors, the median price of an existing home in a US metropolitan area grew 13.7% between July 2012 and July 2013, the latest in a 17-month streak of year-over-year price increases. 

New landlords can choose from properties that are likely to appreciate and a large pool of potential renters.Licensed realtor Pat Mueller cites a few reasons for this trend: “Many families have lost their homes to foreclosure and are entering the rentals market for the first time in years. Mortgages are also harder to get now, so fewer people are qualifying for a new one.”The more skills you bring to the table to get into Houses for Rent in Philadelphia Philadelphia or Bucks County, PA and the more time you have to devote to your properties, the faster you can make a return on your investment. 

But investing in rentals can also be disastrous (or too stressful to be worthwhile) without expertise. Here are three professionals you may consult about your new rental properties, and what you can do to mitigate how much they cost you:Handyman:  You may need to hire a specialist for some work on your rental. If you need new outlets or new pipes, for example, hire an electrician, plumber or licensed contractor. Handymen usually tackle smaller, more manageable tasks, like:

  • Painting and paint removal
  • Drywall repair
  • Minor appliance repairs (fixing a leaky toilet or faucet, among others)
  • Installing tiling or flooring, moldings, windows, doors
  • Refinishing decks, cabinets and other wood items

When You Could Skip It: You could do any (or all) of these projects yourself if you have the time and interest in learning. Of course, this only works if you live relatively close to your rentals and are flexible enough to service them on short notice. And if you’re willing to respond to the occasional 5 AM basement flooding.

Average Savings: Any base rates or costs-per-hour vary from location to location in Philadelphia or Bucks County, PA , but nationally, you can expect to spend an average of $60 to $85 per hour for repair costs. It general costs less to hire an individual handyman than a handyman employed by a company. Expect an additional charge if your job requires a trip to the store for materials.

Resident Property Manager As the owner of a handful of rental properties, you may be able to manage them yourself, but if you want help, a single resident manager would probably be more cost efficient than a property management company. Resident managers may:

  • Serve as a handyman
  • Advertise vacancies in your units
  • Show apartments to prospective tenants
  • Review rental applications
  • Collect rents

When You Could Skip It: Again, the closer you live to your properties and the more spare time you have, the less likely you are to need a manager. The obligations of being a boss will also cut into the time you save on maintenance.

Average Savings: The national median wage for residential managers is just over $25 per hour. Research the wages in your community and adjust according to how much responsibility your manager will take on. 

Real Estate Agent: Once you’ve gotten your financials in order and done your own research on the neighborhood(s) you’re considering, you might contact a realtor to show you potential properties. You can also arrange for a realtor in Philadelphia or Bucks County, PA to show rentals once they’re ready to rent.

When You Could Skip It: It depends. Even if you’re a local, or have thoroughly researched the neighborhood(s) you’re considering, a realtor is a great resource for a first-time rental buyer. Realtors have access to data and statistics not necessarily available to the general public and first-time buyers may not know all the right questions to ask. Using a realtor to fill your Houses for Rent vacancies is less of a no-brainer, depending on your other time commitments or whether you plan to hire a resident manager who could do the same thing.

Average Savings: As a buyer of rental properties, as when buying your own home, sellers typically pay most, if not all, of the buyer’s realtor fees. In this case, Mueller points out there’s little reason not to work with a realtor. For help in filling your units in Philadelphia or Bucks County, PA, the services of a realtor would set you back between 10-20% of the unit’s rent per month.  Mueller recommends interviewing with several brokers before making your final decision to invest into Houses for Rent .

The Bottom Line: As a new landlord, you can’t necessarily control the flexibility of your schedule or the amount (and cost) of unexpected repairs to your properties. Rentals are a long-term investment. However, to maximize profits from your Houses for Rent, new rentals, you can buy close to home and start small. It is best to begin with just one or two properties. This will allow you to maximize the time you spend on your properties’ needs, and minimize the amount you’ll have to pay anyone else.

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