I know a lot of landlords that manage their property themselves. This is perfectly fine, but you need to know how to avoid bad tenants. Many landlords had no idea how to identify bad tenants, much less how to avoid them.
When I first started our HOA Tenant Screening processes, for our Association, many landlords in our complex had no idea how to screen tenants. These ideas are things I have learned, and mistakes I have seen, after being a landlord for 14+ years, and as the lead tenant screener for our 120 unit apartment complex.
If you only take in a renter every five years, you can get through life being lucky. When you have to get multiple tenants per year, your luck runs out fast, you need a system.
The Gut Feel Approach
Many landlords use a “gut feel” towards prospective tenants. That is, if the landlord likes the tenants, they take them. This is problematic for a number of reasons.
Most people, if they ever had a chance to met Ted Bundy, the BTK Killer, the Boston Strangler or even Jeffrey Dahmer, would think they are great people. They were personable, had decent jobs or job prospects, and were likeable people. They would never have the ability to kill as many people as they did, without being likeable. I myself rented to a person that committed a murder shortly after they moved out.
It is human nature to like people, similar to you. You already hang around people every day, like yourself. You work with people that have a similar job. You go to church with people that have similar beliefs. You live in the same neighborhood as people with similar incomes. You marry or date people that have the same sexual preference. There are many things that attract individuals to each other, and similar habits and personalities to themselves are a major factor.
In a Fair Housing investigation, which I have never been a part of; one of the first things the Fair Housing board may ask is what criteria you use to select tenants. If you just use a “gut feel” approach, it could be a huge problem. If you have a solid, non-discriminatory approach, and can document that you follow it, it is much better. Declining a tenant based on “I just didn’t feel right” about them”, will not fly.
Past Landlord References
Some landlords use a “Past landlord Check”. That is, they call the previous landlord(s), and ask how the renter was. Did they pay rent (on time), did they have any police calls, and did they get their deposit back are common questions. This is a good intention for the new landlord, but I have run into issues with it.
More than once, the tenant’s previous landlord referral was a relative or friend, not a landlord that had rented to them. I have had landlords give me glowing references, only to find out the landlord was in the process of evicting the tenants. I myself have even given a glowing written reference to a tenant that I wanted to leave as soon as they could find a place. Do not ever trust the current landlord’s referral, unless it is a bad one. Use the one prior to that landlord. Even then, landlords will say great things, or nothing, to avoid getting into a potential law suit.
If you are calling past landlords, make sure you are calling the property owner of the previous address that the tenant lived in. Make sure that previous address is on the credit report.
If you get a past landlord reference that says the tenant is “Free to re-apply”, that is a red flag.
Saving Money on a Background Check
Some landlords will take a tenant’s word for things in their background, rather than run a full background check. It’s cheaper and faster. Often, tenants will forget about issues their past landlord had with them.
Asking about a criminal record will also lead to tenant’s forgetfulness. Google the tenant’s name and the word “arrest”, and if the tenant is very bad, it will come up right away.
I had a prospective tenant that said she did not have any evictions on her record. I had her write down her name and date of birth as I gave her an application. As it turned out, she had nine (yes 9) evictions in the past seven (7) years! And to top it off, even though she said her and her fiance had clean criminal backgrounds, he had served 12 years for second degree murder. He stayed in the car while she looked at the apartment. NEVER skip a professional background check.
Some landlords do a national criminal check, and neglect to do a county criminal check due to the extra $10 it costs. Why would you want to skip one of the most important pieces of information on your prospective tenant? Knowing about recent violation(s) is a key piece of information. If the tenant had recent DUIs, or assaults, you need to know. It could impact their rent payments. A recent violent past could impact other tenants in your building if this tenant moves in.
Know Who is Moving In
Assume whoever looks at an apartment will be moving in. That is, if a boyfriend is there “just helping”, he is already picking his side of the bedroom.
Anyone who drives the tenant to look at your rental will also likely be there, even if they stay in the car. They have already figured out that looking at an apartment with the tenant leads to too much scrutiny. They now just stay in the car, only to move in as soon as a lease is signed. Send in the TV personality, keep the face for radio in the car.
Do your diligence
Have a process set up to perform a background check, and know what a good tenant looks like on paper, before you even have an application in hand.
Run a credit check
A credit check is the first step. It will tell you about past addresses, it will tell you about any landlord collection accounts. It will tell you the applicant’s previous bill payment history. It will also tell you something about how they will behave.
Get income verification
Bank statements and check stubs are evidence of being paid. Employer verification is always difficult; employers do not always provide verification. Self employed people should have tax forms, or bank statements verifying deposit and income amounts.
Call Past Property Owners
Call the past property owners where the applicant lived, as evidenced on the credit report. Get at least a non-negative recommendation.
Do a county level criminal back ground check
Whether or not you take action on the items on the report is up to you. But you can assume what the person did in the past seven years; they will do for the next seven years.
Have set criteria, in terms of income, credit score and criminal background. Let the tenants know before they apply what you are expecting. Wait for the tenant(s) that can pass your check.
Remember, income will tell you the tenant’s ability to pay rent, Credit score will tell you the tenants desire to pay rent. Both are needed.
What background checks do you do for your applicants before they move in? What shows up when someone Google’s your own name?