Now that you have purchased your property and the contractor has finished renovating and modernizing it, you’re ready to start screening potential tenants.
There are a number of ways to go about this. As well as a number of websites to find tenants. There are also a great deal of places to look where people post their own ads in search for housing.
Depending on your market, it is in your best interest to post your property to as many places as possible, and interview as many potential tenants as possible, in order to get the highest quality tenant.
Before I get into it, I will give you the story of two landlords: one landlord is sitting on a beach, with his properties thousands of miles away. The rent is deposited in full on the first of every month to his account. His tenants treat his properties as though the homes are their own. This landlord is never bothered by small problems. In fact, the tenants he has in place fix the issues themselves. The relationship between tenant and landlord is cordial and professional.
The second landlord lives below his tenant. Regularly, he gets calls in the middle of the night of plumbing or electrical issues. The tenants bother him for something as simple as a lightbulb change. Rent is regularly late, and lies and excuses are common. The tenants make noise constantly, and once the tenants leave, there is a long list of repairs that need to be done in the unit.
Which one of these landlords do you want to be? The answer for most is obvious. The reason some landlords fall into the second category is because they don’t take the time and care to screen their tenants wisely. They rush into putting a tenant in their home.
There could be many reasons for this. Some landlords just desperately need the money. Other landlords go by first appearances when they screen tenants and don’t do a background check.
I’ve come across so many people that seemed kind and professional, but once I ran a background check, they had drug trafficking charges, evictions, and violent assaults on their records.
Naturally, everyone needs a place to live, and every situation and person is different. A person’s past should not define who they are today. And of course, no one should be treated unfairly.
However, you have a business to run. You have a mortgage to pay and a property to maintain. You have your livelihood, too, and your financial security and mental health come before anyone else’s.
The tale of two landlords is one of my favorites because it shows both realities that come with this job. Real estate investing should be about improving your life, not adding problems to it.
Otherwise, why would anyone do it?
I’ve screened hundreds of tenants, and I’ve had good tenants and not so good ones. My experiences generally have been very good, however. I take weeks to fill up a unit. I prepare for it before I need to put a tenant in. I never invest in a property I cannot pay myself, or at least not a property I don’t have the cash available to maintain vacant for at least a couple of months.
This leaves me with breathing room for when I need to put a tenant in. I don’t need to rush. I can take my time screening potential tenants and then making a decision after a phone call, background check, and an in person final interview at signing.
One of my favorite quotes is “Trust, but verify.” As I’ve said before, some of the kindest seeming people have some of the most unexpected things come up during the background check. Things that you would never expect. You might go with your gut, but going with your gut can get you in trouble. As with running numbers on a real estate deal and leaving your emotions out of it, so should you screen your tenants.
They are, after all, looking after your hard earned assets.
Here are some sources I use to screen tenants along with their official descriptions:
- SmartMove—SmartMove tenant screening helps identify the best tenants. Accurate credit, criminal, and eviction reports. FREE signup. Fast Results. No hidden fees. www.mysmartmove.com
- MyRental—An innovative suite of tenant screening services including renter eviction history, background search reports and tenant credit score. www.myrental.com
- TurboTenant—It’s the easiest way to market rental listings, screen tenants, create lease agreements, and collect rent online. TurboTenant is a DIY landlord’s one-stop shop. www.turbotenant.com
There are a number of websites like the ones above. However, these are the three I’ve used on separate occasions and I’ve been happy with the outcome of all three. Each one provides enough information in the screening report for you to be able to make a well educated decision on whether or not to rent to a potential tenant. From what I’ve found, a reasonable price to pay for a background check, including nationwide criminal and credit check, is somewhere between $30-$50.
Aside from running background checks I also screen a tenant’s social media and do a Google search for the tenant’s name. This gives me more information on the kind of person the tenant is and what kind of lifestyle they live. Is my property going to be full of house parties all the time? Is the tenant cleanly and do they keep their current home in good order? Does anything bad come up when you Google their name? What do they post about on their social media?
I think looking for these small details can have large consequences. You never know what you might come across, and people are an open book on the internet.
Another important item I look for is credit score. Now I’ve rented to tenants who have had sub-par credit, or in some cases no credit at all. But each time I needed an explanation for why, and I needed to see that they had a substantial amount of money in their bank accounts. Enough to at least cover the rent for 6 months. Some people come across all different kinds of events in life, from medical debt to falling ill and being out of work, falling behind on their payments. If everything else looks good, I can make exceptions to the rule.
The entire point of being a landlord is to help people find housing. You are essentially providing a service, as well as providing them with a place to live. Many people cannot or do not want to buy their own property. This is where your role comes in, and where you contribute to the housing market.
You should always do your due diligence on respective tenants and be selective about who you allow into your properties.
It can be the difference between whether or not you will be a landlord for just a year, or whether or not you will be a life-long landlord. It means the difference between being Landlord #1 in the example above, or Landlord #2. Which landlord do you want to be more like? What kind of life do you want to have? The difference is in the details.
