Posted by Teresa on September 21, 2009 under Screening and Background Checks, Tenant Credit Checks, Tenant Screening & Background Checks | 
It’s rather difficult to find anyone who has not been affected by the economic troubles of the past year. That includes people who want to be your tenants. What should you look for when running tenant credit checks these days? If everybody’s credit is bad, why bother to do a credit check? Should landlords and property managers lower their standards in light of the rise in rental vacancies? Read on for answers to these questions.
Why bother with a tenant credit check when it’s going to be bad? Besides, if I skip it, I save money, right? Actually, the money you invest by doing thorough tenant screening will more than pay for itself when you consider the long term cost of evicting and/or cleaning up after bad tenants. And believe it or not, lots of folks are making it through the down economy by spending less, saving more, and keeping their credit records clean.
Should I lower my standards? This is a tough rental market, with rents down and vacancies up. You must decide whether to keep your qualifying standards high—and face empty units—or take a chance by lowering them in order to fill your properties. Experienced landlords say that empty units are far better than renting to bad tenants. It all depends on your tolerance risk, your cash flow—and a lot of luck.
Can I ask why a prospective tenant has had a bankruptcy? Yes. There is no time like the beginning to start communicating clearly with your tenants. If there is a bankruptcy on the credit check, ask what happened. You may find out that medical bills forced the tenant into bankruptcy, or that an ex spouse was actually the cause. Of course, if the tenant has other red flags on the credit report, you must take them into consideration, too.
Take a wide-angle view of the tenant’s credit history. If a bankruptcy is several years in the past, and everything else checks out, they may be an acceptable risk. If the bankruptcy was due to a business failure, the economy could be to blame—not the tenant. Past evictions and utility judgments are a higher risk indicators to many landlords than bankruptcies.
Do not ignore your gut instinct. If someone seems untrustworthy, they very well might be. Only you can decide whether a poor credit score or bankruptcy is worth the risk. The important thing is to perform consistent tenant credit checks!
Posted by Teresa on September 14, 2009 under Screening and Background Checks, Tenant Credit Checks, Tenant Screening & Background Checks |
Pre-qualifying tenants means a good start to a mutually respectful, mutually beneficial landlord/tenant relationship. So what exactly is pre-qualifying, and how do you begin to implement this strategy? Here’s a list of what pre-qualifying is and is not:
- Pre-Qualifying is about finding the people who fit the minimum requirements you set for income, references, job and credit history. Proper tenant screening will further narrow the field by giving you solid background check results to base your decision on.
- Pre-Qualifying is not about discrimination. As a landlord, federal law prevents you from using a person’s race, color, religion, nationality, familial status, age, gender, or disabled status to determine housing eligibility. Your state may have additional guidelines.
- Pre-Qualifying is about laying the groundwork for a great landlord/tenant relationship by communicating clearly and effectively from the start.
- Pre-Qualifying is about reducing tenant turnover by avoiding broken lease agreements and evictions.
- Pre-Qualifying is not about judging applicants based on personal appearance, the car they own, or the number of people in their family unit.
- Pre-Qualifying is about applying the same rules and requirements to all applicants.
- Pre-Qualifying is a way to reduce your risk by keeping tenants with previous criminal convictions or negative rental histories out of your rental properties.
- Pre-Qualifying is started by advertising your property for rent in the right publications, including enough information to weed out individuals who are not a good fit for your rental.
Every landlord should consider pre-qualifying tenants. While it takes effort to begin any new procedure, it will soon be a habit—and this is a habit that will pay off through better relationships with your tenants and increased profits for you!
Posted by Teresa on August 25, 2009 under Landlord Tips, Rents and Deposits, Tenant Credit Checks |
As the housing marketing continues to struggle, many landlords are finding themselves in a tough spot. Perhaps you’re one of them: vacancies are rising, your bank is tightening up your credit line and won’t refinance your mortgage, and you really need a positive cash flow.
If your tenants are smart, they know that in some areas, it’s a renter’s market—and they could be planning to ask you for a rent reduction, especially if they feel they’re paying more than the market dictates.
What should a landlord do if a tenant asks for lower rent?
- Determine whether or not your tenant has a valid case for a reduction in rent. Look at your local rent market, and compare your rents to similar units. You should always be aware of the fair market value in your area—and there are plenty of resources to guide you.
- Analyze your cash flow. If you determine your rent is above market value, but you can’t lower the rent and stay profitable, look for ways to reduce expenses. Perhaps you can take over landscaping duties from your contracted service. Or, perform small repair and maintenance yourself for awhile. You could even offer a compromise, such as keeping the rent the same, but covering some utility costs.
- Analyze the tenant’s history. Does the tenant pay on time every month? Have there been any complaints against them? How careful are they with your property? If they have been a great tenant, compare the rent reduction request with the hassle of finding a new tenant. You may find that peace of mind will make the reduction more palatable.
- Advise that you will be conducting a tenant credit check—and then follow through. If your tenant’s credit status has changed since the lease was signed, a thorough screening is the only way to find out. You may discover credit problems that indicate the tenant is not a good candidate for lower rent negotiations.
As a landlord, you are in a constant balance act to obtain and keep good tenants who pay on time. As the economy starts to slowly recover, you may have to concede to belt-tightening or reducing rents in order to attract and keep your best tenants.
Posted by Teresa on August 14, 2009 under Landlord Tips, Tenant Credit Checks, Tenant Screening & Background Checks |
Some people love being landlords. But not everyone does—and not everyone who invests in rental property is cut out for the job. It’s hard work and can be very stressful at times.
Whether you’ve been a landlord for ten years or ten months, the time could come when you’re not sure you want to keep going. Here are some ideas for when the role of “landlord” is one you wish you could shed like a winter coat on a hot day!
1. Don’t let your properties own you. Maintaining balance is important. If you’re spending more time on property issues than you want to be, only you can make a change.
2. If you’re spending too much time maintaining your properties and making repairs, hire someone to do it for you. There are probably hundreds of handyman-type services in your area. Ask friends for recommendations and interview several before making your choice. Remember to ask for references and check them!
3. Consider a property management company: Not only will they collect the rent and fill your rental units, property managers also screen tenants and conduct background checks. Plus they handle all the bookkeeping and emergency issues! Sounds like a dream come true—but they do have certain disadvantages: property managers are not free, and unless you own multiple properties, hiring one doesn’t make sense
4. Keep your eyes on the prize: If you’re investing in real estate for the long term, remember that setbacks and headaches you’re dealing with today will be worth it when it’s time to retire, if you’ve managed your cash flow properly. Building a portfolio takes time. Be patient.
5. Find tenants you’ll enjoy dealing with. You can’t control everything about your tenants, but by carefully choosing and always screening tenants, your chances of finding folks you get along with are certainly increased. You must not discriminate against anyone based on Equal Housing laws, but properly worded advertisements and finding tenants through friends and acquaintances are two great ways to start the process.
6. Take the headache out of renting to bad tenants—before they become tenants. Credit checks will ensure you have a tenant who will more likely pay rent on time. Background checks will help you find tenants with good job histories.
Every landlord goes through difficult times. If you’re having one of those, take a deep breath, get some exercise, go on a vacation, or hire someone else to deal with your problems! If you can raise the rents to cover the increased expenses, you may find it well worth it!
Posted by Teresa on August 4, 2009 under Housing Trends, Tenant Credit Checks, Tenant Screening & Background Checks |
As the housing market struggles to recover from its historic downturn, thousands of new condominiums remain unsold across the country. Many cash-strapped developers are turning to leasing unsold units—which can cause problems among residents who purchased theirs.
Condos are usually rented by their owners—not by the developers of a project. But when the majority of units have not sold, developers—and their lenders—get more creative. Renting is one way to fill units and improve cash flow. And in this economy, cash is king!
But is renting to unknown tenants okay with the owners in the building? Often, it depends on numbers. A few rented units, while a risk for the developer because they can no longer be sold as “new,” are usually not a problem with the owner-neighbors. But when a majority of units are rentals, it can hurt property values—and discourage potential buyers, too. Renting condo units can become a sure way to prevent selling units—an unending cycle.
However, even if condo owners don’t like buildings inhabited by renters, there is usually little they can do about it. Most developers will reserve the right to lease unsold units in the sales contract—and buyers have already agreed to it.
If you’re a developer with unsold condo inventory on your hands, you might consider renting units to quality, pre screened tenants. You can appease unit owners by assuring them the condos will be rented only to tenants who have passed background checks, including credit checks and criminal history screening. You’ll sleep better, too, when you properly screen tenant applicants!
Besides, condo owners might consider themselves lucky to not own a unit in a certain luxury building in New York City—where the owner is renting unsold units to a homeless shelter. Sometimes you do what you have to do—and at least the homeless are benefiting.
Posted by Teresa on July 14, 2009 under Landlord Tips, Tenant Credit Checks, Tenant Screening & Background Checks |
In a college town, chances are you could fill your rental properties with students if you chose to. What are the advantages and disadvantages of leasing to college students? What should you look out for?
Students can be good tenants, or bad tenants—just like the rest of the population. They are also willing to pay top dollar in many cases. If you are clear with college students and let them know your expectations, you can be a successful college student landlord!
Since the new school year is coming up quickly, here are some Dos and Don’ts for considering student tenants:
1. Do make sure you have an iron-clad lease. Have a lease or real estate attorney draw it up for you.
2. Do specify that each individual tenant is responsible for the entire rent. Then, if one moves out, the remaining roommates cannot claim they don’t that person’s share.
3. Do remember that the security deposit won’t cover the potential damage that can be done to your property. Make sure the lease assigns responsibility for damages and losses.
4. Do consider the extra maintenance or repair costs when establishing your rent. Repainting, and replacing carpet and more often, as well as repairing damages, should be considered standard operating procedure.
5. Do specify noise restrictions in the lease. College students like to party, and even small gatherings can become out-of-control in no time at all. Let your prospective student-tenants know that if the police are called to your property due to noise complaints, it is grounds for eviction.
6. Don’t allow “squatters.” If your tenants want to have overnight guests, enforce a 7-day (or however many you deem reasonable) limit.
7. Do specify lease dates: is the lease period for the school year or for a 12-month period? Students might think “one year” means August – May! Be sure the tenant knows the number of months they are responsible for paying rent.
8. Don’t allow anyone who is not on the lease to live in the rental unit. Period. You have no protection against their actions if they have no binding lease agreement with you.
9. Do prescreen all applicants to verify employment history, criminal history, and credit history.
10. Don’t allow the students alone to sign the lease. Require co-signers, such as their parents, and conduct proper credit screening on co-signers, as well—before you offer to lease your property.
11. Don’t hesitate to call the co-signers/parents at the first sign of trouble.
12. Do keep the communication open with your tenants—if they’re late, follow up immediately, from day one, to break bad habits. And, if they’re respectful, clean, and quiet (hey, it could happen!), let them know you appreciate it.
13. Do check your local zoning laws for maximum number of residents allowed in a housing unit—but if you follow suggestion #1, your lawyer will know for sure!
Posted by Teresa on July 10, 2009 under Landlord and Tenant FAQs, Tenant Credit Checks, Tenant Screening & Background Checks |
From time to time, we get a handful of rental property-related questions that concern many landlords—but don’t fall neatly into any category. We hope you find one or two that you’ve been wondering about, too!
Q: My rental unit has a jetted tub. If it breaks, am I responsible for repairing it—or replacing it with the same type tub?
A: You might want to consider adding a clause in your lease agreement that states the jetted tub is as is; the tub itself will be maintained for bathing purposes; however, if the jets malfunction, they will be repaired at your discretion only.
Q: I live in a city where only the owner of the property can be billed for the water and sewer service. How can I handle this with my tenants? I’m afraid they’ll run up the water bill, since they’re not paying it.
A: Your lease can state that you will pay for a certain amount of the water and sewer, based on average rates in your area. The lease can require the tenant to pay anything above that amount, to be included with the following month’s rent.
Q: Is it necessary to prescreen tenant applicants if they were referred by a good friend of mine?
A: Not only is it necessary, it is the most important thing you can do to protect yourself, your other tenants and the neighborhood residents. You need the peace of mind that a professional credit and background check will bring you. But just as important, if you don’t follow consistent procedures for each applicant, you could be accused of discrimination. Apply the same rules and follow the same procedures on every single tenant applicant—no matter who recommends them!
Q: What’s the absolute most effective way to advertise my for lease property?
A: Landlords we talk to say that good signs in the yard or window, visible from the street, plus an ad with photos on Craigslist.com, are the two best ways to advertise. Do beware of scams on Craigslist—read the warnings posted on the site and don’t allow anyone you have not personally met send you a check to hold a rental—many scammers operate like this.
Q: What should I do to make my rental property appealing to high-quality tenants?
A: Give your rental the best curb appeal possible! Get rid of unsightly trash, hide the trash cans, trim shrubs and low-hanging branches, and plant some new flowers. Repair any broken windows or screens, and paint the trim if it’s needed. A bright color for the front door is a great way to make the property pop!
Q: How do I know when it’s time to hire a property management company?
A: If you no longer enjoy or have the time to spend on property maintenance, dealing with tenant questions and problems, and finding new tenants, you should research property managers. Base your decision on the out-of-pocket expense; if you decide your time and peace of mind is worth more than what you’ll pay the management company, give it a try!
Posted by Teresa on June 18, 2009 under Fair Housing Act, Screening and Background Checks, Tenant Credit Checks, Tenant Screening & Background Checks |
What are your risks when considering applicants for your rental property? Even in these tough times, you cannot approve every applicant. It’s important to know your parameters when you must reject a potential tenant.
The federal Fair Housing Act prohibits discriminating against tenants on the basis of race, religion, sex, disability, or national origin. Some states have laws making it illegal to discriminate based on sexual orientation or marital status.
Of course there are legitimate reasons to turn down an applicant. Just be sure to document your process thoroughly and to be fair and consistent with each applicant—so you are well prepared if you’re ever accused of discrimination.
Here are some legitimate reasons to turn down a rental applicant:
Income level: It is legal to use a prospective tenant’s income as a basis to approve or reject their application. Be sure to check the income of all tenants on the application to avoid any potential problems.
Bad Credit History: Prior bankruptcies or low credit score are objective criteria for rejecting tenants.
Exceeding Occupancy: You do not have to rent to a family of six applying to rent your one-bedroom apartment.
Inadequate Rental History: You may require a reasonable number of positive rental references, and reject an applicant based on a negative reference from a previous landlord.
Past Eviction: If an applicant has ever been evicted, you may reject the application. However, if he or she won an eviction lawsuit brought by a previous landlord, you cannot hold the lawsuit against them.
Criminal Record: If an applicant has been convicted of a crime, it is probably enough reason to reject their application. Take care, however, to make a distinction between an arrest and a conviction.
Pets: If you do not allow pets in your rental unit, you may reject a pet-owning applicant. However, be aware of how the Americans with Disabilities Act (ADA) views therapy pets. You may have to make an exception to your no-pet rule to accommodate a disabled tenant.
As always, staying consistent with procedures is extremely important—especially when considering whom to approve or reject as tenants. Keep your paperwork in tip-top shape, and follow the same process with each applicant. Favoring any person or type of person over another is a lawsuit waiting to happen.
Your best practice is to run credit and background checks on each applicant. Screening tenants is quick, easy, and inexpensive—and it could potentially save you thousands in legal fees. Use the facts—just the facts—to determine whether or not you approve an applicant.
Posted by Teresa on May 26, 2009 under Landlord Tips, Marketing for Landlords, Screening and Background Checks, Tenant Credit Checks, Tenant Screening & Background Checks |
When it comes to written communication, the “Two Cs” should be top-of-mind: Clear and Concise. This is particularly important when composing an ad for a rental unit. Follow these steps to an easy, effective ad:
1. Attract attention. Make your newspaper ad stand out by adding a border or bold headline. On Craigslist, the descriptor is short, so use creative language: “Amazing house in Oak Tree neighborhood,” “Best $500 apartment in town,” or “Hardwood floors, 3BR, super-quiet” are all ways to capture attention quickly.
2. Be clear. At a minimum, list the number of bedrooms and baths, the neighborhood, parking information, and the monthly rent. State that you check previous landlords, criminal background, and credit history. You can eliminate unqualified tenants easily with a well-worded ad.
3. Use photos. A picture is truly worth a thousand words. A photo can instantly tell a prospective tenant whether your rental property is the right place for them.
4. Don’t skip the details. Do you include utilities with the rent? Say so! Are you okay with pets? Put it in the ad. Are you completely against smoking in your rental home? Tell us! Tell readers about the schools, whether a grocery store is close by, and all about the beautiful landscaping. Brag about your place, and you’ll get enthusiastic responses. You want the most qualified tenants to act upon finding your ad.
5. Make it easy to respond. Put your primary phone number in the ad, as well as an email address. For Craigslist ads, all responses will be through the site’s secure email unless you add a telephone number in the ad.
6. State a good time to call. You can certainly list what time you will accept telephone calls from prospective tenants. And if a call is made outside that time, the caller either didn’t notice, or didn’t care that you requested otherwise. It’s a good screening mechanism to find the tenants you’ll get along with best.
An effective ad is the first step in prescreening tenants. You can eliminate the ones you don’t want and attract the ones you do by being clear, descriptive, and detailed in your newspaper or online For Rent ad.
For more landlord resources, including everything you need to know about
tenant screening, turn to
E-Renter.com. You’ll know that you have the best possible tenants when you
prescreen tenants.
Posted by Teresa on March 31, 2009 under Housing Trends, Landlord Tips, Tenant Credit Checks |
Falling Prices no Cause for Panic
The heated rental market of the past few years is definitely over. Rent increases followed housing price increases to unsustainable levels. Reports from around the country show that rents continue to fall.
In New York City, the biggest drop, 8% over last year, was in the category of studio apartments in doorman buildings. In a city like New York, where rents are excessively high when compared to the rest of the country, that’s significant. Renters in NYC are used to numbers like $3,395 for one-bedroom apartments with a doorman (but you can lose the doorman and pay only $2,632). It’s a tough, competitive market—but people are finding more rental deals than ever right now.
Renters who signed leases at the height of the bubble are more interested in investigating their alternatives—including moving—than before. Most folks are not willing to pay more, but they are looking for—and finding—similar properties for less money.
Other renters are downgrading to cheaper properties just to save money. With job security at a new low for many working people, the opportunity to save several hundred dollars a month only makes sense. Thrift is in, and the ability to sock away money in savings appeals to people who never considered it before.
What could this mean to landlords and property managers? Expect to work a little harder to secure and keep good tenants. It’s a renter’s market, but there are still good, solid tenants looking for rental properties. Make sure your property is in top condition and advertise it well.
In this market, current tenants might ask for rent reductions at lease renewal time. To avoid reducing the rent, think creatively of other ways to keep them. Perhaps you can pay for certain utilities, or upgrade the cable package. If you have a vacancy elsewhere, upgrade a good tenant to a nicer property. A fresh coat of paint or new carpet could be perks a tenant would stay for.
Some landlords, desperate to keep properties filled, are accepting tenants with bad credit. This “I’ll take anyone” approach is a mistake. Tenants with bad credit could cost you much more money over time than you’ll lose by waiting for a solid tenant. And in this economy, a low credit score is likely to get worse, not better. There is no better time to thoroughly check your prospective tenants’ backgrounds and credit histories.
The rental market will swing back up again. Rents are often tied to jobs, and when job numbers increase again, look for signs that rents are on the increase. Until then, be patient, don’t panic, and plan carefully. Consider new ways to keep your properties leased; be open minded to new ideas and to all requests from your tenants. But remember, you are under no obligation to let tenants out of a binding lease, just because they can rent somewhere else for less.
For more landlord resources, including everything you need to know about
tenant screening, turn to
E-Renter.com. You’ll know that you have the best possible tenants when you
prescreen.
