Posted by Teresa on November 20, 2010 under Tenant Credit Checks, Tenant Screening & Background Checks | 
When it comes to filling a rental vacancy, most landlords are happy to have several applications to choose from. But sometime, you don’t have a clear “winner” among your potential tenants. As the economy continues to slog along and unemployment shows no signs of easing up, it’s possible that the pool of potential tenants will just keep declining in quality.
What does a landlord do when the only applicants for a rental property have low income, no job, shaky references or no clear source of income?
The first thing to take a look at is each tenant’s credit history. If the applicants pay their bills on time, they will likely pay their rent on time. If all four have questionable credit checks, then compare incomes. For example, if Mary will be paying 2/3 of her income on the rent, but Jane makes enough to cover rent with just 1/3 of her take-home pay, many landlords would breathe easier signing a lease with Jane.
What about unemployed applicants? Landlords report they are seeing more applicants who report they are unemployed. Most receive unemployment benefits, but as everyone knows, they run out. Is an unemployed applicant a definite “no?” Not for some landlords. Devin says he checks other sources of income, such as child support and disability payments. If unemployment is a potential tenant’s sole source of income, he will typically deny the lease application.
For potential tenants who are self-employed, it’s not always easy to prove income. Ask for tax returns, bank statements, and several references—including, of course, former landlords. Money in the bank is a good indicator that the tenant lives below his or her means and knows the value of having cash reserves. And, note that the income reported to the IRS may or may not be indicative of the individual’s true income.
When landlords feel pressured to sign a lease with a less-than-perfect credit risk, it’s sometimes a little less painful to make it a six-month term rather than a full year’s lease. If the rent has been paid on time, you can always extend it for another six months. If not, it’s possible that the pool of potential tenants will have improved in six months.
Posted by Teresa on September 21, 2010 under Landlord Tips, Tenant Screening & Background Checks |
Sizing up tenants is a tricky business. Legally, a landlord cannot discriminate against potential tenants based on gender, age, race, family status, religion, disability or country of origin. And experienced landlords know that you can never judge a book by its cover. That flashy car and expensive jewelry doesn’t guarantee a tenant that will pay the rent on time. Conversely, a beater car and sloppy appearance might not be ideal, but if they can pay the rent, should we care about a wrinkled shirt?
While keeping an open mind during the tenant application process is a good idea, you still want to start the screening process with your very first contact.
Here are 4 warning signs that a potential tenant could cause you problems:
- Your potential tenant cannot pay the security deposit. If they want to pay in installments, or as soon as they get paid next week, or when they get their security deposit back on their current place, you might need to get used to hearing such excuses.
- They are a little too “salesy.” Excitement over finding a great apartment or rental house is great—you want your tenants to like your rental property. But major flattery of you, your outfit, your hairdo or the property should be a red flag. So is selling him or herself too hard. You could have a con artist on your hands!
- A potential tenant starts asking about trading services for rent. There are plenty of landlords who allow tenants to repair and maintain their building or cut the grass in exchange for rent. But it can lead to problems. If you’re not yet at the lease stage and you’re hearing offers of bartering for rent, consider yourself lucky and move on.
- The lease application is not filled out completely. Conveniently forgetting the phone numbers of a current landlord, boss, or personal references is a bad sign. Leaving blanks indicates that your potential tenant might not want you to have that information.
Follow up your gut-check on every tenant with a thorough background and credit screening. If all comes back clean, check with references and employers to give yourself a complete picture of your tenant—before the lease is signed!
Posted by Teresa on September 19, 2010 under Tenant Screening & Background Checks |
As we all wait for the economy to fully recover from recession, we’ve heard reports of landlords skipping over essential steps in the tenant screening process. Thorough tenant screening is one of the best investments a landlord can ever make—some suggest that it can help you avoid about 99% of the problems landlords have with their tenants. When prescreening tenants, don’t skip over two essential pieces of background checks: verifying tenant income and employment. 3 Reasons to Verify Every Tenant’s Employment and Income 1. Not all tenants tell the truth. Tenants reflect the whole of our society, and your potential tenants are a mix of honest, dishonest, professional liars and ex-cons. When they tell you where they work and how much money they earn, they might be telling the truth—or they might not. Verifying employment and income is the only way to know for sure. Landlord Tip: Be wary if the tenant insists you talk to a certain person at their place of employment—they could be directing you to a friend who is posing as the employer. 2. Having money doesn’t equal having a job. A nice car, expensive clothes and shoes and armfuls of jewelry can all be purchased on credit. A landlord we know was conned by a nicely-dressed applicant and signed a lease with her. Later, she found out that she had been laid off six months earlier from the employer she listed on the lease application. Making a quick telephone call to the employer would have avoided this situation. Landlord Tip: Look up employer telephone numbers yourself, either online or in the phone book. Some tenants will provide false information. 3. Keep your tenants safe from harm and your business safe from risk. Verifying income and employment helps you avoid renting to tenants involved in criminal activities. It’s easy to be impressed by a tenant with cash in hand to pay your security deposit and rent. But failure to verify a tenant’s source of income—with paycheck stubs, income tax returns (in the case of self-employed applicants) and phone calls to his or her employer—is almost asking for trouble to move into your rental property. Landlords who fail to screen properly have been held liable for harm suffered by neighbors or other tenants. Landlord Tip: Be prepared to submit a written request for information. Many employers will not provide salary info over the telephone. Don’t be in such a hurry that you can’t invest the time necessary to obtain complete information. Prescreen Tenants for Complete Peace of Mind The best way to be sure you’re renting to a qualified tenant is to prescreen all rental applicants. 100% online tenant screening is easier than ever — and it can reduce your risk!
Posted by Teresa on September 14, 2010 under Landlord Paperwork and Forms, Landlord Tips, Tenant Screening & Background Checks |
1. Not approaching your rental business like a business. To be successful, all businesses need to follow a plan. They need to be capitalized. And they need to be run professionally. This takes time, energy and money. Some landlords are not willing to invest all of these resources into their businesses. Some don’t have a plan. Some don’t have enough capital to keep their businesses going when rent income falls below projections (if they even have projections). Being unable or unwilling to do all of these things will almost guarantee a rental property business that is not as successful as it should be.
2. Conducting less-than-professional relationships with tenants. Landlords vulnerable to becoming too personal with tenants are often sucked into giving extensions on paying rent, reducing security deposit requirements or otherwise allowing tenants to ignore the established rules. Tenants who suffer no consequences will usually continue to bend or break the rules. It may seem harsh, but just as you can’t walk out of store without paying for a gallon of milk, a tenant should not be allowed to live for free in your rental property—even for a day.
3. Treating tenants differently. Letting certain tenants slide on the rent, steering certain tenants toward certain units, and otherwise showing deferential treatment to an individual or group of tenants can land you in trouble quickly. Landlords are constantly taken to court on charges of discrimination for actions like these. You don’t want to be one of them.
4. Failing to document. Keeping excellent records is a habit that can save your business. It’s vital to make copies of everything from driver’s licenses (if legal in your area), move-in/move-out inspections, applications, tenant screening authorizations and lease documents. But consider making notes of phone and text messages, emails and snail mail communications, too. Even a simple spreadsheet can prove to a judge that you treat all tenants equally and follow the law.
5. Not knowing when to call in the professionals. A licensed electrician and plumber, landscaper, lawyer, accountant, tenant screening service and possibly a property management company should be on every landlord’s list of resources. You may not need all of them all of the time, but you will likely need them at some point in running a rental property business. Trying to do it all has been the downfall of many a real estate investor. Knowing when help is needed in managing rentals can save your sanity—and maybe even some of your profit!
Posted by Teresa on August 27, 2010 under Landlord Tips, Tenant Screening & Background Checks |
Landlords are faced with making tough decisions every day. If you’re like the investment property owners we talk to, you regularly ask yourself questions like these:
- Where should my next rental property purchase be?
- What can I be doing to lower my vacancy rate?
- When can I quit my day job?
- Should I hire a property management company?
When it comes to question #4, we have some tips for you to consider when making that decision. Read on for ideas on how to choose a property management company.
First, take your time and do your research. Whether you own one or a dozen rental properties, the decision to outsource management is one of the most important ones you’ll make as a rental property owner. It can make or break your bank account—and even your business. Look at things like:
- How do they handle tenant disputes?
- What is their maintenance agreement like? Do they charge for labor and materials? Is there a surcharge on materials?
- How do they conduct tenant screening?
- What is their reputation in the community?
- Do they offer online rent payment?
- When do you receive rent payments?
- What is their fee?
Understand that hiring a property management company means letting go of the day-to-day management of your rental business. The PM company will show the property, advertise vacancies, screen tenants, handle the paperwork and all the maintenance. If you are not ready to give up control, then hiring a management company won’t do you or the company any good.
Smart landlords know that you must manage the management company. It’s like having employees—and business owners must manage their employees. The property management company is representing you, so make sure you are 100% happy with how they are treating your property and your tenants.
Hiring the right property management company can lead to increase profitability through lower vacancy rates, better tenant satisfaction and lower turnover. You might even get some of your free time back! Do your homework and carefully consider all the implications before you sign any contracts.
Posted by Teresa on August 17, 2010 under Landlord Tips, Tenant Screening & Background Checks |
- An incomplete tenant background check may not provide information on a lease applicant’s employment and income.
- Verifying the employer listed by a lease applicant will indicate his or her honesty—or lack of it. If you call the number provided and the telephone is not answered professionally (or at all) you might have reason to suspect the potential tenant is not being truthful. Certainly, exceptions apply—especially for small businesses.
- Long-term employment is an indicator of stability. However, recent economic difficulties have put many talented and dedicated employees out of work. Landlords may need to be flexible on their standards until the economy recovers. Requiring all tenants to have held their jobs for two years, for example, could mean a record number of vacant rental units for you.
- It can help you determine whether a potential tenant’s income source is lawful or illegal. Sure, it’s nice to have tenants who have plenty of cash to pay their rent. But if they’re not legally employed or cannot provide proof of income, like pay stubs, you could be asking for big trouble.
- Verifying employment can give you peace of mind. Renting to qualified tenants with jobs is the number one concern of most landlords. Confirming your lease applicants’ employment can keep your cash flow healthy and reduce turnover in your rental properties.
The best time to thoroughly check out a tenant’s employment situation is before the lease is signed. Following this tenant screening procedure on every applicant will ensure that you are not discriminating against any protected groups and that you will be leasing to only qualified tenants.
Posted by Teresa on July 27, 2010 under Landlord Tips, Tenant Screening & Background Checks |
According to MPF Research, the apartment rental market is showing signs of improvement, as the vacancy rate declined from 8.2% to 6.6% in the first half of 2010.
That’s good news for landlords. Perhaps you’re already seeing an increase in the number of prospective tenants viewing your rental properties. If you’d like to fill your vacancies fast, this might be a good time to review our tips for selling a good prospect on your rental unit. Don’t let a good tenant go just because you failed to close the deal and get a signed lease!
Remember, there is more to renting an apartment than the unit itself. People want to feel good about where they live. Highlight the following:
- Good communication with owners or management: let the prospect know how well you handle interaction with tenants. Examples of great communication include 24/7 emergency availability in case of emergency, a stellar call response policy, and active listening—which starts the minute you meet the prospect.
- Demonstrated level of professionalism: when you’re on time, your documents are in order, the unit is clean and ready, the grounds are professionally maintained, and you have the statistics to back up why your property is the best, who wouldn’t feel good about living there?
- Location: make it your mission to know every business and attraction within a 5-mile radius. Letting the prospective tenant know there is a dry cleaner, grocery store, library, park, and coffee shop close by could seal the deal.
- Amenities: even if you don’t have a first-class gym or on-site laundry, list the amenities you do offer. Things like water-saving fixtures, low-VOC paint, professional landscaping and free parking are good news to many good tenants.
When the prospective tenant shows signs of interest, be proactive and close the deal. People sometimes have a hard time making a final decision, so it’s up to you to help them:
- Have a lease application ready. Never show a unit to a prospect without one.
- Get a commitment: ask them to complete the lease application.
- Let them know you only want the best tenants, so there will be an application fee to cover paperwork and required tenant screening.
- Your goal should be to collect a signed application, first month’s rent, and security deposit at the same time. Let the prospective tenant know if they do not qualify, the rent and deposit will be returned.
- Remind the prospect that you are showing the rental unit to additional prospects and you cannot hold it without a deposit.
You don’t have to be pushy. If you have a good prospective tenant who needs a great apartment, it’s just a matter of putting the two together. As the rental property owner, it’s your job to make this win/win situation happen!
Posted by Teresa on June 18, 2010 under Tenant Screening & Background Checks |
The U.S. Supreme Court issued a ruling June 1 that could affect landlords whose tenant background checks are limited to the state they reside in.
Essentially, the Court ruled that a convicted sex offender did not have to register in the state he currently lives in because his conviction pre-dated the Sex Offender Registration and Notification Act (SORNA), passed in 2006.
Background to the Decision
The case involved an Alabama man, Thomas Carr, who was arrested for a sex crime in 2003. Upon his release from prison in June 2004, he registered in Alabama as a sex offender. He moved to Indiana 5 months later, in December 2004, where he did not register with proper authorities. Two years later, he was arrested for violating the Sex Offender Registration and Notification Act (SORNA).
Carr’s lawyer argued that his client was not subject to the law because he moved to Indiana well before SORNA was passed by Congress and before the attorney general established a regulation retroactively applying the law to interstate travel by sex offenders.
Supreme Court Overrules Circuit Court Decision
A federal judge ruled that retroactive enforcement of the law did not violate the Constitution. Carr pled guilty and was sentenced to 30 months in prison. On appeal, the Seventh U.S. Circuit Court of Appeals upheld his conviction. The Supreme Court reversed the Circuit Court’s decision, taking a narrower view of SORNA than the Obama administration’s.
According to the Court decision, the law as written by Congress did not authorize retroactive enforcement. Why not? Because Congress used the word “travels,” instead of “traveled,” when referring to offenders who move state to state.
What Does This Mean for Landlords?
If you typically screen tenant criminal backgrounds only the state you live, they could be hiding a criminal past—including for sex crimes. Running a criminal background check on Carr in Indiana, for example, would show no record.
Landlords, Be Safe with Thorough Tenant Screening
Whether landlords agree with the Supreme Court’s decision or not, the prudent solution is to make sure your tenant background screening is as thorough as possible. Peace of mind is priceless!
Posted by Teresa on June 8, 2010 under Eviction, Tenant Screening & Background Checks |
Elaine is a responsible, no-nonsense landlord. Her leases are clear and thorough, and her tenants generally live by her rules. Every now and then, however, Elaine signs a lease with a tenant who unexpectedly starts causing trouble—despite her checking the tenant’s rental history, criminal background, and credit.
This time it’s a young woman who is simply too loud. She plays her TV at top volume, listens to bass-busting music late at night, and has way too many parties with her also-loud friends.
Elaine has reminded the young tenant about her rules on disturbing the peace. She’s asked her to discontinue the behavior. And now, other tenants are complaining. Elaine is ready to issue a Three-Day Notice to Quit. Is that her best option?
According to our sources, no. This non-conditional notice is generally used when whatever is happening to breach the lease cannot be corrected. Examples include illegal behavior like selling drugs, irreparable damage to the property, or subleasing the property without permission. The notice tells the tenant that if they are not out in three days, eviction proceedings will begin.
In this case, Elaine’s tenant could still correct her problem—just by quitting the loud parties and turning down her stereo equipment. Therefore, a Three-Day Notice to Perform Covenant or Quit is the better recourse. It must specifically state the behavior that breaches the lease so the tenant can correct it.
Then if the problem continues over the three-day period, Elaine can start eviction proceedings. But what if the tenant quiets down for three days, and turns up the volume again? Hopefully, the threat of eviction is enough to inspire behavior modification in this tenant. If not, another Three-Day Notice to Perform Covenant can be issued. After a few of these, it might be time for the Three Day Notice to Quit!
Legal disclaimer:
The contents of this article are intended for general information purposes only, and should not be relied upon as a substitute for obtaining legal advice applicable to your situation. Always consult your legal advisor for your particular situation.
Posted by Teresa on June 2, 2010 under Landlord and Tenant FAQs, Landlord Paperwork and Forms, Tenant Screening & Background Checks |
Leases begin and end; tenants come and go. Often, life interferes with details like legal documents (leases) and a tenant comes to you with an announcement: “I’m moving, but don’t worry—I found someone to take over my lease!”
For some landlords, this is when the worrying begins. For others, it’s not a big deal—having a new tenant without advertising and showing the rental unit is the best part about subleasing.
Subleasing is when a tenant assigns his or her lease to a third party; in effect, they are renting the unit from you, while renting it out to someone else.
To protect yourself, you should be aware of the following when considering whether or not to allow a sublease situation in your rental property:
1. Make sure the original tenant knows that a sublease itself does not release them from the original lease. If the sublease renter defaults on the terms, the original lessee is still responsible.
2. If you as landlord choose to release the tenant from the lease, then the sublease renter becomes responsible for rent and other obligations of the lease, and you become responsible for responding to the sublease renter’s needs under the lease.
3. In many cases, landlords do not release the original tenant from the lease, so the original tenant collects the rent from the sublease renter, and pays the landlord per the terms of the lease. The original tenant is also responsible for any damages to the property caused by the sublease renter.
4. You are still in control—not only can you approve or deny the applicant who wishes to sublease, but you can refuse to participate at all in a sublease situation. You then handle the tenant’s breaking of the lease agreement the way you normally do, whether it’s collecting the balance of the lease period’s rent, keeping the security deposit, or agreeing to let them out of the lease providing you find a new tenant.
5. Keep in mind that tenants don’t always inform landlords of their plans. Sometimes they move out and let their sublease renter move in—and you’re none the wiser. You are under no obligation to accept the situation, and after checking with your legal advisor, may be able to start eviction proceedings against the sublease tenant and the original tenant, too.
If your tenant asks about subleasing your rental property, check with your legal advisor first. To ensure you’re protecting your best interests, as well as your other tenants’, insist on full application procedures and tenant screening on the sublease renter.
Legal disclaimer:
The contents of this article are intended for general information purposes only, and should not be relied upon as a substitute for obtaining legal advice applicable to your situation.
Pre-screen all tenants as part of your standard application process. Background and credit checks will help ensure you rent to qualified tenants. For more landlord resources, including forms and information on tenant screening, turn to E-Renter.com.
