Out of any 10 lease applications, how many contain lies, omissions or truth-stretching? Unfortunately, many will. That’s why landlords and property managers can’t assume every applicant fills out an application truthfully. If you’re lucky, the majority will be hard-working, honest people who are simply looking for a great place to live. But can you count on every applicant to tell the truth? And how can you tell if they’re not?
Verify, verify, verify! It’s up to you to do the digging and reveal the truth.
The best way is to do that is through a thorough background check, which can reveal the following information:
- Whether the applicant has ever used another name.
- If the Social Security Number listed is valid.
- Whether the applicant has declared bankruptcy, and when and where it was filed.
- Any liens or judgments against the applicant.
- Whether the previous addresses listed are accurate.
- Any addresses the applicant omitted.
- Whether the applicant is listed as a registered sex offender.
- Any flags on any of the addresses listed by the applicant.
What’s more, a background check can also tell you whether you can be confident in accepting the applicant’s check.
Of course, you’ll need to do some verification on your own, including contacting and talking to the applicant’s previous landlords and current employer. Be sure to verify that you’re actually talking to the property owner and a representative of the employer. Look up names and phone numbers online, and compare them to what the applicant provided.
We all know the importance of tenant screening. It provides benefits to you as well as to your other tenants, including:
- Peace of mind
- Quality tenants
- Fewer evictions
While a tenant credit check will tell you whether an applicant meets your qualifications, and a tenant background check will inform you about an applicant’s criminal history, you should do a little more digging before signing that lease.
Every landlord should look at every prospective tenant’s current employment, employment history and rental history. Here are a few tips:
- Call the tenant’s current landlord, as well as at least one previous landlord. More is better. The current landlord might just be anxious to get rid of the tenant, so don’t accept a glowing report as the truth. But, if two or three previous landlords—who have nothing to lose—also say great things, you might have a gem of a tenant! On the contrary, if previous landlords say he was a problem tenant, but the current landlord says he’s great, it’s possible that he cleaned up his act, but can you be sure?
- Ask whether the applicant was current on rent, took care of the property, were courteous to the landlord and fellow tenants, and followed the rules of the lease.
- Check on the applicant’s current employment situation. Make sure you are talking to someone at the company who is authorized to verify employment. Often, applicants will provide the phone number to a friend or co-worker who is coached to give the right answers.
- Check to see if the actually applicant worked at the previous jobs listed on the application. Unless you check it out, you’ll never know if she has decided to stretch the truth or make up a job she never actually held.
When screening tenants, do a little digging of your own to provide a complete picture of each prospect. You’ll make a more informed decision about whom to accept as your new tenants!
In many areas of the country, rental vacancies are very low; some are at all-time lows. But that’s not the case in every market. If you’re a landlord or property manager with no available units for lease and a waiting list, you don’t need to worry about whether or not to negotiate the rent. But for those of you who have vacancies to fill, should you be considering it?
Here are some tips for knowing when it might pay to negotiate the rent:
When you’re in a renter’s market. When local economic conditions are such that vacancies are high and demand is low, that’s a renter’s market. Savvy tenants will read the signs: units staying vacant for months, several open units in the same complex or building, and landlords who seem anxious to get a lease signed.
Your tenants moved out months ago. If you have several empty apartment units, or your rental home has been empty for more than a month, it’s probably time to consider negotiating with prospective tenants. Losing a month’s rent for too long can be difficult to make up.
You don’t have other perks or amenities to offer. When attempting to attract new tenants, landlords often waive certain fees or pay for a tenant’s Internet service for several months. If you can’t offer other perks, then rent may be your only place to negotiate and bring a tenant to the table.
You have a high-quality applicant. When you have a tenant who meets your income requirements, passed your tenant screening with flying colors, has a steady job and gets rave reviews from former landlords, it might pay to negotiate on the rent. And if that applicant is willing to sign a long-term lease—such as two years—you might regret not reducing the rent if it’s a deal breaker.
Your unit is overpriced. If your tenant has done her homework, she’ll know what comparable units are going for in your area. If she can walk away and rent another place for less money, you might find it difficult to get a good tenant in your building without matching—or at least coming close to—comparable units.
And don’t forget that in negotiation, you also get to ask for what you want. For example, in exchange for lowering the rent, you might get your tenant to agree to pay before the first of the month, or to pay the first few months up front. You could ask for an 18- or 24-month lease. Or, you could ask the tenant to accelerate his move-in date.
Okay, that’s a trick question. Why? Because your dream applicant shouldn’t “look like” anything in particular: not male, female, black, white, Asian, Catholic, Muslim, American, Russian or any other pre-determined profile. Using a prospective tenant’s race, color, religion, country of origin, gender, family status or disability to either approve or reject him or her for a lease is against the law, after all.
But there are several qualities that most landlords would probably agree make for a dream applicant:
- She can afford the rent: Smart tenants know how much of their take-home salary should go to their rent, utilities, car payment and other bills each month. Dream tenants only apply for rental housing they can afford.
- He has stable employment: A dream applicant is proud to present his employment history, because it shows he’s stable enough to hold down a job for longer than a month.
- She doesn’t balk at the tenant screening process: These days, smart tenants know that they will probably undergo tenant screening. And they appreciate the fact that you care enough about who lives in your rental property to require background checks for all tenants.
- He has a good credit history: The dream tenant has never been evicted, pays his bills on time and lives within his means. He’s not overextended on credit, is not going to have his car repossessed, and will most likely pay his rent on time each month. And, if his credit history is less than stellar, he has a co-signer lined up.
- She has great references: When you call a dream applicant’s former landlords and personal references, they all say good things. And they’re not her friends, co-workers or parents who are pretending to be former landlords!
Remember not to judge a prospective tenant by anything other than their ability to pay the rent and security deposit, and pass a background and credit check. And if you’re lucky, you’ll land a dream applicant who becomes a dream tenant!
Start your tenant relationship off right by knowing who you’re leasing to. Protect your rental property and assets with tenant background checks. Proper tenant screening will ensure you are leasing to the best possible tenants.
Landlords typically include language in the lease that prohibits subleasing without permission. But what exactly is subleasing, when and why would a tenant want to do it, and how should landlords proceed?
Subleasing is different from transferring a lease to another party. In the latter situation, another tenant takes over a current lease and the original tenant is absolved of any responsibility for its terms.
In subletting, the subtenant is granted the rights contained in a sublease, but the original tenant is still responsible for the terms of the original lease. In essence, the subtenant is renting from the original tenant, who is still bound by the contract with the landlord. For example, a subtenant is allowed to live in the unit but must pay rent. If they do not, the original tenant is still liable for the missed rent.
Tenants might be interested in subleasing if they are going away for an extended length of time, but wish to return to their apartment. It wouldn’t make sense to go to the trouble of subleasing for a trip of a few weeks. But if your tenant were planning on traveling through Europe or South America for three months, subleasing is a way to cover the rent without having to break the lease and start over when they return.
Tenants who are interested in subleasing may ask permission, even if the lease states you do not allow it. Remember, it’s always up to the landlord whether or not to allow the sublease. If you decide to allow a tenant to sublease your property, follow these tips for a more successful outcome:
- Write up a Consent to Sublease agreement between yourself or your company and the two parties.
- Include elements such as effective date, the tenant and subtenant’s names, the property address, and the monthly rent.
- Be sure to state that the tenant is still responsible for his or her duties under the original lease.
- If you decide to allow subleases, be sure to create a policy. Don’t let one tenant sublease, and forbid another from subleasing. This could lead to charges of discrimination.
- Be sure your tenant also has a sublease agreement with the subtenant. This is a different document from your Consent to Sublease agreement, and covers the legalities between those two parties. If expectations are not made clear, you could find yourself stuck in the middle of their disagreements.
- Keep in mind that if the subtenant damages the unit, leaves before the lease expires or breaks any other condition of the lease, you may hold the original tenant responsible. He or she can will have to get satisfaction from the subtenant.
- Just as you screen all your prospective tenants before signing a lease, you should make it clear that any subtenants will also be required to undergo tenant screening.
Subleasing can be a hassle, but if you have good tenants whom you want to keep, allowing them to sublet while they’re away can make sense. Remember, it’s completely up to you!
Start your tenant relationship off right by knowing who you’re leasing to. Protect your rental property and assets with tenant background checks. Proper tenant screening will ensure you are leasing to the best possible tenants.
As the economic recovery slogs on, tenants continue to double- or triple-up in rental units. In many cases, landlords are not aware of roommate situations; in others, property managers approve one roommate, only to find out he moved out months ago and has been replaced by two others.
Tenants often think that once they sign a lease, they can have anyone they want move in to help pay the rent. For many reasons, this is a bad idea. First, landlords alone get to decide who lives in their properties. Second, tenants don’t always make the best choices in roommates. Third, it’s potentially dangerous to have unknown people living in your apartment building or single family rental house.
That’s why most landlords insist that everyone living in a unit must apply and be on the lease. The property owner may then conduct thorough tenant screening, check credit reports and verify employment and income.
Tenants may think it’s easier to just have a friend move in and hope the landlord doesn’t notice. But it’s actually better for tenants if the new roommate is vetted and approved. Who wants to find out a month or two into the new living arrangement that their roomie is actually unemployed, has poor credit or has a felony record?
Smart landlords will stipulate in the lease that no roommates are allowed without the permission of the owner, and that all residents of a unit must be on the lease. To facilitate good roommate relationships and establish legal responsibilities, you might want to provide tenants with a Roommate Agreement for all to sign and keep with the lease.
- Include language that each tenant/roommate is liable for all terms of the lease or rental agreement. Have your attorney review it before providing to your tenants.
- Include things like the lease term, start date and lease renewal procedures.
- Have a place for each roommate’s name, Social Security Number, and emergency contact.
- List some roommate rules, stating which share of the rent and security deposit each is liable for, which rooms are designated shared and private, and how damages will be handled.
- State the procedure for paying utilities: who gathers the funds and pays the bills, when the bills are due and consequences for late payments.
- Cover parking, garbage and recycling, and other details.
- Determine how guests will be handled, where they may stay and for how long.
- Include guidelines for quiet hours, pets, cleaning, food and other details.
Putting agreements in black and white can go a long way to reducing tension and improving relationships between roommates. And helping your tenants have better roommate relationships can only be a good thing for you as a landlord or property manager.
If you’re like many landlords, you often have more than one qualified tenant wanting to sign a lease. Let’s assume you’ve already gone through your standard process: application, application fee, tenant background screening and tenant credit check, verifying employers and income, and checking references. Now you have two or more approved prospects, and only one vacant unit.
What do you do? Here are a few guidelines to help you decide:
- Who wants to move in first? Each day your unit is empty, you’re losing money. We give extra points to the tenant whose move-in date comes first. How do you know? Hopefully, you’ve either had this conversation at some point in the process, or your lease application contains the question, “When do you want to move in?”.
- Who has the security deposit and first month’s rent ready? Obviously, it’s a good thing to have all your prospective tenants ready to pay you rent and deposit, but this isn’t always the case. If any approved prospects need some time to come up with the money, move on. And cash is always nice. Let all your applicants know that you will continue accepting applications and showing the unit until the first month’s rent and security deposit are paid.
- Don’t give in to your emotions. You may hear that a prospect can’t pay the security deposit until they move out of their current place. You may hear that they need a week or two to get the rent and deposit together, but they definitely want the unit. They might be nice people, and excellent tenants, but… don’t let them get the upper hand. Don’t forget that he or she may not get the deposit back for awhile, and may not get it all back. So they need to be able to come up with full rent and security deposit for you.
- Be realistic. If a good prospect is looking at your vacancy on the 25th of the month, and want you to hold it until the 1st, it’s not likely you’ll have anyone else ready to move in before then. You can always ask for a deposit to hold the place, and convert it to the security deposit. Adjust your procedures when it makes good business sense.
You may not realize it, but you could be facing competition from an unknown entity. All over the country, scam artists are posing as landlords of buildings they don’t even own and preying on unsuspecting would-be tenants. One elderly woman in Maryland lost $5,000 to con artists.
In a tight rental market, people are more anxious about finding affordable rental housing. Scammers take advantage of their desperation—and willingness to let their guard down—to steal thousands of dollars that victims think is going to pay rent and security deposits. Soon, they discover that the “landlord” to whom they handed over their money is nowhere to be found. Typically, they have little recourse for recovering their funds or getting justice. The phony landlords simply vanish into thin air.
Scammers like this affect everyone. Most tenants have limited funds for rent and security deposits—so, when that money is gone, it won’t be replaced for months. Legitimate landlords miss out on the chance to lease to new tenants, and the victims are left scrambling to secure new housing—or become homeless.
How can this scam happen? Con artists search for homes for sale or rent online, and copy the information and photos to create “For Rent” listings on Craigslist and other websites, using their own contact information. When someone inquires, they say they are relocating and need to immediately rent out their home. If the house is for sale, they tell interested parties to ignore the sign in the front yard—they’ll be taking it down soon. Some even find ways to change the locks on the house so they can show it to unsuspecting victims. Others tell tenants they will get the keys after the security deposit is received.
These con artists are creative and convincing. It might be hard to understand how anyone could fall for a scam like this, but they do. Maybe some of your tenant applicants have fallen for these scams. Or maybe they’re getting ready to. As a responsible landlord, you can help prevent these con artists from getting away with their schemes—and help your future tenants save money so they can rent from you!
First, check Craigslist in your area to see if any of your rental properties are showing up under phony listings. And, when showing your rental properties or talking to applicants, be sure to mention that there are scam artists out there. If they are considering other properties, let them know that they need to do their due diligence:
• If there is a For Sale sign out front, call the agent on the sign and ask if the home is for rent.
• Never mail a security deposit to a random address or PO Box if you haven’t met the landlord and determined that they do indeed own the property.
• Check public records to see who owns the property.
• If the rent seems too good to be true, it probably is.
• If the “landlord” is in a hurry or pushing hard for a rent check or security deposit, something is probably wrong.
Going to a little extra effort could help stop these con artists from victimizing another innocent would-be tenant, so they can rent from you!
If you’re thinking of joining the millions of real estate investors who either make a living or add to their income by leasing property, we’ve got some basic tips for you, suggested by our clients, or based on our own experiences.
Think about your goals: Do you want to secure your retirement by creating wealth or income-producing investments? Are you in it for the short term, or the long haul? Do you want to buy property locally, or wherever the deals and returns are the most favorable? How much time and effort are you willing to put into this venture? Do you want to be a hands-on or hands-off landlord?
- Have a long-term view. Buying and flipping houses for profit is generally a thing of the past. Today’s real estate investors have a long-term plan for growing their portfolios slowly over time. They save money to build up a cash reserve, in case of emergencies. And they plan for making bigger improvements, such as painting, roof replacement and structural repairs.
- Keep it local. Sure, there are bargains to be had in Arizona, Nevada and Florida, just to name a few areas. But unless you already live in these states, it will be difficult to manage your rental property. Hiring a property manager is viable option, but it will cut into your profit. Besides, there is nothing like being able to drive past your property to check on it.
- Do the research. Find out the history of the property you’re interested in. Become familiar with the zoning laws in the town and neighborhood. Find out if there are any plans for development, road construction, or commercial building in the area around it. You don’t want to buy a property on a quiet street, only to find out that it’s been zoned for a strip mall.
- Find out what the local rental market needs. If you invest in three-bedroom, single family homes, but the demand is for one-bedroom condos, you’ll have a problem.
- Keep emotions out of the equation. Don’t fall in love with a rental property. Keep it strictly business. Figure out your costs, including mortgage payments, taxes, interest, upkeep, licensing, etc. Determine the market rent for the unit/s. And then determine if the asking price is a good deal. Don’t pay more than your monthly costs, or you’ll be losing money. That’s not the idea behind investing in real estate!
- Screen every tenant applicant. We can’t stress enough the importance of tenant screening. Too many landlords have regretted the decision to skip this important part of the process. Conducting a background and credit check on a prospective tenant is the best way to protect yourself. Make sure you know as much as possible about the person you are renting to.
The contents of this article are intended for general information purposes only, and should not be relied upon as a substitute for obtaining financial advice applicable to your situation.
landlords have faced one of these situations:
- You’re doing a routine maintenance inspection and discover an occupant in the rental whom you’ve never seen before. You ask who he is and he replies, “Oh, I live here.”
- You sign a lease with one tenant. A few months in, she mentions that the rent will be late because her roommate hasn’t paid her share yet. Roommate?
- You live upstairs, your tenant lives downstairs. You notice he hasn’t been around lately, but someone else is clearly staying in the apartment. You ask questions and find out your tenant is away for three months, but he sublet the place to a friend.
- Tenants who live next to one of your rental units call and complain about the three cars that are taking up all the available parking. You reply that only two people live in the unit, but they assure you that three people have been seen regularly coming in and out.
What’s going on? Most likely, your tenant has brought in a roommate or sublet part or all of your rental property to an additional person. If your lease agreement states that no subletting is allowed without your authorization, then the tenant is in violation of the terms of the lease.
The problem with subletting, or adding roommates without your knowledge, is that you have no idea who they are, where the work, if they’ve ever been evicted or convicted of a crime, or if their credit history meets your requirements. Without a chance to perform due diligence, including tenant screening and credit checks—the same tenant screening you do on all prospective tenants—you are at risk of liability for the actions of an unknown person. Plus, your property and business are at risk.
Why would tenants deliberately violate the terms of a lease?
- Maybe they don’t thoroughly read the lease, or forgot what the lease said.
- They may think you won’t catch them in the act, as long as they pay their rent on time.
- Perhaps they think the lease terms don’t actually apply to them.
- Or they simply cannot afford their apartment or house without a roommate.
In any of these cases, you likely have cause to send a cure or quit notice. Of course, check your local and state laws concerning eviction notices. You may want to send a reminder to all your tenants that subletting or adding roommates without your authorization is strictly prohibited. If they want roommates, they must undergo the same application and tenant screening process as everyone else. Explain that this is for the safety of all residents. Keep in mind that treating one group of people differently than others could put you at risk of discrimination charges, so make sure the same rules apply to all of your tenants. Finally, notify tenants that violations are grounds for eviction.
If you do agree to a sublease situation, be sure to put everything in writing. A sublease agreement should be signed by all parties and place in your tenant’s file.