A Property Manager’s Field Guide to Successful
Tenant Screening Policies & Procedures
“Tenant Screening by far has to be the most important responsibility
of landlords to avoid ending up in housing court.”
– Chief Justice Timothy B. Sullivan
It has been said by many landlords and other rental and real estate professionals, much wiser than I, that the primary function of a successful rental business is the process of an effective system to screen for good residents. Having the wrong resident in your property can be the beginning of a downward spiral that can be hard to recover from financially, and take too much time to reposition the property to start to attract good tenants again. Result can be the ultimate failure of the property to perform leaving the landlord with little other option to sell the property because they can no longer afford to operate the building.
Bad tenants can result in lost revenues, battered budgets, lack of funding for needed cash flow to make repairs, and the start of a mass exodus of good residents leaving your property to get away from neighbors that never should have gotten through the doors of your rental property in the first place. Having good residents makes for a much more pleasant rental experience for everyone at the table. Residents will like and respect their neighbors, good residents obey the house policies, pay rent on time, take care of the property, and take pride in living in your property, which they call, their home.
In this post I will walk you through several punch lists to be on guard for to seek out, select, and rent to the best possible residents to give you the best possible rental experience as a landlord. These top ten tips will walk you through one step at a time to better understand and evaluate what you are hearing, being told by a prospect, and what to look for to read between the lines to determine if this applicant is the best fit for your rental community.
So lets get started.
TACTIC 1: BASIC BOOT CAMP TRAINING
Are you prepared to screen tenants?
You should know your state’s laws and rental policies for fair housing. If you don’t then hook up with a local REIA, Landlord group, or hang out in housing court for a few days BEFORE you end up having to be there. Networking at the court house is a great way to find attorneys, property managers, and possibly more resources where you can begin your education before it comes from first-hand “experience”.
- State Building Code: 780 CMR
- State Sanitary Code: 105 CMR 410
- Tenant/Landlord: MGL 186 ss 15B, 93A, 139 19
- Discrimination: Title VIII of the CRA of 1968
- Information Protection: 201 CRM 17.00 & 93H
- Americans With Disabilities Act
- Section 8 & Housing Authorities
TACTIC 2: REVIEW THE LANDMINES
Why is screening so important?
A good resident can pave the way to your financial freedom for years to come. Putting in the wrong tenant can be a toxic situation for the property, your good residents, and eventually bring down the cashflow from the building, increase your vacancies, attract the types of tenants you do not really want in the property, and possibly put you out of the game before you even get started. Choose wisely!
- Who Is A Good Tenant?
- What Are Your Rental Criteria?
- What Are Your Income Criteria?
- Do You Allow Evicted Residents to Rent?
- Do You Pull a Credit Report? When?
- What Are Your Credit Score Requirements?
- What Is Their Credit Payment History?
- Smoking or Non-Smoking?
- Pet (Animal) Policy?
- CORI & SCORI Requirements?
TACTIC 3: FOLLOW THE MISSION
Planned Precision Criteria Pre-Screening
I cannot express enough how important it is to develop a strict regime of rental criteria and stick to it – all of the time – no exceptions! Build your basic plan and do not deviate. If you do make adjustments to your criteria along the way, put it in writing. The best thing you can do is greet each potential prospect at the property and give every person a printout of your rental policies and procedures. Don’t balk at the cost of the cheap printouts, housing attorneys are MUCH more expensive.
- Be Consistent with ALL Applicants
- Always Use the Exact Same Process
- Pre-Qualify Income Requirements
- Ask Specific Questions
- Establish Standard Income Requirements
- Get ALL Their Contact Information
- Full Names For Everyone 18 Years Old And Over
- Current Address
- Current Phone Number
- Current E-mail
TACTIC 4: OPEN-ENDED INTERVIEW
Ask ALL Applicants Consistent Questions
Work on this one. Whatever you are going to ask, make sure it is an open-ended question that cannot be answered with a “yes” or “no”. Have fun with this one too. If the answer they give you seems like there might be something missing, or even if it was a great answer, be ready to dig deeper with “That sounds really cool/interesting, can you tell me more about that? Then keep digging deeper into several layers down to learn more about them and how they make react down the road when stuff happens.
- How many people are moving in?
- Who is moving in?
- What is your combined monthly income?
- When do you want to move in?
- Where do you live now?
- What do you pay for rent?
- How long have you lived there?
- Have you given your notice to move?
- Was there any one event that made you feel that way?
- What do you like and dislike about where you currently live?
- If there is one thing you could change about where you live now…what would it be?
- Are you finding your search for a new home stressful?
- How does that make you feel?
- What do you like/dislike about some of the other rentals you’ve currently visited in your search?
- What did you like about your last landlord?
- Tell me about your neighbors.
- Why did you move from the previous rental?
- When did you decide to move?
- What are your hobbies?
- Why would you or wouldn’t you rent from your present landlord again?
- Do you smoke indoors or outdoors?
- Does anyone have a CORI or a SCORI?
- What type of animals do you have now or thinking of getting?
- When are you able to see the unit?
- How long would you want to live there?
- What type of vacuum do you own?
- Do you have all of the required deposits now?
TACTIC 5: DOSSIER DEVELOPMENT
Rental Prospect Documentation
You cannot have enough information on a potential renter who will be occupying your rental property investment. Try to get as much as you possibly can. We will explain to a prospect that it is important to request these documents to verify that someone has not stolen their identity setting them up to be a victim of fraud. You should also provide them with your written policy you give to each and every applicant outlining the steps you are going to take to protect their identity from theft or fraud. This is a great way to have shady characters shun your rental process and satisfy really great candidates that your due diligence has been performed on all of the other renters in the community they are moving into.
- Current Federal Photo ID, Passport or Driver’s License
- Current Utilities Bill
- Current Phone Bill
- Current Cable Bill
- Current Credit Card Bill
- Current Pay Stubs (at least 3 months)
- Current Tax Return (self-employed)
- Current Bank Statements (self-employed)
- Current Reference Letters (landlord)
- Current Reference Letters (personal)
- Current Credit Report
- Current/Previous Rental History
- Social Security Number
- Auto Make, Model, Plates
- Birthdate
- Type of Vacuum
- Renter Insurance Policy
- License To Carry Firearms
TACTIC 6: KILLER RENTAL APPLICATION
Belaire Property Management LLC Rental App
I cannot tell you how shocked I am when I see a one-page rental application. How on earth are you going to be able to find out what you need to know about someone before handing them the keys to your investment property on a single sheet of paper? Again, I air on the side of caution here. Find out AS MUCH as you can here. It may come in handy later on in the relationship should you need to garnish wages, attach bank accounts, put liens on personal property, or whatever else you ask for at the beginning of the relationship. Take a look at our 16-pager for grins and giggles.
- To be filled out at the showing, in advance, or online
- Filled out completely and double-checked
- Time stamp and date each application
- Verify all information
- Make sure the application is signed
- Yahoo
- Bing
- MySpace
- Shutterfly
- Verify Everything on the Rental Application
- Credit Report/Background Check
- Online Resources http://www.masscourts.org
TACTIC 7: FOLLOW THE MONEY
Verify ALL Sources of Income
You have to have a number in mind for the rent/income ratio before you even post the rental advertisement. In fact, your rent/income ratio should BE IN your rental advertisement! I cannot tell you what a difference this has made in our rental operations. Without the ration in there, we would get calls from a wide spectrum of candidates and spent a lot more time pre-screening a lot of phone calls to get to “no”. After we started to list the criteria, we got fewer calls. But we got even MORE qualified calls who saw the ratio and opted out before taking up valuable time.
- Pay Stubs
- Tips & Wages
- Subsidy Letters
- Financial Assistance
- Alimony Payments
- Family Trust
- Veteran’s Benefits
- Pension Funds
- Section 8
- Food Stamps
- Fuel Assistance
- Bank Checking/Savings Accounts
TACTIC 8: GETTING “HIS STORY” STRAIGHT
Verify ALL Past & Present Landlords
This part is fun. There are different thoughts on the strategy to approach past and present landlords. One tactic I have used in the past is to call the number on the rental application listed as “landlord”. When I get on the phone I will ask “Do you have any apartments for rent?”. You would be surprised how many times I have caught unsuspecting “fake” landlords off guard who reply with “Rentals? I don’t have any stinking rentals. I am not even a landlord”. Sounds to good to be true, but it happens. If it is legit, it is a quick conversation to explain why I asked that question. Other landlords I know will pass right by the phone number on the rental application and go directly to the land records for that state, look up the property, deed, mortgage, and start the discussion with the “actual” landlord.
- What was the resident’s payment history perfect?
- Did the resident give sufficient notice according to the lease?
- Did the resident fulfill all of the terms of the lease?
- Did the resident give a reason for moving?
- Were there any complaints from neighbors about the resident?
- Would you rent to this resident again?
- Why would you not want to keep resident longer?
- Where they clean tenants?
- Did they have any animals?
- Did other tenants complain about them?
- Have the police ever been called to the property?
- What did they pay for rent (did it include any utilities)?
- What was required to move in? First? Last? Security?
- Was their rent subsidized in any way, and if so how?
- How long did they live there?
- Did they get along with their neighbors?
- Did the applicant smoke?
TACTIC 9: DOING “THEIR JOB”
Verify ALL Employment & Income References
In the old Detective series, Colombo would ask a series of minor almost insignificant questions and write down his notes on a scratch pad. Then just when everything seemed great, he would ask that infamous question, “Oh, just one more thing…”. In today’s culture most HR departments are horrified at the risk exposure taking the call for a background check and will not confirm anything at all. That’s ok. You can always put the obligation back on the applicant. Just explain that HR could only give me this much information, and that is ok. But this can open the door for you to ask “Oh, just one more thing about your missing pay stubs, job transfer, SSI, disability letter, Veteran’s pension (you fill in the blank here – trust but verify)”.
- Do they still work there?
- How long have they worked there?
- What was their starting date?
- Can you verify what they have put down for their income?
- Does their future employment with your company look promising?
- Are they dependable employees?
- Do they get along with their co-workers?
TACTIC 10: PULL THE TRIGGER
Decision Time
Hopefully at this stage of the process you have funneled down to a few good rental prospects. You should either have two or three folks you would rent to in a heartbeat, or a wishy-washy feeling about the candidates and feeling not so sure about your options. If you have a great one, pull the trigger, get the deposit and sign the leas before they go to rent somewhere else. But be prepared if none of the candidates really meet your criteria to start the process again until you find the right one. Keep in touch those prospects that looked good too. It is always great to build a relationship with great rental candidates. Having a waiting list can really add value for a property manager, or help a landlord get back above keel if things turn upside down in another rental unit. We are constantly prospecting for great leads with model unit listings and you should be too.
- Resident Report Card
- Tally Up & Choose
- Document Everything
- Keep Clear Records
- Keep Digital & Hard Copy Back Ups
- Stay Organized
- Be prepared for court from day 1
- Good Results Build a Preferred “Waiting List”
Top 10 Tips:
Guerrilla Tenant Screening Tips for Landlords
A Property Manager’s Field Guide
Do you have any other ideas on this topic you could share to help our online community? Please chime in to share a comment or review. All feedback is welcomed!
Warmest regards,
Brian Lucier
Belaire Property Management
Regional Property Manager
(978) 448-0669 office
info@belaire.co
www.belaire.co
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