Screening tenants – the importance of background checks.

 

Author– Trevor Thompson

Board Member

This week I have been accepting rental applications for a property that we have just brought back to the market for rent.

This house happened to have a fire last February and we have now repaired and updated it. That is a story for another day, but illustrates that unexpected challenges can arise as an owner or manager of real property.

As I have reviewed applications and met with prospective tenants it has been impressed to me, the importance of being thorough in your tenant screening.

I have had 2 applications for this home that spoke clearly and politely on the phone, raised no flags when viewing the property, and by their rental applications, seemed to be well prepared and qualified to do business with me for no less that 12 months and maybe longer.

However, as I was verifying the information they presented it became clear. This is not someone that will fit into our system, or that we would choose to rent to. Here are some general reasons I have turned down tenants in the past – not necessarily these applicants.

1. Inflated income – I see this often. When applicants calculate their income it is sometimes wishful thinking. I understand rounding up, like paystub says $1927, and they say “about $2000”. But occasionally I will receive an amount of the clear blue sky. In one case the stated income was inflated by just under 50%. That strategy did not work well for the mortgage industry. I ask for the paystubs in order to verify. Check the year to date figures to also give you an idea of if they work full or part-time, and give you an idea of time on the job.

2. Rental References – We like to see a history for the previous 3 years. I want to see that the dates don’t leave large gaps between references. If I can’t see 6 months or a year it is clearly worth a phone call to the applicant. On one past application I found a landlord that had been left out because of an eviction and the tenant knew the reference was bad. As a property manager, I am more likely to give you a new chance if my applicant lists the reference and explains the circumstances around what took place. I also realize that there are two sides to every story. I recently had a landlord tell me the applicant had destroyed the yard and home. By taking an extra 10 minutes in my travels around the city I drove by to see that this claim was greatly exaggerated. But, I brought it up with the applicant, asked for more information and reviewed my expectations for yard care. This applicant became my tenant and keeps a beautiful yard. I feel like it was worth the extra time and effort to train her as a tenant.

3. Past Due Balances – I rarely hear about past due balances still owed to a previous landlord from the applicant. This is the type of information you usually only get if you speak to the previous landlord. Sometimes the tenants are unaware of it, sometimes they are wishing it will just go away, but always I want it dealt with before I can do business with them. I have had 2 cases this past year where roommates applied and were denied because one roommate had a past due balance. In one case the other roommate also decided not to take a chance on that partner to a lease. By calling the previous landlord and asking this one question you can make an easy decision about who will respect you as a business owner and who will take advantage of you if you allow them to.

I also want to highlight a positive experience. I have another tenant that brought up their balance owed before making the application for my property. She explained that because of a job loss they were unable to complete a lease, moved out promptly, and made payment arrangements for the balance until the landlord could re-rent the property. I verified this with the documents and a phone call to the landlord. We also deducted the payment amount from their total verified income and they qualified without it. This shows me that the tenant is responsible, considerate of the landlords position, and making good on their responsibilities. She immediately rose to the top of my list and has rented from us for 5 months now without a hiccup. I expect that it will be a good relationship

I hope it is clear that meeting with an applicant and having a “good feeling” is not sufficient to enter into business with that person. I have heard it said, “In GOD we trust. In everyone else we collateralize.” I would add that we also verify.

 

CONTACT US

We're not around right now. But you can send us an email and we'll get back to you, asap.

Sending

©2017 SLREIA Salt Lake Real Estate Investors Association

Log in with your credentials

Forgot your details?