How to Screen Tenants?

Question

Hi everyone,

I'm under contract for my first multifamily deal in NJ. My husband and I are planning to live in the first floor while we want to rent out the second one. do you have any tips how to market the property and more importantly, how to screen tenants? I know that BP has some tools for tenant screening but would be great to hear your experiences!

Thanks,

Beste

Mackaylee Beach · Answer

Hey Beste,

How exciting and congrats on your deal!

Make sure you always follow through with screening criteria with every applicant. INNAGO allows you to market your properties and provides a link for prospects to come. You have the option to obtain background and credit checks.

Evan Polaski · Answer

@Beste Park, I have used Zillow's suite of services for the last few years and love them.

Zillow has resulted in several great tenants.  I send them the application through Zillow, which they pay for directly.  It does the background checks, credit checks, requires paystub verification, etc.

Things I look for, and include in my listing: no evictions or major criminal background issues, take home income at least 3x monthly rent (this is personal requirement, and higher than the typical rent = 30% of gross).  Outline pet policy, if you have a preference.  FYI, emotional support dogs are not a legally protected class of animal and is simply a "certificate" anyone can buy online. (I had a dog policy (including additional deposit and monthly charge) in my listing, then had a woman apply, sent her lease, and then she argued that I couldn't charge her additional deposit and rent for her dog because it was her emotional support animal and she had a certificate.  I held firm and shared the law from my attorney, and she was pissed, but we didn't sign lease.  True service animals are different)

As I get inquiries through Zillow, depending on the volume and frequency, I will just do an open house if I get a wave of applications initially.  If they are more trickling in, I will schedule one off times with each tenant.  I show them the property, personally, because I like to see if they arrive on time, are communicative in general, and what questions they ask during the tour.

If they want an application, since they were already communicating through Zillow, I can send the application link to them directly through app right away.  They complete on their own, and I review.  Then I can let them know if I will go forward with lease with them.  If I do, I use Zillow's customizable templates and email to them for e-signature.  I countersign electronically.  They setup payment through Zillow and all is set.

And it is all free to me.  Tenant pays application fee directly to Zillow.  I think Zillow charges tenant for monthly payments IF they choose to use credit card.  But I get my full rental amount direct deposited each month in my assigned account.  There is a delay on me receiving money, but I can see if the tenant's ACH was pulled on first or if there was insufficient funds.  Typically deposits clear my account around 6th of each month.

Mason Weiss · Answer

Congrats @Beste Park!

Use the BP tools for tenant screening. For marketing your property, make sure to use as many possible channels. I personally like Zillow, but for a house hack duplex I would consider seeing if you can find someone you know to rent out the second floor. This could be a more enjoyable tenant than someone random.

Bryan Hartlen · Answer

There are also several useful blogs on BP.  Just search on screening and/or tenants:  Here's a few I have bookmarked:The Complete Pre-Screening Tenants Process (biggerpockets.comScreen Tenants For Rental Properties in 7 Easy Steps | BiggerPockets Blog7 Advanced Tenant Screening Tips (Don't Get Fooled as a Landlord!) | Blog (biggerpockets.com)

Michael Bailey · Answer

@Beste Park congrats on the beginning of your journey to becoming a landlord!

Bigger Pockets actually offers tenant screening on their site through a trusted partner. There are multiple options available for screening packages; tenant involvement/no tenant involvement, instant reports, hand-compiled reports, and even income verification.

You can find further information by going to Tenant Screening under the Tools tab.

Best of luck to you!

Beste Park · Answer

@Abel Curiel thanks for the fantastic insights! I'm planning to be fully hands-on for our rentals. I'd like to hear about brandon's recommendations for managing rentals. Thank you so much!

Abel Curiel · Answer

Good morning Beste!

Congratulations on your upcoming first deal!

The answer for this will depend on how 'hands-on' you and your husband would like to be with this process.

If you want to do everything yourselves:

1. There are a number of platforms (i.e. zillow, apartments.com, etc.) that you can use to market your unit for rent. Depending on your location in NJ, you may also have access to Streeteasy rentals (past and present) to assist with research and marketing your rental unit. I highly recommend professional photos if you are listing on these platforms.

2. Once you've done your research, price your unit according to the market. i.e. if comps were rented at $3,000/month back in the summer, you may want to lower your marketed rental price to adjust for the winter months' slower demand.

3. Have your prospective tenants complete a rental application - Brandon Turner shares great resources in his book on managing rental property. Shoot me a DM if interested in some of his recommended documents

4. Verify all application details by collecting supporting documents i.e. W-2, tax returns, bank statements, full credit report, pay stubs, reference letters, employment verification letter, etc.

Look out for any discrepancies and red flags. I.e. gross exaggeration of qualifications, missing paperwork (this could sometimes be intentional), vague responses to important questions

5. If you are satisfied with the application and supporting documents, have the prospective tenant complete an online background check which should cost them ~$20-40 (non-refundable)

6. Based on the application, documents, and reports, you can move forward with lease-signing and collection of deposits. I like to recommend the added step of a face to face or (at least) virtual video interview.

If want to be hands-off:

1. connect with a local investor-friendly Realtor who works with landlords, knows the rental market and has experience/resources for all the above!

All the best to you on your next steps as landlords!

Abel

Beste Park · Answer

@Evan Polaski such a great answer! thanks a lot.

Beste Park · Answer

thanks everyone, these are very helpful!

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