Tenant applies, now what?

Question

Hi! We are super new to landlording and have gotten a few applicants for our long term rental. We are using Zillow.

First, do you call previous landlords/supervisors/etc.? And what are some general questions you ask?

After you choose an applicant that meets all of your qualifications, how do you then add certain things that you want the renter to be aware of/responsible for in your lease agreement? I’ve found generic agreements online and there is even one on Zillow. But has anyone used the Zillow lease agreements, and can you use free text to add clauses? Or if I use a general form, can I make my own addendum to the lease agreement?

Again, super new to this so any one would be helpful! Thank you.

Kristina Hinostroza · Answer

Great! Thank you to those that have responded to my questions and provided valuable information.  As mentioned before, we are new to this ourselves and have to start somewhere.  So I appreciate the advice from all of you. @William Powell @Malkia Ra @Brandon Peery @Konstantin Ginzburg Account Closed

Henry T. · Answer

1st. Go to a really experienced landlord/real estate attorney and work with him to make you a bullet proof lease. One full of clauses and requirements that will ensure your tenant tows the line and doesn't damage your property....then start concentrate on getting applicants. There's a few good podcasts here that can help you with that.

William Powell · Answer

Looks like you need the entire spiel. I recommend purchasing a landlord book to have as a guide. To answer some of the questions you asked: Yes, you try to contact previous landlords. I try to google instead of using the phone number they give me. Also, you can get your hands on a general state lease and then put it in MS Word and edit it to your liking but you need to consult with a RE lawyer to make sure you don't add things illegal. I have another document that has do's and don'ts that I have my renter' sign, that has common habits that destroy or devalue property. For example, on my "Do's and Dont's List" it says no BBQs in the front yard, no front furniture etc.  They sign it meaning they agree to these terms before moving into the house. Again I recommend a landlord guide.

Malkia Ra · Answer

@William Powell gave solid advice.

I personally am not a fan of using Zillow for anything other than marketing.  I use another platform for applications and background screening.

Prior to starting this process you should have an idea of what you'd like to know about your future tenant, thus creating a questions checklist in advance is ideal.  What's also very important is knowing what you can/cannot legally ask; therefore you should refer to your local housing authority for guidance.

Regarding your lease, I encourage everyone to have a lease template prepared prior to marketing their rental.  It often takes a bit of time to think about the "who, what, when, where and why" regarding the terms for your rental, which should be standard and not "tailored" per tenant.  If you create a lease after you've received interest/applicants, you'll increase the likelihood of rushing to put it together and perhaps miss important items that should be included.Again, your local housing authority is a great resource, as well as tenant/landlord attorneys and even real estate agents.

Mackaylee Beach · Answer

Hey Kristina!

Whenever prospects inquiry about any of my properties and before they even apply, I inform them of my requirements. This provides them with an idea if they would qualify or not saving us both lots of time!

I like to conduct rental verifications of at least the last 2/3 years. Some general questions would be: any known pets? Any known damages to your property? Have you ever issued any lease violations?

Having a lease template makes it so much easier to get the ball rolling once you have a qualified prospect. I would suggest of consulting a local attorney to make sure your lease is not in any way violating anything.

Josh McDonnell · Answer

Great post, thanks for sharing.

What is your website? I'd like to check it out

Michael Smythe · Answer

@Kristina Hinostroza why didn't you research all this BEFORE buying a rental or listing it online?

If you continue to operate like this, you will be courting disaster.

From our website, hope it helps:

A bad tenant can lead to thousands of dollars of losses via unpaid rents, legal fees and property damages. We’re one of the few property managers that require W-2’s and a bank statement and we go way beyond the traditional, “income must = 3x rent” qualifier.

Below is more information about what our Applications Department does to screen applicants and find the best tenants possible for your property.

• Required InfoWe require the following from each applicant over the age of 18, that is not a dependent of another applicant (as evidenced on a tax return):Copy of acceptable state picture IDRecent YTD paystubRecent W-2Recent Bank Statement, all pages, no info blacked outRecent tax return if self-employedApplicants are often slow about turning this information in, asking us why we need it and then taking several days to submit. Then they complain that our process takes too long!
• Copy of acceptable state picture ID
• Recent YTD paystub
• Recent W-2
• Recent Bank Statement, all pages, no info blacked out
• Recent tax return if self-employed
• Credit HistoryMany companies use credit summaries, but we find these rarely tell the whole credit story. So, we obtain a full credit report and review collections, chargeoffs, age of credit accounts, active accounts, etc. to build an overall credit evaluation.
• Public RecordsWe also obtain data from national databases about evictions, convictions and sex-offender histories. These all require applicants to submit an acceptable Letter of Explanation addressing each specific issue and occurrence.
• Rental HistoryBecause a current landlord may say anything to get rid of a bad tenant out of desperation, we also require information for the previous landlord of all applicants. Verifying rental history often takes a long time to complete due to applicants not giving us correct landlord contact information, landlords not returning our calls or refusing to give us any details.We also deal with applicants trying to have family or friends pose as their landlords. To address this, we verify the property owner per government records and use this information to vet imposters.Anything that seems suspicious will lead to us requesting an acceptable Letter of Explanation to address.
• Analyze IncomeMany landlords require a month of paystubs from applicants and just use these to calculate a monthly qualifying income. In our opinion, this doesn’t result in a viable income amount or analyze income stability. We use a YTD paystub and last year’s W-2(s) to calculate income several different ways:Hourly or salary income calculated to a monthly amountYTD income divided by number of YTD monthsYTD + W-2(s) income divided by the corresponding number of monthsIf these numbers vary too much, then we investigate and require an acceptable Letter of Explanation.
• Hourly or salary income calculated to a monthly amount
• YTD income divided by number of YTD months
• YTD + W-2(s) income divided by the corresponding number of months
• Employment StabilityUnless an applicant has exceptional credit, we strive to determine their stability of employment to make sure they’ll always be able to pay the rent on time. So, we require a detailed employment history for the last two years and verify as much of it as reasonably possible.
• AssetsWe are one of the few management companies that requires a bank statement as part of our application process. We think it’s important as it allows us to check for Non-Sufficient Funds (NSF) issues and to determine if an applicant is living paycheck-to-paycheck. Bouncing payments or only being an illness or accident away from not being able to pay the rent, are issues considered by our underwriting.
• Letter Of ExplanationAny time there are credit issues or we discover an inconsistency, we require a written letter of explanation (LOX). Many applicants just want to tell us their excuses over the phone, but if they won’t take the time to put it in writing, we find they rarely end up being good tenants.
• UnderwritingTraditionally, landlords have only looked at the income of applicants and approved those having income equal to three times the property rent. This crude method ignores all the other debt payments tenants have. Given that many tenants will make their car payment before their rent payment, we’ve copied the mortgage industry’s method of debt-to-income (DTI) ratios. We calculate rent plus all debt payments as a percentage of gross monthly income.Our underwriters strive to analyze and balance all the information above to determine the statistical likelihood of a tenant paying their rent on time.
• ApprovalOnce an applicant is approved, we require a nonrefundable Holding Fee to make sure they are serious and don’t change their minds. We actually keep marketing your property and accepting back up applicants until your property is actually occupied.

• Copy of acceptable state picture ID
• Recent YTD paystub
• Recent W-2
• Recent Bank Statement, all pages, no info blacked out
• Recent tax return if self-employed

Applicants are often slow about turning this information in, asking us why we need it and then taking several days to submit. Then they complain that our process takes too long!

Anything that seems suspicious will lead to us requesting an acceptable Letter of Explanation to address.

• Hourly or salary income calculated to a monthly amount
• YTD income divided by number of YTD months
• YTD + W-2(s) income divided by the corresponding number of months

If these numbers vary too much, then we investigate and require an acceptable Letter of Explanation.

Scott Allen · Answer

@Kristina Hinostroza

Things I look for for personal rentals - At least 600 credit score, 2.5-3x the monthly rent in income, criminal background check.

It is always smart to call employer and verify employment and call previous landlord to get background info as well as condition of the unit they're moving out of.

Konstantin Ginzburg · Answer

@Kristina Hinostroza

Zillow property management has a feature that allows tenants to provide a background check during the application process. Viewing this background information from each tenant is a very good initial source of information to eliminate some tenants such as their rent to income ratio (3x or above is the normal rule of thumb), no prior eviction record (a prior eviction will automatically make us reject an application), and credit score (I personally do not weigh credit score when I select a tenant but others may). Once I have a tenant whose able to pass a background check like that, I will contact prior landlords to ask about any prior issues they may have had (late rent payments, damage to property, what condition did they leave their unit in, ect.). Once I am comfortable accepting a tenant, I would forward them a copy of the lease for their review and allow at least 24 hours for them to look over the lease before I schedule them to sign. Once an agree is signed, I require first months rent and a security deposit to be provided prior to given them access to the actual property. As far as a specific lease, there are many template that you could find online. I may also ask around within your network with other investors to see what leases they use. Your real estate agent may also have a template to get you started. You are free to amend leases to suite your suites but it may be a good idea to consult with a local real estate attorney and refer to local tenant laws to ensure your amendments stay within the law.

Brandon P. · Answer

Hello Kristina,

Tenant applies, now what?

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