What's the best way to screen tenants & collect rent??

Question

So I'm looking to purchase my 1st rental property. How/what should I use to screen potential tenants? What's the best way to collect rent? Is it normal to get the 1st and last months rent plus security deposit OR just 1st months rent plus security deposit? Suggestions??

Lucas Hall · Answer

Hi @Bryan Bacallao

I suggest getting a credit report and a background check.

Here are my standards:

• Income = 2-3x rent
• No evictions, ever
• No convictions last 2 years
• No violent / armed crimes, ever
• No or low credit card debt
• 650 credit score or higher

I don't think collecting last month's rent is wise.  It only restricts your usage as a landlord.  If you want more security than first month's rent + a 1 month deposit, then collect a 2 month deposit.  But also know that most tenants will have a hard time coming up with 3 months worth of money at once while continuing to pay their current rent.

I've been collecting 1st months rent + a 1 month deposit for 10 years and it works fine as long as a do a great job screening applicants.

John Fleming · Answer

+1 for Cozy.co

Al Williamson · Answer

Hello @Bryan Bacallao Check out http://cozy.co

@Lucas Hall

Sarnen Steinbarth · Answer

For Tenant Screening I would suggest doing the following:

• Tenant Credit Report
• Tenant Background Check
• Landlord References
• Employment References
• Proof of income / assets

I think it is more typical to get 1st month + sec. dep.  Assuming your property is in Florida, I do not believe there is a security deposit maximum. So you could charge whatever you are comfortable with for the sec. dep.  Then not have to worry about collecting the last month's rent.

Jeff B. · Answer

In Calif, you make take 1st+last OR 1st+security, but NOT Both!  Security can not exceed 2x rent.

Dan Perrott · Answer

@Bryan Bacallao - Welcome to BP!

First - make sure you create a documented list of rental criteria.  You need to create this so that you consistently screen all tenants the same way.  You need to make sure you do not discriminate in any way.  Lucas and Michael have given you good starting points for that criteria.  I have a rental criteria list that each potential applicant must agree to prior to me showing the property.  It eliminates the applicants that would never pass my screening process and prevents me from wasting my time.  @Marcia Maynard introduced me in a past pod cast to the use of a standard, documented rental criteria.

Second - find a screening service to conduct background and financial checks on every applicant.  I screen every tenant 18 years and older.  Every person 18 years and older are listed as tenants on the lease.  There are services listed here on BP.  I use youcheckcredit.com to process my screening.

Finally, set your security deposit based on your screening results.  For example, if they have had issues in the screening that are borderline with your rental criteria, then charge additional security deposit.  For example, I have taken a renter that had a bankruptcy in their background.  They provided documentation that it was caused from a medical situation - life happens.  I had them give me 2x rent as a security deposit.  It works and I have a great tenant that had an issue in their past that was out of their control.

Hope this helps.  Good luck and happy investing.

Russell Brazil · Answer

For screening...I use Transunion MySmartMove to run their credit. I also verify employment, salary, landlord reference and run their names through a court search.  I also verify that the employment and landlords Im calling are who they say they are and not just their friends lying to me.

I use Intuit Payment Network as the primary form of rental payments.

Lisa Wright · Answer

I have always collected double the rent the first month, half of that was basically my security deposit. You must collect some type of security deposit just in case. I have also always used myrental, this is a tenant screening service that includes renter eviction history, background search reports and credit checks.

You can do a package of screenings or just one. I feel it's a MUST when renting out your property. Good luck.

Michael Boyer · Answer

What Lucas said has a good basis in the renter data (which is sobering) out in this study from last year on the financial state of renters in the US:

http://www.finrafoundation.org/web/groups/foundati...

Short answer: be rigorous but realistic

What's the best way to screen tenants & collect rent??

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