Filling the gap in tenant screening tools… Opinions, Please!

[David Van Brunt]

I started down this path of real estate investing just over a year ago, and am now on my 3rd property (six doors). I realised pretty early on that with buy and hold your success is as much dependent on the tenant as the property.

So tenant vetting is critical. However, many (most?) people who are renting out a property don’t own 300 units in multi-building complexes with a full-time staff— they are just individuals with a day job, one or two properties, and limited time during a work day play phone tag with the past 2-3 landlords, verify they really ARE the landlords, etc., etc… so too many don’t bother with this at all … !

I searched online for tenant screening services to see what help I could get. With seemingly dozens of options, they all sell pretty much the same thing: a credit check and eviction screen, a criminal background check, or some combination thereof. I found one service that will make phone calls for you. That was nice.

But it seems there is a real gap here— and I wanted to get a quick sense from this community of whether or not an idea is worth pursuing before I put any serious money into developing a solution.

The best predictor of future behavior is past and current behavior of the same kind. So the idea is this: a tenancy “clearing house” that just stores simple ratings of tenant behavior as it relates to leasing. As PART of a tenant screening process, you could check the dates and addresses on the application against an online database that simply shows the 3-5 question summary reference for that property during that time frame. No names are needed for this— for example, if the person who lived at 123 Main from Feb 2014 through March 2015 (which your applicant provided) has an entry from the landlord or property manager that says “I’d rent to them again”, “They paid bills on Time”, “The property was well cared-for” and a couple other things like that. If similar entries existed for every other address in their history -- that’s a good reference that could be checked 24 hours a day in just a few seconds. Bad entries might drive a rejection or at least other follow-up. Confidential messaging link-backs (if opted-in by the rater) and meta-data can support the validity of the landlord/rater as the real deal.

My questions are these:

1. Would you personally USE this sort of site to check tenant references? (assume it’s free to use)
2. Would you personally ADD data to this site (assuming data entry is super simple, 3-5 questions plus property info) knowing you could send people there directly for references on your tenants?
3. What would your other expectations be for such a site for you to trust it and make it part of your workflow?

The main concern with this type of thing is a “sparse data” problem—With ~40 million people in the US living in rentals, the odds of any specific tenancy showing up will be very low. It would take time for the database to become truly useful from a search results perspective, but instantly useful from a referral library perspective. I’d like to get a sense of user interest before sinking significant time and money into development.

[Levi T.]

The best predictor is credit score and criminal history, this is why everyone uses it. Credit score shows their ability to handle their financial commitments, criminal history is a social credit (example: if they get drunk and fight a lot, you can expect complaints, damaged property, or both). Lastly for our industry we use eviction history as it shows their level of commitment to their landlord in terms of performance in terms of money, timely payments, or breach of contract.

We use Appfolio and hardly ever call their old landlord or confirm payment history as they supply pay stubs, and we know our 4 prong requirement (credit, no criminal, no evictions, and income) is very effacent.

So my answer is no, your trying to fill a gap that is not really a gap in the industry, but more of a gap in your operating process as a business.