Do I get a say in tenant selection if going through PM?

Question

I am in the "rehab" stage of my first BRRRR project. I have a full time W2 job with varied work schedule, so I will be going through a property manager to help place tenants and handle all other usual PM type duties. In my W2, I am very familiar with looking at credit reports, and underwriting loans. My question is, when it comes to tenant selection, does anyone ask the PM for the ability to examine the candidates and have an opinion based purely on things like rent to income, overall DTI, job time, job stability (W2 vs. 1099/self-employed)? I would like to be able to have some sort of input on who will be living in the SFR, but don't want to open myself up to possibly violating the rights of a protected class. Any input would be greatly appreciated!

Nathan Gesner · Answer

@James Palassis you need to talk to your PM and see how they operate. Some will involve you while others will not.

I'm a PM with over 300 rentals and years of experience. I have a busy office. Why would I take time to involve an amateur Landlord in the decision-making process? The Landlord has far less experience, doesn't know the law, hasn't met the applicant in person, etc. It would be a waste of time to have to regurgitate everything, share my advice, and then wait for the Landlord to give me a thumbs-up.

What is gained? Some managers involve the owner because they don't want to take responsibility if something goes wrong. If a tenant trashes the property or stops paying rent, the PM can point back to the owner and say, "You approved them so it's your fault!" That's not how a professional operates.

I know how to screen applicants better than private Landlords. I have all the information in front of me. I understand the intricacies of the law (e.g. disparate impact) that most Landlords will never even hear of. I have a busy office and don't want to waste time trying to contact the owner, share all the details, and wait for them to decide. Either my clients trust my expertise or they don't and can hire someone else.

Kevin Dougherty · Answer

Our PM always confer with us prior to signing leases, we look at the tenant's history and give the thumbs up/ thumbs down on each one. The PM should be able to guide you if they think you are in violation of protected class, etc... Protected class,  etc... are not given a pass when their past rental history reveals them as a risk to the new landlord because they didn't pay, destroyed property, evictions, unregistered persons living with them, arrest for criminal activity at their previous residence. These are all good reasons not to rent to them. Documentation is a beautiful thing when making a decision.

Michael Hayworth · Answer

@Nathan G.'s answer is kinda blunt, but it's a good one if you're going to hire a PM. As he points out, the PM sending you tenants to approve is trying to transfer responsibility to you, BUT they don't really give you the tools to do it, because PMs are subject to all kinds of restrictive laws (most of which had good intentions, but are easily abused). When I was new, my worst tenants came thru realtors or property managers, like the 9-person family who only put two adults and two kids on the application, but the PM only provided me the written application to review because the applicant belonged to a protected class and the PM was afraid of getting sued.

For only owning/managing one rental, I wouldn't hire a PM. An individual, renting his/her own property without use of a broker, is not subject to the Fair Housing Act, so most of the things Nathan mentions aren't an issue. (That's federal....check your local and state laws). One big advantage of that is that you can more easily deny nuisance tenants who claim their pet is some sort of service animal, but have no certification of that except a certificate from an internet site.

If rentals are in demand in your area, you can advertise the property on Zillow/Trulia/Hotpads, set a couple of open-house showing times for the property, and take the best tenant, not just the one who applied first. Running their credit or background check is fairly simple - there are numerous sites that can do that for you over the internet. And if the house is newly renovated, having a handyman on call is a lot cheaper than 8-10%/month to a PM for handling repair calls.

Once you get to where you have quite a few rentals, a good PM is quite valuable, but I'm not sure it's the best thing for just one.

Cory S. · Answer

I use PM on all my properties and it is my decision on who we pick.

They send me detail reports on the applications and we do a comparison on each one based on their employment, credit score, rent history etc. and then I make the final decision.

Of course I ask for their input as well as the PM is going to have more experiences with tenants than me.

Do I get a say in tenant selection if going through PM?

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