Should I screen inherited tenants?

Question

Good evening BP family!

I recently just closed on my first deal, a duplex with tenants occupied on both sides. I am preparing a new lease agreement as one is up and at the end of the month and the other is on M2M. Looking at the rent roll they have never had any issues paying on time and on the surface seem like responsible tenants (one is a bit cleaner than the other but no major issues). I plan on increasing the rent with the new lease agreement so I was thinking I would first see if they plan on staying at the new increased rental rate. My question is, should I screen these inherited tenants to make sure they are even the kind of tenants I want staying another year? Or if they are willing to stay under the new lease terms just forego a screening?

-Dom

Timothy VanWingerden · Answer

Sounds good! One thing I would think about in the future is if they choose the 6 month option then that means the lease will be ending right around Nov-Dec which is not a good time to fill a unit. I've been in the process of consolidating all of my leases so they end May-June. For some tenants that I signed on, that meant a 18-month lease, 15-month lease etc. So far none of them seemed to care about the odd lease terms.

Since I only have 8 doors right now, the cost of a property management software isn't feasible. I am currently using cozy as a free service to collect rent which is great --for the tenants that use it. Some tenant's still like to me their rent checks.

Good call on using email. I would use one method of communication and stick to it.

Timothy VanWingerden · Answer

@Dominic Franco money order, certified check, paypal, venmo, cash whatever they want to pay with as long as it isn't a personal check or an IOU.

Cathy McCormick · Answer

If you do have the tenants do a background check for you through Cozy, you can always credit their 1st months rent that amount, because Cozy will bill them directly.

Dominic Franco · Answer

@Timothy VanWingerden thank you for the advice. I sent out an email today letting the tenants know the new rental lease terms to see if they are even going to stay with the increased rent rates. However, I did include in the email, after they pick one of the lease term pricing options (1 year/6 month/M2M) that per company policy we will require each occupant 18 years and old to complete an application, background check, and credit report. We are currently using Cozy to manage our property since we just have the one property with 2 tenants in it. What property management software do you use?

-Dom

Timothy VanWingerden · Answer

Yes, you definitely should. You wouldn't want to put someone on a 1-year lease if they don't meet your screening criteria. I purchased my first set of properties last year which were 2 quadplexes and I screened all of the inherited tenants that were on a M2M lease. Since I wasn't in a position to handle 2 vacancies at once, I just kept the ones I wasn't so sure about on a M2M lease.

It's difficult at first since you are probably still working through a screening criteria. That's where putting someone on a M2M lease is helpful.

Dominic Franco · Answer

Thank you everyone for your input and advice!

@Timothy VanWingerden I did consider this risk of vacancy come December time frame with a 6-month lease. I made the monthly rent cost for a 6 month or M2M term quite higher than the year term in hopes that it would deter them from wanting to do anything but a year lease. I suppose I should have only offered a year lease but I was trying to do some anchoring to offset the new rent price. Essentially the new year lease price won't seem as high when they see what the rate is for a 6 month or M2M lease.

Do you use Cozy's paid service to do a background check and credit report on applicants?

We are definitely sticking to email to keep a record of communication. Our phone line is for emergencies only unless they want to schedule a time to call and discuss something.

@Melissa Ward absolutely! We have set out qualification standards and will stick to them. We emailed both tenants our qualification standards and one of them has said already that they do not meet them so it looks like we will not be renewing a lease with them and will have to fill that side of the unit. She is on M2M and prepaid the months of May and June before closing so we will honor those 2 months that she is paid for on her old lease rate.

I was going to try Cozy's paid service to do background checks and credit reports. It emails a link directly to the applicant and they pay Cozy directly. I believe it is $39.99 for both reports at the time of this writing.

Account Closed I started out by sending an email to both tenants about the new lease terms for renewal. Tenant B was very upset and said they could not afford that rate and that a background check and credit report should carry over from the previous owner. I informed them that it was company policy to screen all tenants (including inherited ones) and let them know our minimum qualification standards. She told me that she does not meet the income or credit score requirement so I will inform her that she will not be eligible for lease renewal.

I will consider covering the background check for the tenants, should they wish to renew. However, there are 4 adults living in the property so that would be 4 separate reports. I am considering using Cozy to screen the tenants since it sends the link to the applicant and they can pay Cozy directly.

Joshua Bloom · Answer

@Dominic Franco as a property manager you are always going to want to screen tenants prior to you giving them another year lease at an increased rate. They should always be screened. That way you know exactly who is in the rental property regardless if they agree to the increased rental terms

Eric Worral · Answer

@Timothy VanWingerden thanks for the RentPrep shoutout, we appeciate it. @Dominic Franco if you do decide to use us just know we have a Live Chat feature available on the site that will connect you to a Screener in our office who can answer any questions you may have. Good luck on the new rental and congrats!

James Wise · Answer

As landlords we screen tenants to reduce our risk of placing a tenant into one of our properties who will cause us problems. As your tenants are already in your property there is no reason for you to screen them. Any problems that they can cause you by living in your unit are going to happen regardless as they are already there. Basically the train has already left the station man, you're gonna get what you're gonna get.

Dominic Franco · Answer

@Timothy VanWingerden thank you, I'll definitely reconsider the 6-month lease term should the tenants want to go that route.

I have heard of rent prep before, I'll consider giving that a try. How do you collect the application fee from applicants?

@Kenny Dahill absolutely, I plan on handling it step by step like you described. First, see if they are interested in a lease renewal at the new rental rate. Then do they qualify? If so, do they pass a background check and credit score? I am certainly trying to remain as friendly but firm as possible through the transition to set the precedence for the future of their tenancy.

Should I screen inherited tenants?

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