Credit and Background Checks

[Harris Pantlik]

Hi All,

I am planning to close on my first rental property tomorrow in North Charleston, SC. I purchased the property with 5% down. It is actually two homes on the same lot that I plan to separate with a fence. I plan to live in the 3bed/2bath home and rent out the ADU (2bed/1bath). I was looking for any advice with finding potential tenants for this property. I was planning to run credit and background checks with application fees but any other advice would be much appreciated. Does any one recommend a credit and background check company to streamline the process?

For tax purposes, I sent over my appraisal to my CPA and we plan to depreciate the ADU and write off as much as we can (i.e. tax, utilities, repairs). I also plan to make the largest room in the large home a home office and write that off. I am all ears for any other tips.

[Kenny Dahill]

Hi @Harris Pantlik,

I'll do my best to give a detailed high-level guide.  Here are the three primary scope when you are seeking new tenants.

1. List / Advertise Rental Unit & Showings
2. Receive Applications / Screen Tenants
3. Tenant Move-In

List / Advertise / Show Rental Unit

• Listing Site:  You need to list your rental property on popular listing sites: Zillow, Facebook Marketplace, Apartments.com, Craighlists, etc.  Side note: Zillow is starting to charge $9.99 per week in a lot of markets.  Not a fan but they gotta do what they gotta do.
• Block Showings:  Landlords who are nervous generally are worried about time and messing up.  To save time, utilize block showings. This can include open houses or scheduling several interested applicants the same time.  You don't want to do 100 different showings.  Try to minimize that.
• Know Your Ask:  When interested tenants come, they will ask you about their responsibilities and requirements.  Have this prepared so they know exactly how much it will cost to move-in and live there

Reviewing Applications / Screening Tenants

• Follow the Law!: Can't be stated enough. Every state and city have unique laws; one of the perks for hiring a PM. Read up on FHA laws about discrimination. Don't discriminate race, color, familial status, sex, gender, national orgin and disability.
• 18+ Applications:  Everybody older than 18 shall be responsible for submitting an application and getting screened.  No exceptions.
• Screening Reports:  These are very handy, but not an end-all be-all.  Know what your criteria will be for tenants: minimum credit score, allowable criminal records, etc.  Screening reports help shed light on the applicant but still require more due diligence.  For example, I personally don't care too much about credit score.  I care about the trend of their credit score, which you will see their credit payments that were hit/missed.
• Contact Landlords:  Skip the personal references; waste of time and a joke. I've never had a personal reference give honest feedback about potential troubles.  However, landlords are more likely.  Ask them about their experience.
• Proof of Income/Funds:  Doesn't matter how much somebody does or doesn't make, they need proof.  You would be surprised that some make a lot of money but spend all their money and have no savings.  Request pay stubs and bank statements.

Tenant Move-In:

• Checklist:  Make sure to walk the property, ideally with the tenant, for any damages.  Make note so you can withdraw from security deposit when they move out.
  
• Rent Collection:  Have a system and be consistent.  Lots of choices but I always advise one of the free landlord software.  Tenants will have their own preferred method, often Venmo or Zelle.  You're able to go with them but landlord software offers the same service with more benefits to the landlord.  Never collect rent in cash or check.
• Landlord Gift:  Start the relationship off great with a move-in gift!  I typically provide pizza dinner because moving sucks.  Then a week later I'll give them a Lowes gift card to address any little thing they need.  They're always appreciative and let's them know how the relationship will go.

Best of luck!  Let me know if you have any questions, I'm happy to answer any you have.