Tenant Screening Now more important than ever!

[Alberto Nikodimov]

Tenant Screening - Now more important than ever! This has always been the a crucial part of the rental process, but now landlords and Property Managers should be even more meticulous because the CDC Moratorium has been extended through at least March 31, 2021. This ties the hands of all landlords if tenants decide to stop paying rent. After hearing many horror stories from self-managing investors and other Property Management Companies, I decided to share the process we use in Central Florida and Orlando. I'm also excited to learn what other people are doing in order to prevent issues, place a great tenant, and make sure they will pay consistently while taking care of the home. Most importantly, if you have made adjustments due to the pandemic, what are they?

Here is what we do:

The first and most important step is providing a great rental home which attracts great tenants - I can't stress this enough! Landlords and Property Managers need to provide clean, well maintained, good looking homes. Even small things like lighting or a pleasant smell in the property make a huge difference. Great homes attract great tenants and poorly maintained properties attract bad tenants! This works for all types of properties A, B, and C. As an owner, your goal should be to place yourself as one of the nicest, cleanest, and best presented homes in the area. If you think you’re saving money by cutting corners and skipping "unnecessary items" you’re actually hurting your investment property. Having your home professionally deep-cleaned for $250 is much cheaper than having tenants not pay their rent. Beyond that, you should have a very extensive screening process. Really learn who you’d be letting live in your rental property!

What we check during the screening process:

• - All adults over the age of 18 that will be living in the home are required to submit an application.
• - Run a comprehensive check of each applicant’s credit history, rental history, and criminal/civil background to include any evictions filed. Make sure you’re not only checking credit score, but their debt-to-income ratio and their payment histories. Keep an eye for money owed to Property Management companies or accounts in collections. Something very important to know is that it takes some time for accounts to go in collections. Therefore, if the applicants just moved out of their previous property and they have a balance, most likely that balance won’t be on their credit report. This is why it’s very important to call previous landlords and ask about the tenants. A great question to ask is: Have they even been late paying the rent or did they carry any balance? Also, would you recommend them as tenants for my property?
• - Confirm their income and employment information. Always call employers and make sure that what you see on the paystubs is accurate. Also make sure the person you are talking to is the actual employer. FUN FACT: Did you know tenants can buy fake/counterfeit paystubs from the internet or Facebook for $20? This is why you as a landlord or property manager need to be very careful when screening applicants.
• - Verify their rental history with their two most recent landlords/property managers. I don’t mean to sound like Geico but a 2 minute call can save you thousands of dollars!
• - Request a higher deposit or a co-signer if all qualifications aren’t fully met. If there are some red flags, don’t hesitate to request additional deposit or a co-signer. If they’re not in a position to provide either of those things, it may be a sign they can’t perform on the lease and may best to deny their applications. It’s better to be safe than sorry! Many landlords have reached out to us for help because they were despaired due to a long vacancy and they placed a tenant even though there were some red flags. A few months into the lease, the tenant stops paying rent and the landlord is in a difficult position.
  
  I hope this is helpful. I could elaborate even further but this is already becoming a big post. I would love to hear what your process includes and if you have made any changes due to the pandemic. We’ve always had a lengthy process of items we review for each applicant, and this is why we have a very low delinquency rate and a nearly non-existent eviction history!

[Drew Sygit]

Fantastic advice Alberto, that we recommend all the time also!

Some additional tips:

1) Check the credit report for other reported addresses and use the corresponding dates to make sure their application occupancy history isn't trying to hide an address - which could be a negative landlord situation.

2) Ask for a bank statement. Since most employers now pay electronically, you can use it to cross-reference payroll deposits and avoid the paystub fraud Alberto mentioned.

3) Look up public records for the actual owner of applicant's current & previous homes. Powerful knowledge when you're contacting the current & previous landlords when you ask them if they own the property or are managing it for someone else. Recommend doing the same lookup on any other occupancy addresses found on their credit report. 

4) You only need one paystub if it has YTD figure on it. Use the YTD income to calculate average monthly income to confirm income stability. Also get last year's W-2 to prove job stability.