Do You Screen Your Tenants?

You have invested your hard earned money, time, and sweat equity into your property. No one and I mean no one will look after it as well as you. For the most part Pennsylvania has a quick eviction process. Not quite as good as Texas but a hell of a lot better than Jersey and New York. Anyway you cut it though the best eviction is the one that never happens. You must arm yourself with solid practices to help you accept a good tenant and run from the bad ones. Nothing is foolproof but the more thoroughly you investigate your prospective tenants the better your odds are of avoiding a headache latter on.
Screening your tenant is a multi level process, an extremely important one. I am in a continual state of screening from the moment I create the marketing ad until they actually sign the lease.

The Marketing Ad

When I market my property on such places as facebook, craigslist, flyers, rent hub I always include the price of rent and the general location of the property, i.e near the courthouse, park, supermarket. This action weeds out those that cannot afford it and those that don’t want to be in that part of town. This is pre-screening and saves you from all those tire kickers.

The initial phone call

The initial incoming phone call starts the ball rolling. During this phone call I am paying more attention to how they conduct themselves then what they are saying. What are the background noises? Are they constantly being interrupted?, By whom? By what? Are there dogs (or any pets for that matter) in the background? Are they constantly interrupting me when I speak? Things as simple as when I first answer the phone what is the first thing they say or I hear. There is a big difference between “Hi, I’m calling to inquire about the house for rent on Ann Street.” And “Yeah, how much do you want for that house for rent” yep that’s not a dramatization, you will be amazed at some people.
I lay out my basic criteria for qualifying to rent. Things like Gross income 3 times that of monthly rent. Security deposit, first and last month rent do at signing the lease. Passing a background check that includes references, credit check, evictions, and criminal background. I engage them as to what they are looking for in an apartment. Ground floor, walk up, dishwasher, central ac, bedrooms, yard access etc. I am paying specific attention to HOW they answer, are they speaking in a respectful polite manner or are they annoyed.

The Showing

Each investor does this slightly differently. Some show multiple tenants the property at the same time, others set individual appointments. I personally like individual appointments. It allows me to “read” the tenant a little closer. Again, just like the phone call, I am paying attention to so much more than just the obvious items. Things like, is the outside of the auto beat to hell, or clean and waxed. Are there burger boxes and beer cans thrown about or is it neat and organized. A 15 year old well kept Honda civic with a dent or two is way better than a 2 year old benz with an interior that’s a mess. I pay more attention to actions than appearances. Do they show on time? No, then why not? When I was a fireman we always showed up an hour early, this way if some unforeseen thing happen we had plenty of time to deal with it and still make it to the firehouse on time. Besides it was always good to get there a bit early and talk with the guys about what happen on their shift. It’s called time management. It prudent and it’s responsible. With that being said, there will be occasions when things happen and they will be late. Did they call? Were they apologetic? Did they act as though “ah so what, who cares”. When they arrive are they neat and presentable? Polite, clean, and/or personable? Do they answer your questions or talk like a politician? Taken individually none of this means much, but looked at collectively and you start to build a story.

The Application

I have a 1 page, front and back, application. Each adult living in the unit will need to file an application and submit to a background check. This is a deal breaker right off the bat. If they give you a hard time tell them to walk. Did the applicant fill it out completely and legibly? There is specific information to ask for. Things like Name, address, social security number, driver’s license number, evictions filed against them. Mike Butler, in his book
Land Lording on Autopilot, does a really good job at breaking down the application line by line and explaining way better than I could ever what to ask and even more importantly why and how to ask.
In the end create a document that will gather the needed information for you to dig deeper into their character.
Up to now we have talked a lot about subjective things. How they speak, How they act, Howthey conduct themselves. Let’s take a few minutes and talk about some hard and fast rules. These things are black and white. Either they pass or they do not. It’s not a case of “Yeah but he is a really good guy I can look the other way just this one time”. You set your criteria. Some items you may consider are:

• Favorable credit history
• Gross income to be equal or greater than 3x monthly rent
• Each adult applicant must submit an application
• Be employed and able to furnish acceptable proof of income

Federal Fair Housing Laws
The following was taken directing from the US Department of Housing and Urban Development’s Fair Housing Website, which states:
In the Sale and Rental of Housing: No one may take any of the following actions based on race, color, national origin, religion, sex, familial status or handicap:

• Refuse to rent or sell housing
• Refuse to negotiate for housing
• Make housing unavailable
• Deny a dwelling
• Set different terms, conditions or privileges for sale or rental of a dwelling
• Provide different housing services or facilities
• Falsely deny that housing is available for inspection, sale, or rental
• For profit, persuade owners to sell or rent (blockbusting)
or
• Deny anyone access to or membership in a facility or service (such as a multiple listing service) related to the sale or rental of housing.

In addition the Pennsylvania Fair Housing Act protects tenants from housing discrimination by landlords based upon the following protected classes:

• Religion/Creed
• National Origin/Ethnicity/Ancestry
• Gender
• Age (over 40 in the State of Pennsylvania)

Be very careful here. When I first became aware of the Fair Housing act I found it incredible that I couldn’t reference the husband. Just in general conversation I would say what’s your husband’s name? Nope, I could be scoping Familial Status. Or how many children do you have? Nope again. It’s not that you can’t ask them but it could be used against you later on so why even go there. Also, be careful in your marketing. “great Hispanic neighborhood,” or “great home for families.” Nope. and Nope. This is against federal law. Even if no ill intentions were had.

The one exemption is if you provide housing geared towards 55 and older tenants. There are specific criterions for this. Some investor’s whole strategy is to provide such housing.

So now that you know how to stay on the right side of the law, let’s get back to the real meat here. Finding great tenants.

Social networks are great tools to use to dig a little deeper. I had a prospective tenant call once that had “just a small dog”. That dog turned out to be a puppy that had two big brothers and all three were pit bulls and one was not even house broken (I’m still confused why anyone would put that on their page).

This next one is my all time favorite, number one technique that I absolutely love. I will drop by their current property unannounced with a piece of paperwork or some document that I forgot to give them. As they open the door I will take a deep breath in. What do you smell? I just tell them I forgot this document I needed signed and was out at another property so I thought I would save them a trip. This allows you to take a look at the upkeep of the outside and get a handle on the inside.

Mike Butler’s version of this is much more my style. It is very direct. He writes in his book Land Lording on Autopilot that he is there to verify:

• That they actually live there
• To see how they take care of the place.

After stepping inside he asks himself two very simple questions.

1. If I was offered a sandwich right now, would I accept it?
2. Do I want to clean up after this tenant when they move out?

In case it’s not clear you need an answer of yes to both these questions. And don’t worry Dirty is not a protected class so yes they are DENIED.

Always contact the applicant’s previous landlord. A present landlord may flat out lie to you. If he gets you to take over his problem, then he benefits. The landlord before that is going to be much more honest with you.
When you call the applicants present landlord as they answer simple ask if they have any apartments for rent. If the applicant gave you a family member or friend they will hesitate. An actual landlord will respond without thought.
Some questions you might want to ask present and past landlords are:
• When did the tenant live there?
• Did the tenant always pay on-time?
• Did you ever have to serve a legal notice?
• Did the tenant have any pets?
• Did you ever have any trouble or damage?
• Did the tenant give you proper notice to vacate?
• Did the tenant leave the unit clean?
• Was the tenant asked to leave by you or your company?
• Would you rent to this tenant again?

You may find that some landlords, especially larger property management firms, will require you to fax them over the tenant’s release of information (which you should have on your application) along with your questions.
No I have no affiliation with him nor do I Profit from recommending his book. I just realized that this will be the third time I mentioned him, Yep Mike Butler again, he recommends in his book to never denied an applicant, simply put if you don’t denied an applicant they cannot accuse you of bias against them. So if for example there is a problem with their, credit, or you find that there was an eviction filed against them then you give them a call and explain the problem. Give them a course of action to take to remedy the problem. Let them know that you are here to help them but you will have to move onto the next applicant in line and that you will hold their application until they fix the problem. Most applicants will take the easy option and just move onto the next apartment.

You see most, not all but most problems arise from lack of due diligence during the application period. If you haven’t guessed yet I found Mikes book to be well worth the cost. I’ve discuss his book three times, there are plenty more gems in it and it easily pays for itself.

I will leave this parting thought for you to chew on. Would you take One Hundred Thousand Dollars and ask just anyone to look after it? No! So why wouldn’t you check, double check, and triple check the person(s) you’re going to put in your 100K+ property.

For a slightly more in depth article and one very much worth reading (it’s one of the first I read) see Brandon Turners Tenant Screening: The Ultimate Guide.