All Forum Posts by: Alex Hamilton

You are not required to notify by phone, but you are required to send an Adverse Action Notice. I understand you want to be courteous, but I wouldn't suggest talking to applicants about their failure to meet your criteria. It's too easy to accidentally say something that could land you in a lawsuit. You can say they didn't meet your criteria and explain the reason for their denial if you decide to make the call.

Get in the habit of explaining your screening criteria before they apply. Consider including a disclosure form with the rental application. The denial letter shouldn't surprise your applicant if they know what's on their credit report. The Adverse Action Notice will give them everything they need to initiate a dispute if there are inaccuracies on the credit report. 

Make sure your Adverse Action Notice is compliant with FCRA and Regulation B. Your Consumer Reporting Agency (CRA) should be able to help you with this or feel free to contact me directly with questions. Also, make sure you are applying the same screening criteria to all your prospective renters equally and don't make exceptions.

You can do all the same things for free through CheckPoint and the process is not inconvenient for the applicant. 

Hi Marissa, I replied on your original post regarding the tenant screening vs. discrimination question. I hope you find my response to be helpful. Feel free to contact me directly for clarification or additional questions regarding this matter. Good luck!

Hello Marissa, I'd like to address your question regarding tenant screening vs. discrimination. Let me start by saying that I appreciate you asking this question, because it seems a lot of landlords struggle with this issue.

Perhaps you obtain several applications, then choose one that "makes you feel good", order a credit/background and presto - you've found your tenant! Well, if another applicant decides to sue you for discrimination, the judge will ask you how you decided to choose which application to process first. "I got a good feeling about them," is not a response that the judge will want to hear and you will likely lose your shirt in court.

Some landlords will obtain several applications, process credit reports for them all and choose the best from among them. The trouble with screening this way, is that you are actually damaging everyone's credit with an inquiry, even though they are qualified for your rental. It's not fair to the applicants and not a good business practice.

Yes, you should rent to the first person that applies and meets your screening criteria. I understand that perhaps someone meets your screening criteria, but you still have a funny feeling about them and suspect they will be a problem. The bottom line here is that you are at risk of an eviction/property damages if you accept them, but you are also at risk of a discrimination lawsuit if you deny them. Either decision could cause you a lot of heartache and/or financial ruin. Tenant screening exists to provide you with evidence for identifying problematic tenants, so you may legally deny them.

Set an appropriate screening criteria to meet your property goals. Pay attention to how you market your rental unit. Be very clear about your criteria with your applicants. Obtain a comprehensive tenant screening report. Treat everyone equally according to Fair Housing Laws. Keep all records/evidence for a minimum of 25 months. Keep an eye on the property for signs of a lease violation. Let me know if you have questions or would like more information about FCRA, Fair Housing and Best Practices for landlord. Good luck!

You need to protect your assets, so you should certainly obtain the SSN as part of the tenant screening process for the reasons that others mentioned above. Not only should you ask for the SSN, you should also obtain proof (SS Card) that the SSN belongs to the person in front of you. This helps prevent identity theft and people sharing SSN's. An applicant that is doing their part to keep their information secure, will request proof of your identity and ownership/management of the property. 

Once you obtain a Rental Application (and SSN), it's your responsibility to secure it for at least 25 months. You can be seriously fined if your tenant disputes a credit inquiry and you can't produce the SIGNED authorization on the Rental Application within the 25 month period. Your consumer reporting agency can offer suggestions on how to do this properly. 

Yes, it's ethical for you to ask for SSN. It would be unethical to use the information for a purpose other than screening the applicant. You should protect their information properly and make sure you are compliant with FCRA regulations. When obtaining credit reports, the Bureaus require an inspection of your office to confirm your ability to view/store/destroy the documents properly.

Tenant Screening is my specialty, so feel free to contact me directly with questions about any of these topics!

Regarding question #3: Everyone has different amounts of debt, so I prefer to consider Income to Debt Including Rent instead of Income to Rent. A credit report will reveal their monthly payment responsibility. I recommend to conditionally approve anyone with an Income to Debt Including Rent Ratio of 1.33:1 and fail anyone below 1.2:1. Below is a case study to explain.

Allan and Barry are both applying for the same property where the rent is $1000/month. Allan makes $2500/month and Barry makes $4000/month. It seems that Barry is the better candidate, because his Debt to Income Ratio is 4:1 while Allan's is only 2.5:1, just below your criteria of 3x the rent amount.

What's not shown above is that Allan has $250/month in debt while Barry owes $2000/month. With this information, we can calculate that Allan's Income to Debt Including Rent Ratio is 2:1 while Barry's is 1.33:1, making Allan the better candidate.

I suggest getting as much information as possible about the tenant. You can charge prospective renters for the screening fee, so there should be no out-of-pocket expense to you. 

Look for a Consumer Reporting Agency that offers more than just a database searche. For example, if you are getting a Nationwide Criminal Search, make sure that records found are verified with a County Criminal Search. A good company should also be able to complete the employment and rental verifications for you. Good luck!

Thanks @Mark Nolan and @Jason Jennings for the welcome! It looks like BP is a good place to connect with successful investors.

I have been servicing the rental property industry for several years and would like to start making my own real estate investments. I'm curious about how you got started and what you would do different. Any referrals or suggestions are certainly welcome!

(1) A portion of income is wage and the other portion is stated. The stated income should still be taxed. You can request a copy of the applicant's tax return to see how much income was claimed. You can also call the employer to verify the stated portion of income.

(2) This one is a bit trickier and really depends on your goals for the property. You should set a screening criteria and apply it equally to all applicants. I wouldn't recommend a criteria that approves felons if this was an A property. Since it's a C+ property you may want to lower criteria to accept former felons with a recommendation from the probation officer. Avoid discrimination lawsuits by equally applying the same criteria to all prospects.

(3) Make sure your lease is very detailed regarding unauthorized occupants. If the younger couple qualifies, it's their reputation on the line. Be ready to evict as soon as you notice a violation of the lease.

Sorry you're having trouble obtaining a tenant credit report. There are options that require less work than setting up an account and going through an inspection. We are not allowed to solicit in the forums, so I can't tell you to contact me for support with this matter ;)