Author Topic: How I screen tenants -- thoughts?  (Read 7781 times)

MNBen

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How I screen tenants -- thoughts?
« on: August 15, 2016, 11:23:54 AM »
I have three rental properties which I manage on my own, so I use an online service to help screen my applicants.  Also, I try my best to be fair and follow Fair Housing Act so that I don't get a horror story to write on here.   I've had very "good luck" in my 6 tenants so far.  I only say "good luck" because I think screening weeds out a lot of bad stuff.

Needless to say, every time someone decides to move out, I despise the entire process of showing, getting applications, and signing the lease.  However, I know it's just one necessary part of this rental business, so I just suck it up and do it when it happens.

However, this time, I have what I think is a unique story.  So while it will be long, and hopefully provide useful for others, I'm always looking for ways to improve my process.  I'm also not seeking any kudos, but do appreciate knowing I'm doing stuff right too.

Background:  I have already greatly improved my process learning from previous experience.   I rent 2 BD / 1 BA properties, all three of which are townhomes.  Two are in the same complex.  The third was a previous residence of mine.   The market based on my homes and locations are mostly young professionals/couples who are either starting a family, or have a small family.

I only advertise online, which works well for my demographics as I tend to get electronic correspondence.  I used to just set up random showings, and had a lot of no-shows.  Now I try to book 6 showings in one hour, 10 minutes apart, so that a no-show isn't a bid deal.  I also ask everyone to reconfirm via text a few hours before the showing.  That helps me also gauge their interest.

I put my application criteria in the listing, but also the paper application has a one-page addendum of all the reasons for denial.  I require a 600 or more credit score, rent cannot be more than 40% of income, and then typical background check, etc.   I also have no smoking and no pet policies.

I also charge for the application fee to cover my costs and refund that if they sign a lease.

I do often have people ask if I'm flexible on the credit score, and I tell them I have been in the past, but I will only be flexible if I have run out of applications.   So for example, if I'm doing a handful of showings on one day, or maybe back to back days, I tell them that if I receive no applications from those showings, I'd consider someone with a slightly lower credit score depending on the reasons, etc.

So here's the story...

Applicant #1:   She warns me in advance, she has an eviction but said she will explain and would like to see the place as everything else is good and she qualifies.  The story was based on domestic abuse/divorce, in which she left.  However, he stuck around and stopped paying the rent, so since her name was on the lease, she has an eviction on her record.  Okay, I can sympathize with that and she sees the place and applies.  Get back the credit check, she did not pass the credit check.  This is rare for me as I've seldom had anyone apply who did not qualify.  So I tell her she's denied based on credit score.

I then set up another round of showings...

Applicant #2:  She is very excited to see the place and wants to move in immediately.  She said her rent is going up and she wants to move.  In fact, she takes the application and tells me she'll go fill it out right away.  She mentions where she lives now, and I have to run errands that direction after showings, so I just tell her I'll stop by.  (Good excuse to see her current living situation too.)  She fills it out.  No issues.  I tell her it'll be a couple days for the service I use to verify employment and rental history.  However, she continues to check every few hours to see how it's going.  This is a bit of a red flag, but I don't think much of it.  She also keeps interchanging "me" and "we" when mentioning her current situation and new situation.  So even though she applied for one adult, and said only one adult, it's obvious others live in her current place.  So red flags are going up.  Background check comes back and it mentions a recent arrest but doesn't have a lot of explanation.  Thanks to Google I start searching, and she was in another state, and charged with a gross misdemeanor for assault, is currently out on bail, has a court date in about two months, and if convicted could spend up to a year in jail and/or a large fine.   Needless to say she was denied and she didn't even respond to my denial text and email.   I chalk this one up that she was maybe hoping since I don't use a management company, that she could sneak this past me?  Whew!  Glad I caught it.

So by now it's been a couple weeks, because it's a busy summer, and my renters are about 10 days from moving out.  So I do another set of showings...

Applicant #3:  This man comes and finally, I have someone.  He runs his own successful business, travels a lot.  Was just going to buy a house, but then got a divorce, so he's just moving out on his own.  He has a college-aged son who is away at school.   Doesn't ask a lot of questions.  Just wants a place close to his business to serve as a home.  This is nearly the perfect applicant.   Has great credit score, background, everything is great.  I let him know on a Sunday afternoon that he is approved and ask him when he wants to sign the lease... tonight, or maybe Monday night.  He says he's really busy and "can't until Wednesday Night" and picked 7:30 PM.  Not ideal, but hey, I have the perfect renter.  So Tuesday Night I text him just to confirm we're still on.  No response.  Wednesday morning I text again to confirm.  He writes back that he forgot about it and might not be back in town by then.  He's out of town for business (driving distance based on where he told me).  So I just tell him to update me when he knows.  An hour before our meeting time I text him to check on any updates.  Nothing.  At the time I'm supposed to meet, I call.  No answer.  I text.  I get a response that he's still out of town and it's the anniversary of his mother's death, etc. and he won't be back in town tonight.  I wrote back and asked him when he can make it then.  He wrote back he wasn't sure and I can find someone else then.  At this point I think I'm being led along, and just give him a deadline for Friday afternoon to sign the lease or I'll start showing again.  So I never heard from him again, and decided to let me renter's move out peacefully, so I could get in and make it sparkle for the next rounds of showings...

<<< I decide to change my process and going forward I now require a $200 hold, due at time of applying, which holds the apartment for 48 hours after being accepted and is forfeited if a lease is not signed in those 48 hours. >>>

Applicant #4:  I am setting up another round of showings, and I have one person emailing me and just asking a ton of questions.   She is very excited on the place.  She works in real estate, familiar with the area, and wants this exact location.  It's close to a boyfriend, daycare, school.  Is perfect.  In fact, she gets the application in advance and shows up with it filled out.  She has no red flags, until she asks if she could have the owner's phone number to ask him some things.   Well I'm the owner, so I told her and she said she'll just ask me at the showing.  So the question was she needs a service dog and is that okay for my "no pets".  Well I know legally I can't say no anyway, and I have actually trained a service dog, so I tell her it's fine.

She did tell me she was on disability recently from work, so cash is a little low until she gets her big insurance check, but would be able to come up with the $240 to apply and she did show up with $240 cash.   And she gets approved with no issues.  Her background check comes back fine.  Her rental history comes back fine.  Her credit score comes back fine.   The only hiccup for her, is she doesn't yet have the money to be able to pay the damage deposit and prorated first month's rent.  She claims she just paid her daycare and is starting a new job (including showing me the job offer letter).  She did toss out if there was some way to extend the hold, and while she doesn't have money, she could offer up something for collateral. 

I think on it a bit and realize I can either walk away from her, or allow her an extension.  And I feel once she's in, this will be a good renter because her child will be starting school and her boyfriend lives very close.  So I make her a final offer.  I will allow her to extend the hold at a cost of $70 for every 24 hours.  And that the maximum I'll allow her to extend is one week, or $490.  And that I would allow her to use some type of property as collateral as long as the value is obviously worth more than the amount she's expecting it to replace.  And that if she doesn't sign a lease, I will allow her to get back her property if she wants to pay the amount in cash instead. 

She said that was fair and offered to meet me to give me a necklace her grandmother gave her, which has some diamonds and sapphires on it.  So we met last Thursday.  I have the necklace, she has a hold until this Thursday.  She emailed me Friday to let me know the insurance company finally has all the medical records they need, so she's expecting to get her insurance check this week.

So I'm keeping fingers crossed this will all work out and I sincerely think it will, but wow, this has been a very unique (at least for me) set of 4 applicants.   I tell this story, not to discourage anyone from landlording, but it's a good example of some of the times it's not just about collecting rent.  That being said, again, once this process is over, it's a pretty easy way to have a nice income stream.

I'll take any advice people have on process improvements for the next time I screen tenants.  And I'll update everyone on how this turns out.

fishnfool

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Re: How I screen tenants -- thoughts?
« Reply #1 on: August 16, 2016, 11:53:57 AM »
It sounds like you're doing a pretty good job of screening your applicants and you've learned that when your dealing with people you sometimes need to be a little flexible.

We were flexible when we managed ours but this thread reminded me of how much I don't miss self-managing and the 8% we're paying now is money well spent.

MNBen

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Re: How I screen tenants -- thoughts?
« Reply #2 on: August 16, 2016, 12:37:20 PM »
It sounds like you're doing a pretty good job of screening your applicants and you've learned that when your dealing with people you sometimes need to be a little flexible.

We were flexible when we managed ours but this thread reminded me of how much I don't miss self-managing and the 8% we're paying now is money well spent.

Thanks for the feedback!   And yes, I won't lie, I've considered paying for management, but I live just a few miles from all 3 of my rentals, and I'm the Treasurer on the association boards as well (to protect my assets).   So yes, some might argue I'm just a glutton for punishment!

Seeing how a Board makes decisions without my input, it's more likely I'd just sell them at some point and cut all my ties to the property, rather than pay for management and allow the Board to make decisions without my input.  Let's just say, they don't subscribe to any MMM-type ideals!!   But that's a story for another time...

tonysemail

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Re: How I screen tenants -- thoughts?
« Reply #3 on: August 16, 2016, 12:53:31 PM »
$200 hold fee + $240 application fee. 
is that a lot of fees in comparison to one month of rent?
IMO those fees would be unreasonable in CA... but does your state have rules for this?

credit score of 600 seems awfully low.
http://www.nononsenselandlord.com/2014/03/why-avoid-tenants-with-credit-scores-below-600/

here is one chart that says <25% of americans have credit score less than 600.
http://www.fico.com/en/blogs/risk-compliance/fico-score-distribution-remains-mixed/

I prefer aiming for 50% or higher which is closer to a score of 700.
But your market may be different.

Miss Piggy

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Re: How I screen tenants -- thoughts?
« Reply #4 on: August 16, 2016, 02:43:57 PM »
It's been over 20 years since I've rented, and I have no rental properties, so no "skin in the game," but I'm just curious: If someone fills out an application, is that pretty much a commitment to rent if they're approved? Not a "you're approved, would you still like to rent" situation?

MNBen

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Re: How I screen tenants -- thoughts?
« Reply #5 on: August 16, 2016, 03:47:01 PM »
$200 hold fee + $240 application fee. 
is that a lot of fees in comparison to one month of rent?

It was $40 application fee.  Then after applicant #3, I added a $200 hold, for a total of $240 due at time of application.

credit score of 600 seems awfully low.

Thanks for the input!  I'd love to hear anyone else's input on this.  I only get a pass/fail based on the credit score I enter, so I never know the final score, but from what most tell me when they apply, I'm not sure anyone I've ever rented to has been 700 or higher.

MNBen

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Re: How I screen tenants -- thoughts?
« Reply #6 on: August 16, 2016, 03:55:03 PM »
I'm just curious: If someone fills out an application, is that pretty much a commitment to rent if they're approved? Not a "you're approved, would you still like to rent" situation?

As a landlord, I assume the first person applying wants to rent.  If they are denied, I process the next application, assuming I have one.  But if they were approved, then I would give them a day or two to sign the lease and they would.

It can be tough to "be nice" and not process any applications while you wait, but then also decide how long to wait as time is money.

However, I have had one person in the past drag it out a bit and I was being nice and not sure they weren't just shopping around for a better deal someplace else.   Then after the situation I documented above, I just decided to add an application fee.   That greatly increases the chance I get people who are truly interested.

I haven't rented in awhile either, but it's my experience and knowledge that apartment complexes always require a non-refundable deposit when you apply.   Basically time is money.  They are holding the place unoccupied for you until you sign the lease, so you're giving them some insurance you're moving in.

Beaker

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Re: How I screen tenants -- thoughts?
« Reply #7 on: August 16, 2016, 04:07:57 PM »
Seeing how a Board makes decisions without my input, it's more likely I'd just sell them at some point and cut all my ties to the property, rather than pay for management and allow the Board to make decisions without my input.

I hear you there. We had a really painful Board experience. We considered just bowing out and hoping things would go well, but ultimately weren't willing to bet that the "autopilot" would land the plane instead of cratering it, so we sold out.

Dealing with a Board does make that investment a lot less passive, though. We spent more time managing the HOA's business than running our own rentals.

Blatant

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Re: How I screen tenants -- thoughts?
« Reply #8 on: August 17, 2016, 06:08:31 AM »
Your applicant is not going to jail/prison for misdemeanor assault unless she's on felony parole/probation or has a very, very significant criminal history. It's a misdemeanor; not sure what state you're in, but I'd be surprised if the fine was more than $300.

gazzamatic

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Re: How I screen tenants -- thoughts?
« Reply #9 on: August 17, 2016, 06:48:53 AM »

I just started out in landlording this year and have only used SmartMove, which screening service do you use?


fishnfool

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Re: How I screen tenants -- thoughts?
« Reply #10 on: August 17, 2016, 08:19:24 AM »

I just started out in landlording this year and have only used SmartMove, which screening service do you use?

How's that woring for you? When we retire we may fire our PM and do our own management again. Do they give you applicants rental history? Job verification?
Thanks!

rothwem

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Re: How I screen tenants -- thoughts?
« Reply #11 on: August 17, 2016, 08:30:45 AM »

I just started out in landlording this year and have only used SmartMove, which screening service do you use?

I just tried out mysmartmove, and I didn't love it.  The credit check was fine, but the criminal report was totally worthless because it doesn't tell you what the item is on the record, just that there's an item.  I'd take someone that had an underage drinking ticket when they were 19, but I probably wouldn't take someone with a larceny charge and there's no way to know. I'd also have liked to have references entered, but there's no place for that. 

fishnfool

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Re: How I screen tenants -- thoughts?
« Reply #12 on: August 17, 2016, 10:47:36 AM »

I just started out in landlording this year and have only used SmartMove, which screening service do you use?

I just tried out mysmartmove, and I didn't love it.  The credit check was fine, but the criminal report was totally worthless because it doesn't tell you what the item is on the record, just that there's an item.  I'd take someone that had an underage drinking ticket when they were 19, but I probably wouldn't take someone with a larceny charge and there's no way to know. I'd also have liked to have references entered, but there's no place for that.
I've heard that other than the credit check it's pretty worthless, that's why I asked.

Aloha

MNBen

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Re: How I screen tenants -- thoughts?
« Reply #13 on: August 17, 2016, 11:25:24 AM »
Dealing with a Board does make that investment a lot less passive, though. We spent more time managing the HOA's business than running our own rentals.

Yes, definitely!  Thankfully I've been able to help shape the Board a little bit, so that really I only need to jump in for the major items I see coming down the road and head them off.

There is also a little give and take, because they are part of an HOA, most of the risk and repairs are on the association.  So once I have a renter, I seldom get a call and if I do it's usually a pretty small item/question.

MNBen

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Re: How I screen tenants -- thoughts?
« Reply #14 on: August 17, 2016, 11:32:01 AM »
Your applicant is not going to jail/prison for misdemeanor assault unless she's on felony parole/probation or has a very, very significant criminal history. It's a misdemeanor; not sure what state you're in, but I'd be surprised if the fine was more than $300.

I appreciate the feedback. 

The charge was misdemeanor of the second degree, and in the state it happened, has a maximum sentence guideline of 2 years in jail and/or fine of $5,000.   That was not a risk I was willing to take.   Not to mention, this was not disclosed and I'm pretty confident she was trying to sneak it by.

I have some flexibility with people to come to me with an honest story and explain a situation.  I have little tolerance for sneakiness.

MNBen

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Re: How I screen tenants -- thoughts?
« Reply #15 on: August 17, 2016, 11:34:35 AM »

I just started out in landlording this year and have only used SmartMove, which screening service do you use?

I have used various companies, and am currently using RentPrep.  This is not meant to be any type of endorsement, as your mileage may vary.  I don't like that they have a paper application and would prefer the renters could fill it out online securely.  However, I do like their credit and background check, and their humans who call to verify rental history and employment history.  I feel it's a fair service, but have no alliance to continuing to use them and am always looking for a better solution.

gazzamatic

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Re: How I screen tenants -- thoughts?
« Reply #16 on: August 17, 2016, 11:37:45 AM »
How's that woring for you? When we retire we may fire our PM and do our own management again. Do they give you applicants rental history? Job verification?
Thanks!

So far it's going great.  It took me less than a month from closing on the house to when I had a signed lease agreement.  Since the tenants moved in I've had to stop by the house a couple of times for very minor issues.  Probably took about 2hrs total and cost me less than $60 in parts.

SmartMove shows the applicants previous addresses and has eviction history, if that's what you mean.  I'm not sure if they verify their employment, it shows up in their credit report, so I think it's something they validated, but it wasn't a big deal for me since I was able to verify on the companies websites that the tenants actually work there.

I just tried out mysmartmove, and I didn't love it.  The credit check was fine, but the criminal report was totally worthless because it doesn't tell you what the item is on the record, just that there's an item.  I'd take someone that had an underage drinking ticket when they were 19, but I probably wouldn't take someone with a larceny charge and there's no way to know. I'd also have liked to have references entered, but there's no place for that.

Maybe the detail they have for criminal history is different by state.  I'm in MN and I was able to see the charge description.  It also gave me the court record ID, so I could look it up on the county website if I wanted to.

I've heard that other than the credit check it's pretty worthless, that's why I asked.

I don't have anything to compare it to, but the credit check seemed pretty good.  I could see all their credit history, the month they made payments and if they were on time.

The only thing I don't like is that there's no credit score, it just gives you a "ResidentScore" which is their own thing.

MNBen

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Re: How I screen tenants -- thoughts?
« Reply #17 on: August 17, 2016, 11:46:18 AM »
UPDATE TO STORY...

So yesterday I check in with her to see how it's going and she said she still hasn't received her insurance check, and the insurance company (hint:  *quack*) won't return her calls.

She then says she might go to the bank to see what other options she has, or maybe consider opening another credit card, just to make this work temporarily until she gets her check.  She wants to know if I accept credit card payments.

So I am familiar with a site where renters can pay online, with cash or credit card (and they pay a credit card fee) so I set up an account there so she can pay there if she'd like.  Then this morning I notified her that she can pay there if she'd like, otherwise her deadline is still tomorrow.

She said she's currently at the bank trying to figure out what she can do.   So we'll see how this turns out.

At this point, I'm not even sure which way I'd prefer this end up.  Being MMM-wise, I know that health issues are never fun and can really hurt finances, but also hope she isn't further sabotaging her own situation.   I mean she didn't need to leave her old residence, although she is changing jobs and used to work there, so I understand why she might not want to stay.  And if her daughter is starting kindergarten, I understand why she wants to get into the school district where she'll stay, especially if her boyfriend lives there and she sees this being a long-term thing.

So get your bets in...  will she find a way to make it work, and what will the solution be? 

gazzamatic

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Re: How I screen tenants -- thoughts?
« Reply #18 on: August 17, 2016, 11:46:33 AM »

I just started out in landlording this year and have only used SmartMove, which screening service do you use?

I have used various companies, and am currently using RentPrep.  This is not meant to be any type of endorsement, as your mileage may vary.  I don't like that they have a paper application and would prefer the renters could fill it out online securely.  However, I do like their credit and background check, and their humans who call to verify rental history and employment history.  I feel it's a fair service, but have no alliance to continuing to use them and am always looking for a better solution.

Thanks for the info.  I like that someone is actually calling to verify the details, too bad it's not an online application.  In their sample report I don't see the credit score.  Did I just miss it or is it not included?

gazzamatic

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Re: How I screen tenants -- thoughts?
« Reply #19 on: August 17, 2016, 11:49:58 AM »

So get your bets in...  will she find a way to make it work, and what will the solution be?

I hope I'm wrong, but I think you'll be looking for a new tenant.

fishnfool

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Re: How I screen tenants -- thoughts?
« Reply #20 on: August 17, 2016, 12:35:25 PM »

So get your bets in...  will she find a way to make it work, and what will the solution be?

I hope I'm wrong, but I think you'll be looking for a new tenant.
Insurance settlements can take months, sometimes even years to collect. I hope this isn't one of those cases...ugh!

tonysemail

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Re: How I screen tenants -- thoughts?
« Reply #21 on: August 17, 2016, 01:01:38 PM »
At this point, I'm not even sure which way I'd prefer this end up. 

I hear tinges of discomfort in this statement.
It sounds like you are uncomfortable with the situation your policies have led you to.
Tighten that up so you don't get into this situation again.

You are bending over backwards for her and she hasn't even signed a lease.
I would feel totally uncomfortable taking jewelry for a security deposit.

MNBen

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Re: How I screen tenants -- thoughts?
« Reply #22 on: August 17, 2016, 03:38:15 PM »
In their sample report I don't see the credit score.  Did I just miss it or is it not included?

Yes, this is one part that isn't ideal for me either.  They do not show the score, just a pass/fail based on the threshold you select.

This can be nice, because it helps with a definite answer to the applicant.  However, I have also been burned where someone said there score was 610 for example, and it told me they didn't meet the 600 score.  Of course, while they were both FICO, different companies.  So it would be nice to know if it was 599 or 360 instead of just telling me it's not at 600.   

MNBen

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Re: How I screen tenants -- thoughts?
« Reply #23 on: August 17, 2016, 03:52:45 PM »
At this point, I'm not even sure which way I'd prefer this end up. 

I hear tinges of discomfort in this statement.
It sounds like you are uncomfortable with the situation your policies have led you to.
Tighten that up so you don't get into this situation again.

You are bending over backwards for her and she hasn't even signed a lease.
I would feel totally uncomfortable taking jewelry for a security deposit.

Part of the discomfort is because I'm starting to get skeptical that once she's in the place, that she'll be able to pay the rent.  Hopefully this was just a temporary financial setback, and doesn't become a monthly negotiation about how much money she has this week, etc.

But also yes, the discomfort is also about the jewelry.  I told her I'd take the jewelry, but she better not disappear and leave me with her grandmother's jewelry.  She told me wasn't going anyplace and really wants the place!   And yes, that's kind of the reason for starting this post.  I'm looking for any recommendations to help me improve my process.  Hindsight is always 20/20, and this is my first time charging the $200 hold, so it was strange for me to have someone who would give up $200 and then not have any other money to actually pay the real deposit and rent.

And instead of ending it there, I allowed her to extend it thinking she must know more than me and will have the money.   And now I'm hoping that's not the case!

But I'm also not naive and do realize, sometimes people don't even know see their own issues.  For example, I had a younger (24?) female apply, telling me her boyfriend was moving here to come live with her.  So she'd fill it for both of them, etc.  That's when I learned he was in his late 40's, lived at home still, and had plenty of criminal incidents.  They had met as he was in town on business, she waitresses at a bar, and now he's moving to town to live with her. 

Loves works in mysterious ways, but let's just say when I went to pick up the application my teenager (female) was with and commented how pretty she was.  So yes, she probably could have been more selective in her choice of men if she wanted to be.   Anyway, thankfully his credit did deny him.   I had no faith in how that situation would work once he moved in, or if he'd even show up.  She of course wanted to know more about why his credit was bad, and I basically just told her she should ask him, as I had no idea.   But sounded like he wasn't being truthful with her either.

So yes, that was one of those situations where I almost felt more fatherly than a landlord and just wanted to tell her she's making a big mistake and she should just find herself a better situation.

So yes, this applicant is kind of turning into that too.  Younger, single female parent, with disability, who is so desperate to change whatever situation she is in, is giving up jewelry to make it work.  I mean sure I fixed up the place myself, and have pride in it, but it isn't THAT nice!  There are plenty more places to pick from when she has her stuff more together!
« Last Edit: August 17, 2016, 04:06:56 PM by MNBen »

MNBen

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Re: How I screen tenants -- thoughts?
« Reply #24 on: August 17, 2016, 04:04:22 PM »
ANOTHER UPDATE TO STORY...

She texted me that she couldn't get a personal loan from the bank, and "a credit card will take at least 10 business days apparently".  She got in touch with insurance company though and they said they sent a check yesterday in the mail which will cover all but about $140 of what she needs tomorrow.  So she said assuming that's in the mail tomorrow, then it should all work out. 

She also told me she found out they send each check separately and still haven't process the last two months.   They apparently had the wrong fax number for doctor so weren't getting any answers, but they were faxing again today and also set her up on direct deposit so she doesn't have to wait for checks in the mail.

I told her it all sounds good, and that I hoped it all worked out for her, but also gave her the advice that even if tomorrow works, she should be sure she has a backup plan available because Sept rent is due on 9/1 which is only 11 business days away.

So I thought everything was fine, but just got another text that she doesn't think she can move in Friday because she'd have to pay movers, but wanted to know if she could move in next Wednesday instead, but still pay tomorrow.

This is where my flexibility needed to end, partially because I worked hard last weekend to get everything ready for her this week, and also have all the documents ready for tomorrow night.  I'm also skeptical this isn't a way to squeeze a little more money out to make it last.  Plus, we made this agreement a week ago and I held my end of the bargain. 

So I told her no, her lease still starts on Friday.  But she can move-in whenever it works out for her.  She seemed okay with that.

Anyone want to double their bets?  :)
« Last Edit: August 17, 2016, 04:07:23 PM by MNBen »

Greenstache

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Re: How I screen tenants -- thoughts?
« Reply #25 on: August 17, 2016, 04:04:51 PM »
Our experience with potential tenants has been full of similar stories - people are all sorts of enthusiastic and then don't appear for showings, decide a few hours after saying they most definitely want to live in our rental that they most definitely don't want to do so, etc.  We have adopted a policy stating that once we accept applicants, they have 48 hours to sign the lease and pay the security deposit, or the house is still on the market.  Communicating this very clearly in advance has not failed us so far.

We use SmartMove only for the credit check portion of the screening, and we set it up so that the prospective tenant pays SmartMove fees directly online.  This limits our need to collect any sort of payment and exposure to frivolous fees lawsuits (MD has very strict rental laws which tend to favor the tenant).  All other screening is done by me, and I personally call each of the references and employer(s) listed by each adult applicant to verify those elements of the application. 

I'm not familiar with MN rental law, but I'd feel uncomfortable accepting any kind of personal property in order to secure an applicant's spot.  I don't think it bodes well for her future ability to pay, and it gets you into a murky situation in terms of being able to show that you applied exactly your written, even-handed screening criteria - would you accept jewelry from the next person who wants to secure their spot?  Not to mention whether such a "hold fee" is permissible, or could be deemed excessive.

MNBen

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Re: How I screen tenants -- thoughts?
« Reply #26 on: August 17, 2016, 04:14:10 PM »
Our experience with potential tenants has been full of similar stories - people are all sorts of enthusiastic and then don't appear for showings, decide a few hours after saying they most definitely want to live in our rental that they most definitely don't want to do so, etc.  We have adopted a policy stating that once we accept applicants, they have 48 hours to sign the lease and pay the security deposit, or the house is still on the market.  Communicating this very clearly in advance has not failed us so far.

Thanks for your feedback on the entire post.

Quoting the piece above, the issue I've come into is I work a full-time job as well.  So I typically try to schedule a handful of back-to-back showings at once.  So let's say I do that on a Saturday.   Sunday I maybe get an application.  It usually takes until Tuesday to get them accepted.  Now they have 48 hours to sign the lease. 

In those 5 days, I've received another 10-15 interested people and I tell them that I have a pending application.  Now it's Thursday, I don't have a signed lease, and I have to contact the 10-15 people to come see the place this upcoming weekend.   That's a week of vacancy every time someone refuses to sign, which is lost money.  So that's why I thought better to add the hold fee to recoup some of that cost.

And don't get me wrong, above is a worst-case scenario.  Most of the time I get an applicant before the previous person moves out and I don't even have a day of vacancy.   This time around it's just been very atypical for me from the past, so I'm evaluating my process.

MNBen

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Re: How I screen tenants -- thoughts?
« Reply #27 on: August 19, 2016, 11:45:56 AM »
FINAL UPDATE TO STORY...

Well, the insurance check didn't come Thursday in the mail.  She told me the company said they mailed it Tuesday, so it should be there Friday and when do I want to meet. 

I felt she was kind of ignoring that the deadline was going to pass, so after thinking on it a bit, I sent her a very pointed response that the deadline is over.  That I had given her a one-week extension and wasn't comfortable doing anything else.  I suggested maybe it's better for her to just wait until she has all the money and then go find a place, and for me to just find someone else.  But I also said I have no reason to believe she's being dishonest, but I just can't keep extending and extending or when does it end.  There's no guarantee the check comes Friday, or Saturday, or whatever.  So then I said since her first day of the lease was to be today (8/19) I would let her wait to see if it comes in the mail on Friday and still sign the lease, but if it doesn't, that has to be the end.  I need to get it back on the market and get some new applicants.

She responded, thanked me, and apologized.  About an hour later she said she called her dad to see if he could write her a check today that she could deposit, so she could write me a check, and she will work it out with him if the check doesn't come. 

We did meet last night, a few hours technically after the deadline, but I deposited the check last night, it cleared today, and for now this has turned out okay.  She was apologetic and willing to show me the deposit receipt, etc.  I wanted to help strengthen the landlord/renter relationship and told her I trusted her, she filled out the lease, and the place is hers for now. 

So thanks for everyone's advice and here's to what I hope is a very good, long-term renter!

rothwem

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Re: How I screen tenants -- thoughts?
« Reply #28 on: August 19, 2016, 01:45:37 PM »
Hang on a minute...

So you had an applicant that couldn't come up with the deposit without a personal loan, and you still took her? 

Why not move on to the next one?

MNBen

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Re: How I screen tenants -- thoughts?
« Reply #29 on: August 19, 2016, 02:07:59 PM »
Hang on a minute...

So you had an applicant that couldn't come up with the deposit without a personal loan, and you still took her? 

Why not move on to the next one?

Well, I might be making an incorrect assumption but I'm guessing you didn't read the rest of the posts.

If you have read them, then my reason was she had been very open and honest, and could have tried to hide a lot and still been approved.  She could have told me the check came (but still borrowed the money from her dad) and I still wouldn't have known the difference.

Could I end up regretting this?  Of course.  But minus this financial hiccup in her life, there are a lot of positives and she has the strong potential to be a high-quality, long-term renter.

Sometimes people who can't bust through the large company, formal application process, are really looking for someone to give them a chance and end up being the best renters.

I have a renter in another property who was somewhat homeless, and therefore could only live in a monthly hotel situation, which cost him much more than rent would.  He had a solid job.  He had great references from his boss and from the place he was staying.  He just wanted his own place and was hoping to find someone to give him a chance.  He even told me up front about a crime in his past that actually didn't even show up on his background check.   It was early winter in Minnesota, nearing the holidays and it was getting tough to find people for showings, much the less applicants.   So knowing that no one is perfect, I appreciated the honesty and thought he had the potential to be a great renter and long-term so offered him a 9-month lease which put me back on a summer rental schedule and gave him a chance.

So far he's greatly exceeded my expectations!  He's been my cleanest renter ever.  Honestly, the place is probably cleaner now than the day he moved in!  He loves the place and keeps it immaculate.  In fact, the city inspector came to check out the place before he renewed my license and commented it was the cleanest place he'd ever seen, and for a single male, he couldn't believe it!  The city inspector even told me that he has his own rental properties, and he'll gladly take that renter off my hand if I ever need!  :)

Paul der Krake

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Re: How I screen tenants -- thoughts?
« Reply #30 on: August 19, 2016, 02:24:21 PM »
Stories like these make me so glad that my financial house is in order. It's hard enough to find an apartment at a reasonable price, not knowing whether you can even afford it, and having the thing drag on for weeks, must be mentally exhausting.

MNBen

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Re: How I screen tenants -- thoughts?
« Reply #31 on: August 22, 2016, 10:05:23 AM »
Stories like these make me so glad that my financial house is in order.

Couldn't agree more! 

I am willing to hear someone out on their issues, but sometimes you hear the stories and just know these people need a major adjustment in their priorities -- which we all hear all over the MMM forums.   

For example, I require the rent be no more than 40% of their income, and am constantly asked how flexible I am on this.   I want to tell them... these days, if my rent is more than 40% of your income, you can't afford this.  Not unless you have no cell phone, no car loan, aren't going to get cable, are good about conserving utilities, shopping for groceries, no eating out, and no children or child support.

NoNonsenseLandlord

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Re: How I screen tenants -- thoughts?
« Reply #32 on: August 22, 2016, 09:12:03 PM »
You will ABSOLUTELY have issues with this tenant.  I would have passed.  Hopefully she will not stick you too bad, and you should plan on going without rent for a couple of months while you hear her stories and wait to evict.

When she has car trouble, or any trouble, you will have rent trouble.  Guaranteed.  You were conned.

You say her credit score passed, what was the score, or at least the hurdle she had to pass?

Here is a recent place I just rented.  I would never accept someone that did not have the capability to write a check for the rent at the time of application.
http://www.nononsenselandlord.com/2016/08/screening-tenants-rental-property/

Thanks for the shoutout on these posts.

$200 hold fee + $240 application fee. 
is that a lot of fees in comparison to one month of rent?
IMO those fees would be unreasonable in CA... but does your state have rules for this?

credit score of 600 seems awfully low.
http://www.nononsenselandlord.com/2014/03/why-avoid-tenants-with-credit-scores-below-600/

here is one chart that says <25% of americans have credit score less than 600.
http://www.fico.com/en/blogs/risk-compliance/fico-score-distribution-remains-mixed/

I prefer aiming for 50% or higher which is closer to a score of 700.
But your market may be different.
« Last Edit: August 22, 2016, 09:20:19 PM by NoNonsenseLandlord »

NoNonsenseLandlord

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Re: How I screen tenants -- thoughts?
« Reply #33 on: August 22, 2016, 09:46:49 PM »
We did meet last night, a few hours technically after the deadline, but I deposited the check last night, it cleared today...

No check clears in one day unless it is written on the same bank as your own.  You may get funds available, but the check is not cleared.

And I feel once she's in, this will be a good renter because her child will be starting school and her boyfriend lives very close.

Yes, he will be moving into your rental.  He did not apply directly, as he is a bad character.

It sounds like you're doing a pretty good job of screening your applicants and you've learned that when your dealing with people you sometimes need to be a little flexible.

You need to be consistent.  Not flexible.

... I live just a few miles from all 3 of my rentals, and I'm the Treasurer on the association boards as well (to protect my assets).   So yes, some might argue I'm just a glutton for punishment!

Seeing how a Board makes decisions without my input, it's more likely I'd just sell them at some point and cut all my ties to the property, rather than pay for management and allow the Board to make decisions without my input.  Let's just say, they don't subscribe to any MMM-type ideals!!   But that's a story for another time...

I am close to my rentals too.  I am the Association President and property manager.  It  takes time, but you can control the Boards decisions a bit.

MNBen

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Re: How I screen tenants -- thoughts?
« Reply #34 on: September 06, 2016, 12:18:07 PM »
Update after September Rent...

She paid the first month's rent early.  Payment has cleared fine.  I have also stopped by to see the place.  No issues. 

NoNonsenseLandlord

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Re: How I screen tenants -- thoughts?
« Reply #35 on: September 06, 2016, 06:02:12 PM »
Update after September Rent...

She paid the first month's rent early.  Payment has cleared fine.  I have also stopped by to see the place.  No issues.

Congrats!!  Hopefully it continues to go well.

frugalcoconut

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Re: How I screen tenants -- thoughts?
« Reply #36 on: September 07, 2016, 09:42:18 PM »
I can be flexible on some things but money is NOT one of them.  I make it very clear upfront that the rent will be automatically debited from their bank account each month via eRentPayment ... and, in a nutshell, there is zero tolerance for late payments. 

To the OP:  It's refreshing to hear what you've experienced and what you actually take on during the process of acquiring a new tenant.  At times I have felt like others make it seem so easy ... but I can relate to so many of the things you said, and I've even learned a few tricks for next time.  ;)

I would be extremely hesitant about accepting anything as collateral in lieu of hard cash.  To me, it may set a bad precedent so that down the road the tenant could be like "well you accepted it before".  Also I am slightly concerned about possible repercussions -- if the collateral arrangement wasn't part of a signed written agreement, you might not be able to keep the item anyway ... but landlords aren't in the business of dealing with this area of law or being familiar with how to properly structure it, so I would strictly avoid it (and any potentially associated trouble/drama/whatever).

I'm glad it seems to be working out so far though ... hope it continues.  In reality we take a chance on anyone we rent to -- we just try to assess the risk as best we can based on the information available to us.

bpleshek

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Re: How I screen tenants -- thoughts?
« Reply #37 on: September 09, 2016, 01:32:55 PM »
Good luck on that.  You have to be careful about being too flexible or you could run afoul of the Fairness in Housing Act.  If you are flexible to one and then not flexible to another, that could be a violation, even if unintended.  I would never accept anything except cash.  Someone could claim you gave back the wrong item.  If you kept it, there could be a he said, she said issue that would land you in court.  Even if you win, it's time out of your day and a potential cost.  Not to mention a lawsuit against you on the court record if anyone does a check on you for any reason.

Also, I don't know what neighborhoods you're trying to rent to, but I'd never take a 600.  There is a difference between 600 and 630.  But maybe 600 fits for your properties.  40% of income seems a bit high. You may run into problems there with people being over extended.  30% might be a better number.  I think I read MMM doing income > 45x monthly rent.  So 1200/mo would require an income greater than 54,000/year.  That would be around ~27% if I punched the numbers in my calculator correctly.

I also agree with the poster that said you are going to get the boyfriend as an incidental tenant at some point.

I have no problem with your process up to the part where you said, "here's my story."

You'll probably have payment issues at some point in the future.  It's amazing how Christmas comes on the same day every year and yet it often comes as a total surprise to people.  How many here have heard, "I had x-mas presents to buy, so my rent will be a little late."  NOT MY PROBLEM PEOPLE.  I will have a place to live next month.  You won't if you don't pay.  It's that simple.  Tenants seem to pay for their rent last among all other expenses.  It's weird.

Brian
« Last Edit: September 09, 2016, 01:41:02 PM by bpleshek »

frugalcoconut

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Re: How I screen tenants -- thoughts?
« Reply #38 on: September 09, 2016, 06:18:09 PM »
Tenants seem to pay for their rent last among all other expenses.  It's weird.

It actually makes the most sense (unfortunately) ... it's like the path of least resistance. 

Who is going to scream the loudestLate fees, relentless collection calls, cutting off credit or turning off a utility, threatening legal action, etc.  Those people get paid first.  The landlord is usually lowest on the totem pole because the tenant can usually get away with it (or feels they can get away with it based on past experience).  Easier to make excuses and talk their way out of it with a person rather than a company.

I know it sounds harsh but it's all about setting the right expectation.  If the landlord is perceived as a possible "softie" then the tenant may try to take advantage of the situation.

bpleshek

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Re: How I screen tenants -- thoughts?
« Reply #39 on: September 12, 2016, 01:22:57 PM »
I always thought it was because if they pay their credit card, they can charge up more garbage this upcoming month.  But like I said, I'll have a place to stay, they won't.  Ohio is friendly toward landlords.

sobezen

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Re: How I screen tenants -- thoughts?
« Reply #40 on: September 12, 2016, 01:33:20 PM »
@ MNBen:  Have you considered using COZY https://cozy.co/ for automated online rent payments?  We use it and it helps save some headaches after we've screened the applicant(s).

bpleshek

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Re: How I screen tenants -- thoughts?
« Reply #41 on: September 12, 2016, 01:41:07 PM »
@sobezen,

I provide a savings account at a bank close to the rental property for the tenant to deposit money each pay period.  I'll have to check out the online pay option though.  Seems like having another option is good.

Ensign1999

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Re: How I screen tenants -- thoughts?
« Reply #42 on: September 16, 2016, 09:24:07 AM »
We own a rental in Florida (we live in Northern Virginia) so we use a PM.  When we signed up with them, they offered two different services.  One was a traditional PM where they find the tenants and take care of the property for their finders fee and monthly 10% of rent.  The other service was that they would show the house, find and screen the tenants and get the lease in place, and then the owner would take care of the month to month.  They would just get the finders fee.

We have another property that is much closer to us now that we are back on the East Coast (we were living in CA for about five years) and we are hoping that the PM on our second property will be open to the second kind of service.  We have great tenants and the house is in really good shape to where the PM monthly fee is a bit of a waste.  If something does go wrong we are close enough now to take care of it ourselves.  On the other hand if the tenants do decide to move out, it would be nice to have a much more local PM show the place and screen the tenants.

moof

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Re: How I screen tenants -- thoughts?
« Reply #43 on: September 16, 2016, 10:34:56 AM »
My good friend who seems to be building his own little empire uses a simple strategy.  He sets the rent about 20% above market, and only asks for refernces rather than doing a background check.

All the low end folks trying juggle payday loans, probation officers, and payday loans simply never apply, but folks on the higher end of the income spectrum that like the location still do.  His vacancies last longer, but he swears the folks who do end up renting have all been fantastic tenants that tend to stick around a while.

bpleshek

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Re: How I screen tenants -- thoughts?
« Reply #44 on: September 16, 2016, 02:51:37 PM »
Your good friend might benefit from this thread:

<Shameless Plug of my own thread>

http://forum.mrmoneymustache.com/real-estate-and-landlording/how-many-of-you-use-credit-reports-when-screening-tenants/

</Shameless Plug of my own thread>

Brian

clarkfan1979

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Re: How I screen tenants -- thoughts?
« Reply #45 on: September 17, 2016, 07:56:51 PM »
You seem to go out of your way to accommodate. Good job on being patient. If someone falls short on my requirement, I just move to the next person on my list.

I do a credit report, not a credit score.

jessaragen

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Re: How I screen tenants -- thoughts?
« Reply #46 on: September 20, 2016, 06:09:19 AM »
I was on another side just a month ago. It was a real nightmare. I was looking for a two-bedroom flat for me and my cousine. This process lasted for 4 weeks becouse landlords didn't want to deal with two girls. Somebody asked are you prostitutes? I work and study, my sister just graduated from university. Agents never called back.

bpleshek

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Re: How I screen tenants -- thoughts?
« Reply #47 on: September 20, 2016, 06:41:35 AM »
The prostitute question was way out of line. 

I am confused whether it was your sister or your cousin though.  I'm assuming that you found a place ok?  Why would the landlord not want to deal with two girls?  It might be sexist, but i'd bet the place would always be clean and less likely to be damaged.  But what do I know.

Brian

Evie

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Re: How I screen tenants -- thoughts?
« Reply #48 on: September 22, 2016, 11:58:08 AM »
I don't like the idea of a holding deposit. Until I have a signed lease I don't want to be tied up.

Sometimes you just get a streak of weird applicants. I had this happen for my property when I had to list in Feb.  I ended up pulling it and waiting for a few months, then got a bunch of much better applicants. In the meantime I sublet, had some family come stay, and had some foreign students in a short term rental.  Can be a pain, but am glad I didn't have to settle for the wierdos that applied. 

I had the same issue with two very good applicants getting approved, drawing up a lease, and then backing out at the last minute. Both were dream tenants, and one got cold feet, and the other stopped communicating.  I chalked that up to retrograde mercury (hey, I'm a little superstitious).

Whatever you do, don't get desperate and change your criteria. A few months of no rent is better than having to try to get rid of someone later.

NoNonsenseLandlord

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Re: How I screen tenants -- thoughts?
« Reply #49 on: September 25, 2016, 09:05:16 AM »
I don't like the idea of a holding deposit. Until I have a signed lease I don't want to be tied up.

A holding fee obligates the tenant, it does not obligate the landlord.  You can always give it back.  The lease obligates the landlord.