Looking for a new tenant for your real estate investment property? Here are five things to watch out for.
If you are the owner of a residential investment property, you know that your cash flow is only as good as the tenants you choose. It’s important to ensure that you properly screen potential tenants and accurately assess them during the interview process.
Every landlord has his or her own standard for judging the potential fitness of a tenant. However, from my experience as a property manager and investor, there are a few tried and true clues that can tip you off in the event of a potentially problematic renter.
Remember to comply with the requirements of the Fair Housing Act and with your state and local regulations. These warning signs are not intended to be a replacement for a thorough application process and screening check, but they can help to provide additional guidance.
Curt or Poor Communication
We’ve all experienced the prospect who emails “Hey, I want to see 321 Main St. in a couple hours.” That’s it. Nothing more. No “Please.” No “It would be great if….” Not even a name.
What about the prospect who agrees to a time, confirms, is asked to communicate if something comes up, then…nothing. Often, this same prospect will follow up, say something “came up,” and reschedule.
People lacking manners become tenants lacking manners. Is that who you want to deal with? It may be difficult to get the information you need during the application and screening process. Once approved, this type of tenant may not pay rent on time, and will almost certainly not keep up with required maintenance, lawn work, and debris removal.
I once had a prospective tenant who couldn’t recall where the front door was. This was a 600 sq. ft. apartment unit with only one door in and one door out!
If someone shows up to a tour or open house disoriented, they may be struggling with an addiction to drugs or alcohol. This can present a danger to the tenant, their neighbors, and to the property. Remember that federal regulations state that it is illegal to discriminate against a tenant with a history of drug or alcohol abuse if they are currently in a treatment program. Check with your attorney to find out what screening questions you are allowed to ask and what documentation you can require.
As a landlord, you can be held liable if you know that illegal activities are taking place on your property. You will want to ensure that there is an explicit clause in your rental agreement that states that you have the option to evict anyone who is dealing or making drugs on the property.
Resistance to Screening
You may have met a perfectly nice prospective tenant — friendly, personable, easy to talk to. Then, when it’s time to complete the required paperwork and participate in your required screening process, the prospect doesn’t want to participate or won’t provide the requested information and documentation. Is it a matter of bad credit? Work history? Are they on Megan’s List?
In most jurisdictions, criminal screening is legal. Find out if the applicant has committed fraud or passed bad checks. If their reluctance to participate in a screening process is based on a financial issue, let them know that they can get a co-signer or guarantor to help them meet your designated income or credit requirements.
Do not let a prospect convince you to forego your screening process. It is a violation of Fair Housing laws to require different types of screening from different tenants. In addition, a prospect who refuses all screening is almost certainly a bad apple who will become a bad tenant.
You call their current landlord who says that the tenant has been “okay” or “fine.” In many cases, honest reviews are difficult to come by since they can lead to conflict and lawsuits. The answer to better and more meaningful references is better and more thorough questions.
Contact both the current landlord and the one prior, if possible. Ask any or all of the following questions:
- Did the renter have a pet when he or she lived in your property?
- Did the renter have roommates who helped him or her pay rent?
- Did the renter pay rent on time and in full consistently? How much was the monthly rent?
- Did the renter do required upkeep (lawn care, trash removal, etc.) as scheduled?
- Did you have difficulty with tenant communication?
- Did neighbors ever file complaints about the tenant?
- Was the tenant ever evicted from your property?
Most of all, ask “Would you rent to this tenant again?” Remember, you don’t want an “okay” — or worse — tenant. You want a great one.
Multiple Short-term Leases
Ideally, you’d like to have a tenant who will stay put for more than the term of a 12-month lease. It takes time and money to clean and refresh a unit, market it, and screen for the right tenant. Be sure to look at the tenant’s history and see if he or she has moved every time their annual lease expires. It could indicate that they have trouble staying put or that they have trouble following the rules.
Get your leasing and screening right the first time. Contact us to handle your leasing process and/or property management needs in Marin. We’ll help you find great tenants, perform all the screening, and if you like, we’ll manage your property, too. Contact us at email@example.com or call (415) 825-7761.