Being a landlord can be challenging when it comes to finding and screening tenants. Selecting the right tenant is the most important part of being a landlord. This selection will decide the measure of your success and bliss as a business person.
Inability to screen your tenant appropriately can hurt your wallet, stability, and enterprise. The following are a couple of likely risks of tenant screening mistakes:
1. Eviction cost
2. Loss of rental income
3. Repairs
4. Safety risks
5. Legal accountability
To evade these above-mentioned risks, you must learn to monitor the most common mistakes made while tenant screening and screen your tenant correctly. Listed below are the mistakes to be avoided:
1. Skip the Screening Step from the process
It seems very enticing to permit candidates to avoid the screening system, particularly when you are longing for filling the vacant unit. All things considered, it’s to your greatest advantage that you properly perform the screening process even though you have to keep the property void for a few more days.
Let us understand the point from an example.
Mr. James purchased his first multifamily house for $85,500. He put $16,000 more into it and renovation work was done the day preceding Thanksgiving.
Guess what? Not many people moved in between Thanksgiving and New Year’s Eve and Mr. James got into a serious inquiry made by a woman named Kelly.
Considering that Mr. James finally made a serious question to a woman named Kelly the day after Christmas.
At last, Mr. James choose not to charge any application expenses from the lady and instead just advised her to simply print her credit report from annualcreditreport.com
In response to this, the lady just said that she was not able to print the credit report because of less credit score in a message sent to me. Mr. James requested her to provide him with the contact number so he could talk about the matter, to which she messaged him with another excuse that Verizon wouldn’t allow her to have a cell phone because of her credit score.
Mr. James inquired about her score -and she was correct with regards to it not being great it was 480. He thought this way because he had seen people go into bankruptcy with a credit score of 550.
But Mr. James thought that she had the first month’s rent and he needed to fill the place because it was vacant for very long. So, he let her have the place. Kelly guaranteed Mr. James that she will get him the deposit in a month.
And it will be shocking news for some of you she didn’t pay the rent on the due date and Mr. James had to force her to vacate the place.
The lesson from the incident we get is: Regardless of how great in need you are for a tenant never skip the process of screening the tenant you can do the job easily as apps makes it simple to screen tenants with their partner, RentPrep. Always get the credit check early as it will save you from future loss and headache.
2. Choosing an inappropriate Screening administration
It is sad to say but all screening companies are not equivalent. Just think what your mind says! What is a better option to go with - automated, immediate screening results or hand-gathered results that are assembled with confirmed outcomes after investing time and effort in it?
According to research done by Princeton Study, human instinct will in general pick instant satisfaction over comprehensive decision-making. A Harvard Professor, David Laibson, clarifies upon this review, expressing, “Our emotional brain wants to max out the credit card, order dessert, and smoke a cigarette. Our logical brain knows we should save for retirement, go for a jog, and quit smoking.”
When talking about the tenant screening companies their main focus is on ways to grow profits, which means that they tend to satisfy emotional brains with instant satisfaction of the client.
Let’s suppose someone welcomed you over for a supper and provided you with a decision of a decent home-cooked supper or a ready to cook microwaveable food. What will be your choice? No doubt, you would sit for a talk and wait for home-cooked food as you know it is healthier and a better option.
However, when it comes to choosing a tenant screening company, landlords lack the frame of reference for instant background verification. So, they will choose instant satisfaction because it will be more appealing to the emotional mind.
Instant solutions utilize fewer data and are more close to errors and false-positive results regarding a tenant’s history or background as there is no procedure to double-check the work. On other hand, you will wish to opt for those companies that guarantee an accurate report because of the fact:
1. Manually accessed database
2. Hand accumulated Reports
3. Fact-checked error-free data for observation
So, this means that like home-cooked food the best option is to sit back and wait for the error-free results rather than instant satisfaction.
3. Not giving credit report a thorough reading
This might be obvious. However, assuming you are going through the whole course of getting a precise credit report, ensure that you READ the outcomes not just go through it.
The credit companies do us this great favor of gathering an individual’s whole record of loan repayment into a solitary number, remember that situation and story behind every individual are uniquely interesting and ought not exclusively to be decreased to a number.
To make it clear, let suppose if an applicant’s credit score is low and it shows a huge debt that they ignore because they know that they’ll not be able to pay it off in days to come, yet they still manage to pay their monthly bills and payments timely then this application is a great option for a tenant.
Also, keep in mind that in this technology world don’t ever trust your applicant to bring his FICO score as evidence because it can easily be photoshop. Yes, you heard it right, people use forged documents to make their tasks easy. If needed, verify the papers provided by the tenants.
4. Not screening the co-applicants
One of the most important tenant screening mistakes to try not to isn’t screening the co-applicants. Screening must be done for everyone. Procedure to move to the next on successful verification and screening of co-applicant not only after filling the rental application form. If you skip screening the co-applicants you are welcoming major problems with your renter in the future.
The only reasons for screening the co-applicant are the fact that the co-applicant can leave out suddenly or stop contributing their share in the rent. In this situation, all the burden of paying the rent comes on the shoulder of the primary renter and making it difficult to pay the full rental amount. This is the major issue that few landlords don’t allow renters to have contributing roommates.
Other than this, when renting married or independent living youngsters they should be screened for early expulsions, criminal history, and low financial scores. If ignored these can cause major problems and headaches in the future.
For example, one of my friends failed to screen a co-applicant friend of his primary renter who moved into his apartment on rent. He ended up having to deal with the FBI answering their investigating questions, his tenant run away without paying. Later it was found that the co-applicant friend was having a criminal history.
5. Not obeying the housing laws
It is the foremost duty of the landlords to check the housing laws of the area before screening an expected tenant. Remember some neighborhood laws go above and beyond government laws.
These housing laws exist to avoid any discrimination based on certain characteristics such as your marital status, gender, race, religion, and much more. These laws provide the base to keep the peace and discipline of the area and people living there.
Inability to consent to nearby and government housing laws brings about regrettable lawful consequences for a landowner. Assuming a potential tenant confirms that they are being oppressed, you could end up with any legal actions.
Confirm the fair housing laws for your specific city or area because they change from city to city within a state.
6. Not taking look at bank statements, referrals, and job history
All tenants and co-applicants must fill out the application drawn up by the property manager, one must require the screening process for the tenants. Important points to consider while doing the screening process includes:
1. Bank Statements: These will provide you a good picture of your tenant’s paydays, their previous paid rents, their spending habits, and what their general priorities are.
2. Referrals: These should comprise of non-relative, professional references, and at least two previous landlord reference statements
3. Job History: This will provide you with information that Is the job of the tenant secure and for how long he has been working there. Is he serious about his job or not.?
If you don’t double-check the information provided in tenants’ answers and claims you could end up in great problems and fraud.
Many clever tenants provide false information and you end up trusting them for example, most tenants I have seen provide contact information of their friends or close relations instead of previous landlords. You should try to ask questions to take out the details like exact move-in and move-out dates from previous property to expose these fraud situations.
Tenant screening mistakes -Recap
Summarizing the above writing whenever you’ve put a tenant in your rental property must take care of the following points:
· Screen them thoroughly, screen their criminal history, background check, and even screen co-applicants or roommates if any
· Take some amount before renting the property as a security deposit- that can be returned when vacating the place
· Make sure the tenant you are giving your property to has a secure job or other resources to pay your rent timely without excuses or delays.
As the market progress itself in making methods to verify tenants and avoid any fraud on another hand these worst tenants also become better at lying, hiding information, and fraud. So, one must be very careful and must take his time to clear information regarding the specific tenant as the best option. Because, if you take someone like Kelly or a non-screened friend (above example reference) you will end up in fraud, and odds of you needing to evict in shorter periods will increase drastically. Always make yourself confirmed and put your effort to screen tenants to avoid any problems in the future!