If you’re a landlord, you know your days are more like a battlefield than a walk in the park: There are tenants calling in with maintenance requests; you’re following up with those who haven’t paid rent yet; or worse, you’re trying to figure out eviction procedures. It all winds down to who your tenants are. Finding good prospective tenants for your investment properties is half the battle, but somehow many landlords tend to skip the important step of screening prospective tenants and end up paying for it later.
Bad tenants are at the root of all your problems as a landlord so, it’s imperative that you do a thorough credit and criminal background check, besides getting a reference from employers. While these checks will expose any obvious problems, they won’t necessarily give you a glimpse of the kind of person you’re dealing with. Which is why the most important reference you should seek from all applicants is from at least one of their previous landlords.
The findings from a third party screening won’t be able to inform you about abstract things like the applicant’s temperament, respect for rented property, punctuality in paying rent or whether they treat people living around them with consideration (especially in multi family properties). A quick chat with a previous landlord can, on the other hand, be quite revealing and help you understand what kind of tenant the applicant’s likely to be.
Since the findings of the background checks and what previous landlords have to say about a particular tenant may not be vastly different, it might seem redundant to check up on rental history. However, in some cases, your chat with the previous landlord or property management company might spring some surprise details that went unreported.
For example, you might get wind of damages to property or even an eviction that hasn’t been filed or processed at that point in time. Or, you may discover that the previous management company or landlord chose to cut their loses and not charge the tenant because they were convinced they would never receive compensation.
You can find such hidden details with a simple fax or a call and save yourself trouble down the road. Here are five important boxes to check while looking into an applicant’s rental history.
1. Don’t Hesitate to Investigate
While it’s understandable you might feel awkward calling up an unknown person to check up on another hitherto unknown person, remember it’s something you just need to get done. Besides, you have every right to request such information from prospective tenants and their previous landlords. Don’t hesitate to find out how an applicant behaved in the past because that will decide whether you take things forward with them or not. Although you can, and you should, do your checks at any time you have doubts about the credibility of an applicant, it’s better if you set the ball rolling at the very beginning. In that way, you give yourself and the other party time to reply to your request.
2. Release of Rental History Agreement
The Release of Rental History agreement is an important document that can sometimes open doors for you when dealing with previous landlords or property management companies. It can be a part of your tenant application form or exist as a separate agreement that proves that the tenant has given you permission to check their rental history. Though most landlords will be ready to share the information with you once you’ve established your identity as a fellow investor, some need written consent (from the applicant) that they can legally share such private information with a third party (you). Find a sample Release of Rental History Agreement here.
3. What Questions to Ask
When an applicant’s previous landlord or property management company agrees to provide you with a reference, you must be ready. Your questions to them cannot be vague or random. Instead, they must be pointed questions that reveal how the applicant dealt with situations in their previous tenancy. Remember that your questions need to be objective as well as easy to answer – ones that can be answered with a simple yes/no or concrete numbers will serve you best.
Some of the basic questions that you should ask are the dates of tenancy, rental amount paid during that period, the punctuality (or, lack thereof) of rent payments, whether all rules and regulations were observed and so on. Dig deeper to find if
• they were served any notices
• they ever gave cause for eviction
• they informed the landlord about their plans to vacate
• they were offered a lease renewal
• they are breaking a lease agreement and if yes, what kind of penalty is in order
To understand the personality of the applicant, ask how they maintained the property; whether they displayed disruptive behaviour; whether they were good at communicating; and if the landlord or management company would consider renting out to them again. These questions will give you a clear understanding of whether or not this applicant is for you.
4. Spot Biased Reviews
For most applicants, giving you permission to look up their rental history shouldn’t be a problem. However, there may be some applicants who may be wary about the reference from a previous landlord because they believe their landlord was prejudiced. You must acknowledge the existence of landlords or management companies that tend to be unfair and biased against
• people from other countries or states
• those who cannot speak in English
• people with whom they have political differences
• or, people who enter premises late at night
Landlords, like all people, can be emotional, irresponsible, greedy, unprofessional or worse, racist. Your applicant may try to convince you against seeking a reference from such biased landlords, but learn to professionally say no and press ahead with your inquiry. However, while conducting your interview, you must be able to spot biases and gauge the trustworthiness of the person on the other end.
5. Improve Your Network
Every landlord or property manager you reach out to in the process of checking your applicant’s rental history is a potential contact who could come in handy some day. While some of them may be strictly professional and may even hint that they don’t want any further engagement, there may be others who will truly open up to you. Whatever may be the type of landlord you’re speaking to, don’t pass up on the opportunity to reach out and network. These are fellow investors doing business in the same place as you. Some of them may be veteran investors who could turn into great mentors or they could be newbies who might seek mentorship from you. Either way, it’s a win-win and remember that your business is only as big as your network in the real estate industry.
Learn to Spot Lies
While it may be tempting to forget about screening applicants when your property has been vacant a little too long, don’t skip it. Pre-screen applicants when they first make contact – before rushing to invite them for a showing of the property, find out if they meet your basic requirements. Frame questions in a way that gets the applicant to divulge information you’re looking for, without giving away your stand. Doing so will leave less room for dishonesty from an applicant who’s desperate to find another landlord. For example, ask if they’ve ever owned a pet instead of stating your policy on pets.
And finally, here are people out there who are desperate to find a new place to rent and won’t hesitate to enlist the help of friends or family to pose as previous landlords. Here again, your initial questions to the landlord shouldn’t give away the fact that you think you’re talking to a landlord. Instead, leave it open ended by asking how they know the applicant. Stay alert to spot any discrepancies in the responses you receive and/or, nervousness – they are surefire signs that something isn’t right and it’s your cue to ditch the applicant and move on to the next.