I am a first time landlord and am in the process of reviewing the applications for my rental property. I have some good one and some not so good ones. I was wondering how some of you guys go about informing the rejected applicants (phone call, email, letter) that they were not selected and if you include why they were rejected and if that is even necessary by law (I’m in Arizona). I have a landlording book I bought on Amazon but it just glosses over this subject so looking for some real world help from you guys. Thanks a lot!
My application has on it the reasons for rejection (rental history, violent crime convictions, drug crime convictions, income and job requirements, etc) I always call the applicant and tell them why they were rejected. I usually get some kind of retort, like “That conviction was a deferred adjudication and should not be on my record.” or “I didn’t actually get evicted I moved on my own”. My spill goes like this…I call and say Hello Johnny this is Mr. Johnson. I ran your background and found that you had a conviction in 2009 for a violent crime. As you saw listed on the application that is grounds for rejection so I will not be able to approve your application. They say something like I was not really convicted that cased is on appeal. I then say thank you for applying good bye and then I hang up.
I’m not sure this is for beginners, except that beginners need to take extra caution regarding “discrimination” issues.
I used to screen applications the old way for evictions and convictions, until I found myself defending against a 9-month long discrimination investigation by the federal government back in 1996.
Now, I don’t turn anyone down for anything… I changed my screening model to eliminate Fed Discrimination Investigation II, as it were.
No, today I just get bigger deposits (except here in CA they changed the law limiting what I can ask for, so the really bad prospects that I used to make the most money off of, I actually cannot help anymore, because I can’t offset the risk with higher deposits.
Then I ask for longer leases with higher rents and cosigners, if necessary. The secret is having a one-size fits all screening process, so nobody can accuse us of playing favorites.
All that said, today I’m still looking for…
- Stable income (2 years on job)
- Average to good credit (600 min, to pick a number)
- Good residence history including eviction history (2 years at last place regardless of eviction history).
If one of these is missing, I want a cosigner and more rent, plus normal deposit and pre-paid rent.
If two of these is missing I want a cosigner, more rent, maximum deposit equal to 3x’s the rent, plus normal pre-paid rent.
If all three of these is missing I want everything, plus a 24-month lease.
The reason I want the long lease is that I’m getting substantially more rent for two years, not to mention taking a risk.
That extra $2000 annually would be lost on the tenants with AA credit, good jobs, and excellent residence histories.
Meantime, I want to make it worth my time to deal with the risks otherwise. Frankly, if the tenant survives 24 months with me and cooperates with my credit repair program…they’ll be able to rent whatever they want in 2 years, and this is partly how I sell the extra rent and longer lease requirements.
Again, I never turn anyone down this way. They turn me down, but I never have to think about violating any laws, have to justify turning someone down, and/or perhaps hanging up on an angry prospect.
You can imagine how easy it is for me to find tenants willing to give me extended leases, more money, and who aren’t that picky about what I’ve got available.
I think this approach is really helpful, if not reserved for more sophisticated and experienced landlords, in getting hard-to-rent properties leased up for absolute top dollar in very little time.
I call this a “rent-a-center” screening system for lack of a better description. I make so much more money off this “iffy” niche of clients, who have all sorts of hiccups, that it’s hard to settle for the prospects with good credit, good jobs and good residence histories. The AA prospects have options and they exercise those options…
By the way ask any property manager if they’ve ever had a AA tenant develop crappy credit over time, and subsequently screw the landlord over, only because they had little to lose otherwise. There’s always a horror story about putting in this “great tenant” who turned into the tenant from Hell. Well, that’s another reason to focus on the ones that would be hell in the first place, and address all those problems up front, fairly, elegantly, and profitably. YES! :biggrin
BTW, another reason to get a long lease is because tenants with past credit hiccups tend to move more often, for some reason. And with big deposits on hand, the tenant is quite tempted to get that big deposit back to put on a cheaper place once they’ve established a good residency history (or got their credit, or jobs figured out). Just saying.
Then, of course, the crooks and losers won’t give us the big bucks and rents we ask for, because they always want something for nothing in the first place …and they never find co-signers anyway. :anon
So lowering the qualifying standards is not the risk some might think. We’re actually just making it possible to profit off of the people with ugly pasts. It’s a beautiful thing …that is until the government interferes and makes it impossible to help the credit challenged, like California has done in the name of “protecting” renters. I guess if you’re a D renter in California, you’re s.c.r.e.w.e.d.
:beer
Hope this is thought provoking. If you’re new at this, this approach is probably not wise. Stick with the AA prospects. Later you can think about pocketing an extra grand or two every year and rent to people with hiccups. :biggrin
I use a service that even has a ready to print denial letter,but most people you deny know why and are expecting it,if you make sure they know up front that you ARE screening, not just saying it, most won’t ever return the application,
I tell everyone I will talk to there employer, last 2 places they lived, will run a credit and background check,that I don’t expect “perfect” credit, but basically it will verify they have a history of paying bills on time,if they are hiding something they normally just disappear
I’ve had the same experience as andydallas…if you actually screen and let the prospects know exactly what you will be doing: credit check, background check, eviction check, employment verification and income verification, “most” of the bad apples will fall to the wayside by themselves.
I run the app on my I-Pad I have my answer in about 10-20 seconds no need to send them a letter. If I like them and I’m going to rent to them I fill in the rental agreement on my I-Pad they read it and sign the lease on the I-Pad and I email them a copy right then done.
awesome guys, thanks for the info. I have selected my renter, and will be letting the rejected know tomorrow. I think I will just email them the rejection notice because I have weird work hours. hopefully that is legal…
thank you javipa for sharing your more experienced approach. i would have never thought about renting to anyone else but A+ credit people. Maybe when I pick up more affordable rentals I will try that approach.
That sounds a little fishy, or otherwise risky, to me. Just checking one’s credit and rental history electronically - and that’s it - is not a good landlording practice.
- Computer signatures (assuming they write their signature) do not always look like regular signatures, typed signatures are questionable legally & e-signatures when used through an appropriate service are legal but are a “new thing” to most courts, but people can always deny they didn’t type their name…so I don’t know if that’d hold up in court if you ever were entangled in a real lawsuit beyond a simple eviction. My lease is written in a manner so that it defends me and my legal entities from liability and from other forms of lawsuits, so it’s 100% vital that any signature is 100% legal…you can’t beat ink for that.
- What about verbally checking references via the phone, to verify that person is who they say they are, lives where they say they do and works where they say they work? Thats important.
- What about verbally verifying with their employer that they are still employed in a permenant job? …what if they have a temp job, or were fired in the last couple days (it happens)?
- What about verbally checking their rental history? Not all rental database history matches up with what the landlord has to say. You could be missing something big here.
A phone call is what I always do. As long as you have a legal reason to not approve them…just tell them what it was and that you can’t approve them for that. Prospective tenants KNOW if they have bad credit, any past due evictions / rent, criminal history OR if they lied on their application. That’s usually the end of the conversation there. If they whine or beg after you tell them the situation, just tell him/her “I like you and think you’re a good person, but again you are not approved because of , and I can’t make an exception because of company policy.” Even though YOU are the owner of the COMPANY, they don’t know that. That almost always works well.
What the other guy said about offering him/her a bigger deposit option is a good idea too, and it works sometimes. I have done it successfully…especially on people with bad credit. BUT DO NOT APPROVE EVERYONE. Sex offenders, and most other felons, can actually be a liability even if they have the money to pay rent. If you approve a “reformed child molester who has done his time in jail” and he hurts a neighbor’s kid a year later…YOU will probably get sued for millions. The same applies to anyone who has hurt someone else through assault, robbery, whatever. Be wary of all felons, with maybe an exception or two like for say a hot check felony (be sure they pay you with a money order or cash, LOL). Also someone with a lot of cash and no verifiable income could be a drug dealer…and you don’t want one of those guys moving into your property…those guys live in good AND bad neighborhoods. Also, if you get someone legit with say a couple thousand bucks in savings and no job (e.g. they might be on unemployment, between jobs, whatever), and they give you a big deposit and prepay one months rent…that’s good and all…but if they trash your place when you have to evict them two months later, your expenses could easily exceed your big deposit. So again, the big deposit trick will work, but be smart about it and don’t allow just anyone in your front door.
Agree but I was simplify it a little But I run my report right then and will tell them right there if the answer is no or if everything checks out I see no problem. As far as the signature its 100% legal go to a bank and open an account you sign electronically.
javipa,
Your tale of renting to less qualified renters was fascinating. Maybe sometime you can do a new post on your experiences with this?
If those renters are less qualified, how do they have money? How is your eviction rate?
Also, tworent, I believe in the future everyone will be selling houses, renting houses, everything–right on the ipads. You are just ahead of us all.
Interesting posts.
Furnishedowner
Thanks My agent just sent me 2 bids for me to sign and I sent them back within 5 minutes as I sat there waiting for my hot wings. When great deals are gone in one day with 8-10 bids they want an answer right away and I have got deals because I was on top of it.
I’ve been thinking about writing up a complete system based on my approach and selling it. Short of that to answer your questions…
I don’t rent to those with no money as a rule… That’s for a different situation. My renters have got money, but they’ve had problems handling it, or perhaps keeping it…
People get fired…and their credit gets screwed up while they’re trying to find new jobs…at the same time get forced out of/evicted from their homes/apartments as a result… It’s like a snowball effect.
There’s a gillion former homeowners in this category…believe it or not. So, it’s not about not having the income, it’s about hiccups handling the incomes they’ve got.
That all said, when I’m willing to be flexible about multiple tenants or roommates, than I’ve got more options available to me when it comes to making money from those with insufficient income individually. I’ve got the potential of more than one cosigner…for the same rental unit in these cases. This is rare, of course, but I keep my options open for those who want to pool resources in order to afford what I have to offer.
BTW, I’m not renting junk. I’m renting decent, well maintained, clean, functional units. So, it’s not like I’m attracting only bottom feeders.
My eviction rates are practically non-existent. I don’t take any more risks with CC tenants than I do with the AA folks.
I believe there are five things that eliminate 99% of the drama and trauma for me: 1) treat the client with respect, 2) make the rules clear 3) do what I promise, 4) enforce the rules consistently, fairly and firmly, and 5) make sure the tenant has something to lose if they get tempted to screw me.
Meantime, nothing sabotages an otherwise good business relationship then when the business owner/landlord/investor fails to remain professional; does not follow through on promises or agreements; and/or escalates disagreements or miscommunication ---- and again, fails to make sure the tenant has something to lose if the deal goes south. The last thing is probably more important than anything else.
As an aside, people with either credit, income, or legal hiccups are already being turned down by the unimaginative, low-return types who think they’ll have less problems with people with …less problems. So, by the time they’ve gotten to me, I sound like an abject God-send. And since I rent nice stuff, they are often extremely motivated to jump my hoops, once they realize I can make it possible for them to rent a nice place at all.
Of course, that’s only half of it, because once in, the temptation is to take it all for granted. I think it’s called a dwindling return, or something like that. So, the big deposits and cosigners serve as something to lose.
Hope that answers your question well enough…