Tenant Screening.

Rehabbing, Fix and Flip, Rental Properties
1

Hello I am new here. I have rental units in MA.
My question is.
During screening process you get these applicants that have everything looking good on paper and everything check out and their record indicate that they are outstanding citizens.
BUT for some reason you have a gut feeling that they will be trouble, you can sense that there is potential for drug use, potential for violence, crazy demands and constant complains, you can’t tell this to their face because they will not admit to it.

How do you turn down candidates that “Look good” ?

I am renting in Massachusetts and would do not want to break any laws.

Andyr

Thanks.

2

Are you only getting one applicant that looks good?

Here lately I’ve had two or three at a time to pick from, my last place got ten or so applicants in a week.

3

andyr,

That doesn’t happen.

Unless “looking good on paper, and everything checks out, and their record indicates that they are outstanding citizens,” somehow includes two evictions and three judgements on their credit, you’re not going to have potential drug addicts or ‘crazies’ renting from you.

As far as turning someone down…

This should be done as you’re completing the application with the prospect, unless they’re lying their faces off.

Iffy answers and/or missing information, are red flags, and of course, you won’t process the application without the missing information.

This assumes that you’re not accepting applications that aren’t completed in front of you. Allowing prospective tenants to bring you completed applications, is the best way to make sure you get the most beautiful, well-coordinated, lies ever recorded on paper.

Also, you’re always considering more than one applicant at a time, for any given unit, as far as any prospect is concerned. If not, you’re probably asking too much in rent. Just saying. Nevertheless, you’ll inform the prospect of your decision when you make it, but make no promises otherwise.

FWIW

4

I usually get get several that looks good, but start with the best application and do credit check and if that looks OK I ask them to make a deposit to hold the place for them until they move in.

The problem is in Massachusetts the way I understand it you can not collect application fee, or have them pay for credit report. So if I get tenants that look good on application(possibly lied) but during showing they seem on drugs or drunk, how do I refuse them and not go through the credit and background check expense.

5

If you’re showing a house to a drunk, why would you bother accepting an application?

I would tell the guy that, “I’m sorry, we only rent to blind drunks. And it’s obvious you can still see.”

BTW, if you can’t charge an application fee, then you’re gonna have to cough it up yourself. Also there are varying levels of checking you can pay for.

But why go through the process of processing a drunk, or a suspected drug abuser? Can’t you kind of sense these things before you complete the application?

What you’re describing is so remote and unusual, only you could experience this, evidently. :biggrin :evil

6

Andyr,

You’re right to be curious about tenant screening and tenant rejection guidelines, all landlords large and small, are bound by a matrix of Federal, State and local laws that protect against discrimination on the basis of race, color, national origin, ancestry, sex (gender), sexual orientation, age, marital status, religion, military/veteran status, blindness, hearing impairment, receipt of public assistance or housing subsidy and children.

Here are some links that will give you guidelines on how to proceed with tenant rejection (but
ultimately you should consult an attorney):

http://www.mass.gov/mcad/screening.html
https://www.masshousing.com/portal/server.pt/gateway/PTARGS_0_2_5960_0_0_18/Tenant%20Selection%20Plan.doc

Lastly, send me a DM and I’ll share a template that you can use as a starting point for your tenant rejection letter (free to anyone for the asking).

Regards,

Scott Miller

7

I never charge applicants an application fee, I charge them what I pay for the credit check. It’s always at cost. I tell them I don’t make a dime off it and therefore it’s not an application fee. If they don’t want to do it through my company, they can pull up their own credit report from Equifax on my computer at their expense and I tell them it will take a little bit longer, proving further it’s not an application fee. But, I have to see the credit report on my computer and they are paying for the cost because, as I tell them, my lenders and business partners won’t let me process any application without a credit report. Then I explain the credit check on what we are looking for and what would disqualify them. Usually after they are ok paying the cost of the credit report.

If you get a gut feeling about someone, do a more thorough credit inspection. If they leave a work reference, don’t call the work reference, but do a 411 search on the company they work for and ask to speak to the manager and say they’ve applied for an apartment and you’re verifying that they worked there and for how long. I’ve caught applicants lying on the application before. Usually, I get something out of them without them referring me to their HR department.

Same with apartment buildings. I don’t accept family references. They need to have a rented an apartment from a verifiable apartment building that I can do a 411 on or Internet search and get a phone number for. I don’t accept entry level applicants with a lot of blank spaces on the application. It’s a red flag for trouble down the road and it’s better to have an empty apartment than to have one a-hole cause 4 good tenants to move out.

Also, by good credit, do you mean no fico score shows up or they have really high fico scores in the 800s. I’ve have middle aged troublemakers who had very little show up on their Equifax report with no fico scores. If they don’t have a high credit score, I don’t accept them. That’s it.

8

I’m guessing that it’s the ‘name’ of the fee you charge to do a background and/or a credit check that’s in question here.

Otherwise, we don’t have to eat the costs of doing background and credit checks on potential customers.

Making a profit off the process is another element altogether.

9

I wonder if there is an agency that you can utilize to “preapprove” applicants. Your application requirements are that the applicant must be third party approved prior to applying. You charge nothing.

10

Thanks to all for you input. It was very helpful. Thanks REI4ROI for The form.

11

First thing, you must have a very extensive written criteria so you have lots of options for legally rejecting an applicant. Every little nit-picky thing you can think of should be in your written criteria. My written criteria is 5 full pages of small print.

Never ever take an applicant’s word for anything. Look up phone numbers, don’t use numbers that applicant has given you.

Check to make sure the “landlord” they give you is really the property owner. About 1/3 of my applicants try to have a friend pose as their landlord.

I have gone as far as to drive to their current address and look at what it looks like and talk to their neighbors.

I have gone as far as to drive to the landlord’s house and knock on the door.

If an applicant rings my warning bells, I dig until I find out why and until I can find a legal reason to reject.

12

Put it in your written criteria that applicants will be rejected if they show up for the viewing drunk or under the influence., or smelling of booze or cigarette smoke.

Just be careful that they don’t have a medical condition that affects their speech. Deaf people occasionally sound a bit drunk, and you sure don’t want to accuse one of being drunk when he is not.

13

You’re making this way too complicated and anal. I’ve been at this since I was eight, and at times have done everything you mention, at least once.

However, after while, you begin to read people better, and can ask better questions of the applicant, if not learn to disqualify them without all the running around and cya’ing activity.

The easiest way I’ve discovered to tell someone ‘no’ is to require more than they want to provide.

For example, as we go through the application we ask the prospect about their credit. Sometimes they bring their credit report with them. Often it’s an ‘old’ credit report. We ignore those. Meantime, we ask about their credit this way:

“Mr. Prospect, if we were to run a credit report today, what would we find?”

Then we go from there. Most of the time the credit challenged will claim ignorance, but the tip off is the inability to provide information on the spot to complete the application. That’s the primary reason we don’t (normally) accept applications that were completed off site. We want to read the faces of the prospects as we’re compiling information.

Meanwhile, we don’t have time to indulge in our inner CSI agent, by engaging in reconnaissance missions on prospect’s current residences.

If any warning bells go off, we just ramp up the rental requirements, until we get everything we want, and/or the tenant rejects our offer.

I’ll rent to anybody if they give me:

  1. A qualified cosigner
  2. 4x’s the rent as a deposit
  3. 10% more in rent
  4. 2-year lease

You bet.

14

Thank you Mr. Javipa for your post. I am in the process of doing my first rental, and my first applicant already admited that she has bad credit record due to a messy divorce.
her income is not that great either, but at least she has the 3/1 income to rent ratio that someone here suggested.
I will have an agency to run additonal reports and if she pass, I will request an additional deposit, my prospect already offered to sign a 2 year agreement.

15

I keep it pretty simple.

No felons, no broken leases, no evictions.
Income 3x rent.

I don’t care if they have bad credit as long as they prioritize their bills properly.
RENT COMES FIRST…ALWAYS!

16

Sometimes I think that I am in a totally different business than you other landlords. Renting out fully-furnished units appears to require less vigilance than what you unfurnished regular landlords must provide.

We don’t do credit checks. We don’t even know how to do them. We don’t have application fees. We seldom get a deposit, except for pets. We rent out units sight unseen about half the time.

We have had HUNDREDS of tenants over the past almost ten years, because we allow people to stay as little as 30 days. We have never had an eviction. The number of rent-skips we can count on 1 hand. We have only had theft and damage a couple of times.

The difference appears to be that we operate more like a hotel. We require a credit card number that we hold in lieu of deposit. Or we accept a Corporate Letter of Responsibility from the renting entity. Or rarely we run the credit card or get a cash or check deposit.

We want our tenants to be employed: “Where are you working? What brings you to this town?”

They have to have a good reason for needing to rent from us. Family fights, being evicted, being out-of-a-job are not good reasons. We give those people an application form and they never come back.

It appears that we screen out bad tenants by charging relatively high rent. The rental rates do the screening!

I just took a call this morning from a guest at our local Candlewood Suites. She said “They are charging us $89/day plus tax and now my 80-year-old, 100 lb. mother-in-law is going to stay with us so they are going to charge $114/night! We are here on a 3-month project at the cheese factory and we HAVE got to find other accommodations.”

I can put them into a fully-furnished unit at $48-$75/day. We are not required to charge lodging or gross receipts tax provided they stay 30 days. We even charge for 30 days (with the tenant’s approval) for a shorter stay. We can beat the hotel prices and offer more amenities.

We are softies for the working guy. We just rented a 3-bedroom house to an oil field worker who had to leave Pennsylvania because of the high prices charged there for worker lodging. “I’ve got two little babies in Texas, and now my wife and kids can drive out and stay with me. I’ve only got $300 cash and I can pay the rest on payday the 27th”.

I have never yet been rooked by the working guy.

Vacancy kills us. You never catch up for those vacant days on that unit. So I am happy to do payday deals for rent payment for those workers who come in from out-of-town. Hotels and motels do discounts for their weekly rates. We don’t do discounts, but we can collect weekly if it keeps the units full.

This generates lots of good will and referrals, “We’ve got a whole new bunch of workers coming in next week, and I’m sure going to pass your name on.”

So I guess the gist of all this is that it is possible to screen more like a hotel: “Do you, the customer, have a credit card? What brought you here? How long are you going to stay? Here are our rates, and would you like a receipt?”

Furnishedowner

17

You have a totally different business “model.”

Renting ‘furnished’ is a total change from renting to a family that’s moving in their own boatload of furniture and kids. They don’t expect to pay more, when nothing is ‘furnished’ and they can’t necessarily pick up and leave on a moment’s notice (normally).

Furnished unit customers expect to pay out the wazzoo in rent, and can bail on a moment’s notice. Non-furnished customers don’t, unless their credit sucks drain water. Then they might.

If you’re able to keep your houses rented by furnishing them and catering to a transient class without so much as a signature and a handshake, I’m all for it. Frankly, it’s hard enough cleaning carpets after a tenant has moved, much less work on upholstery, wash dishes, clean appliances, and the list goes on. Nah. :slight_smile:

18

Just the fact that your tenants have credit cards is totally different than what we deal with. Many of our people don’t have checking accts much less credit cards. Know about those credit card scanners you can get for a smartphone? Wouldn’t do me a bit of good for our business cause I’d never get to use it. Oh I wish I could just charge damage or late fees to a tenant’s card. That’s a huge bonus for you. It’s just a different way to profit from REI but you’re dealing with a totally different class of people. I’m 37 and have to counsel people 20 years older than me on why they should pay me, not use payday loans, etc.

19

javipa and justin,
You are right, it IS different and I am grateful that I stumbled onto this business model. Personally I would have a hard time dealing with people who don’t have good budgeting sense.

We do do a lot more cleaning. I have a 2-car garage full of linen and dish cupboards. There is a full-time cleaning lady.

When I had unfurnished tenants in houses I bought I was amazed at how little they required. Basically, we just cashed their checks and they never complained. So I hope that it is often that way for you.

It has always been the back-up plan to sell off the furnishings and just rent out the homes as is. Probably turn it over to a Property Management Company. That would be in the event of a market crash and if those good-paying tenants just quit coming. But they haven’t. Even with 170+ new suite hotel rooms that hit the market here in June, we are at 96% full.

You other landlords don’t have to field those phone calls like, “My pizza cutter just broke!” “The mattress is too hard.” “How can I see a pay-per-view fight on my TV?” “There is an odor in the carpet.”

Once you get your credit checks all done, you just have to deposit the rent checks. That plan sounds pretty good, too.

Furnishedowner