Landlording and Screening Tenants

Source:http://www.milliondollarjourney.com/landlording-and-screening-tenants.htm
So, after you've followed the criteria for purchasing a rental investment property and snapped one up, how do you screen your potential tenants?

I've been a landlord for a few years now and I've seen it all when it comes to tenants. Good ones, bad ones, all shapes/sizes, and all financial the predicaments you can think of.

When I first started landlording, I didn't have a lot of specific criteria when accepting tenants. I basically took anyone who was willing to pay me money. Big mistake. I was completely naive to the fact that not everyone is responsible with money and can/will pay their rent on time (or ever).

From my mistakes, I have come up with some rules that must be followed before I allow a potential tenant to move in.

1. Must have a verified job

This may seem obvious, but I've had tenants who told me they had jobs but turned out not having any steady work. No work, means no money to pay rent. Simple solution, make sure they show you a recent pay stub along with employer contact info so that you can call to verify employment. Note, I don't have any student housing, so this rule may not be valid in that situation.
2. Must have at least 2 good references (from previous landlords preferably)

Get referrals from landlords prior to their current landlord. Their current landlord may give them a good reference just to get them out of their place. To me, landlord referrals are extremely important when screening tenants.
3. Should have decent credit

You can get the tenant to show you their most recent credit report, or you can get it yourself from various sites online. Tenants with poor payment history usually results in a higher probability of rent payment default.
4. Must have enough cash for a security deposit and first months rent (see local rental guidelines in your area).

If the tenant doesn't have the cash for security and first months rent on or before move in date, then I move on. Some tenants will try to pay you a portion of each because they don't have the cash. To me, having some cash in the bank shows money management responsibility which means lower chance of rent default.
5. Prefer not to have a single older lady (or man) as a tenant.

Nothing against single older ladies (or men), but from my experience, they are very needy as tenants (am I going to hell?). I'd prefer low maintenance tenants.
However with that said, I would accept them providing that they meet the other criteria.
6. Prefer no pets.

I don't mind if the cats are spade/neutered (spray is deadly), but not all pet owners are that responsible. I love dogs, but tenant dog owners don't seem to clean up after the dog in the yard. So I just keep a general rule of no pets.
7. Absolutely no smoking inside the premises.

This one is self explanatory. Smoke causes a stink that lingers. The only way to get rid of the smell is to wash/repaint the walls and/or wash/replace the carpets. Besides, indoor smoking in Canada is slowly becoming taboo.
8. If one tenant is viewing the home, I must meet all parties before application is accepted.

If the potential tenants are a couple, it's usually the good one who views the apartment. I've had experiences where I accepted a new tenant based only on meeting one of them and it turned out to be a big mistake. The 2nd tenant turned out to be psycho. Never again.
Can you tell that I've become a disgruntled landlord? :) For you landlords out there, do you have any tips for screening tenants that I didn't mention?

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The Art of Tenant Selection

Source:http://www.milliondollarjourney.com/
This is a column by our resident real estate expert Rachelle.

I have been renting properties in the GTA since about 1997. Here are my hints and tips for selecting the best tenants.

In our current market, if your place isn’t priced properly or is in bad condition you can look forward to bad tenants or periods of vacancy.

Today internet shopping has reached a new level and before people even come to see your apartment they have already shopped it for price, location and appearance. People used to take the first place they could find and now they’ll see many places before they make that buying decision.

As landlords we are competing for the best renters and with tenancy laws being the way they are, it is absolutely crucial to rent to good tenants. A bad decision will cost you 4 month’s rent or more in Ontario, plus any renovations that might be required after they move out. Even more importantly perhaps, the trauma inflicted by the experience of a deadbeat tenant is enough to scar people for life.

What Characteristics Do I Look For?
The selection process is absolutely crucial to weeding out the bad apples and moving the good apples into your place. From the moment I answer the phone I am evaluating the prospect and you should be too.

In my case I often have to “fit” the tenant to the landlord. There is more to a great tenant than paying the rent, especially in homes shared with the owner. Even with multiple tenants evaluating the customs and lifestyle of the building is essential to the landlord’s peace of mind. Tenants with different lifestyles may clash and then expect the landlord to mediate.

Here is my list of desirable characteristics. People who possess these characteristics make superior renters.

Organization: I like the people I select to be organized and be able to follow simple instructions. I tell every person I speak to “you must confirm the appointment by calling one hour before, if you don’t call I don’t go”. Believe it or not some people lack the basic skill of calling and showing up on time.
Preparedness: I love applicants who ask what they need to bring with them so they can rent the place. Some people bring a nice, neat package. The target market for the property will set the timeline. A family with children will be shopping several months before the move in date. A single guy looking for a basement bachelor might end up shopping the weekend before their move in date. In any case preparedness is an asset.
Financial Management: I want tenants to have financial management skills. If you can’t figure out how to get first and last together, I don’t want you renting any space I’m in charge of and I don’t care about your excuses. Please go be someone else’s problem.
Honesty: I want honest people renting from me. I affect a very friendly demeanor with potential tenants. This is deliberate. I don’t like being interrogated and I assume other people don’t either. So instead of telling the tenant all my rules and what I want, I am listening to them, asking leading questions, joking and getting them to reveal their character. If they are liars, what else are they hiding?
A common ploy among bad tenants is to manipulate your feelings and try to make you feel sorry for them. Learn to recognize this as a very serious danger signal. First of all it is inappropriate behavior to start divulging very personal information to your landlord. It’s the first time you’ve met and you know everything including the color of their underwear. Don’t rent to someone you feel sorry for or you’ll be the sorry one.

The Application
I have a very simple application form that I use. When I worked for buildings the application forms were often 2 legal pages long. Most of the information was unverifiable and unnecessary. When I developed my own application I wanted just the meat. I get copies of photo ID and SIN card, present landlord, pay stubs or if direct deposited bank statements to verify deposits from work, a few references, and of course on the bottom of the application I get them to sign for permission to do the credit check. The person you cannot believe is the previous landlord. The worse the tenant is the more they lie as their desperation to get rid of the tenant increases. Don’t judge, this may be you one day.

The Credit Check
The purpose of the credit check for renters is not to check their scores. It does reveal their payment history, which is important, but it also verifies all the information that is written on their application. On the credit check it will say who is their employer, their current address as well as any previous addresses. Pay particular attention to the dates of any moves. Moving every four to six months may mean that person is getting evicted or unstable.

Evaluating the Applicant Overall
Do not under dismiss your sixth sense. This may sound very new age but in fact about 60% of communication is non-verbal and our human instincts have been honed over millennia to keep us safe. I am pragmatic about most things, after years of experience, I don’t ignore my intuition. After I meet a tenant the first time I imagine how it would feel if they moved into the house. This is an easy way to get in touch with your gut.

RED FLAGS
When in doubt, just don’t rent to a potential problem tenant. Here’s my checklist of bad risks.

Last minute renters
Dysfunctional people
People who won’t do a credit check
People who try to manipulate your emotions
People who smell bad
Liars
People who don’t have first and last month’s rent
People who give you bad vibes
People with implausible stories
People with drug/alcohol issues
Do not under any circumstances tell them the reason why their application is being turned down. You don’t have to and telling them why may get you in trouble. You’d be surprised at what constitutes discrimination these days. So be safe and simply say “I’m sorry you didn’t get the space. Best of luck on your search”.

Safety First
When showing an apartment it’s a good idea to let someone know where you are going and call them as soon as the appointment is done. Three times in my years of showing and renting properties I felt like I was in imminent danger. I am a woman and I show apartments at night in questionable areas all the time. If this ever happens to you, do what I do, leave the space immediately and come back the next day to lock the door. Be safe and keep your wits about you. Just leave. No one is going to steal your empty or your applications. I cannot emphasize this enough.

Final thoughts on Tenant Selection
Do the paperwork and trust your intuition. In every single case where I have rented a property to a wrong person, when I look back, I had a “bad” feeling or a sense that “things didn’t add up”. Beware the miracle tenant, the person who shows up two days before the end of the month, who has perfect income who offers to finish your renovation work and pay above market rent.

Happy renting !!!

About the Author: Rachelle specializes in renting property on behalf of landlords. She also works with investors to find good investments in Toronto and surrounding areas. Her passion is bringing multi res properties back from the brink and maximizing profitability.

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