Imagine having reliable, long-term tenants who take care of your properties and pay on time. These are the types of tenants everyone loves, as they generate consistent income and reduce the cost of turnover and repairs. However, it often feels like rolling the dice every time a tenant is selected. But don’t despair, my friend, what if I told you there is a guaranteed way to get the best tenants and build a thriving rental portfolio?
As a landlord with over 12 years of experience, I understand the struggles and hardships that come with managing a successful rental business. I discovered a system that not only addresses the common pitfalls of tenant selection, but also adds value to your rental business. People who adopted these practices enjoy peace of mind and now realize it’s the best way to find great tenants. With this system, you can say goodbye to rental roulette and start grinning at your bank account like Willie Wonka in the chocolate factory. There are only two elements to the system, property preparation and strategic tenant screening.
First we’ll start with the property. If you want a great tenant, you have to prepare your property to compete with certain rentals. To gain a competitive edge, research your market to understand options available to renters in terms of price and property condition. Search rental sites and look for the following:
COMPS: Search for properties that have comparable bed/baths, inside/outside sqft that are within a mile of your property.
TOP 10%: Focus on the properties that are priced on the higher end of the market, top 10%.
PICTURES: Look at the pictures so you get a feel for the condition.
Once you gather market data, it’s time to decide what renovations you’ll make. It doesn’t have to be the greatest on the market, but it should compare to the top 10%. Great tenants won’t settle for less when they know better is available. Also, people tend to treat properties as they see them and stay longer if they’re updated. Investing in the condition will lead to better tenant behavior and reduced maintenance costs.
After investing your time and hard-earned money to improve the property, it’s time to find a great tenant by NOT compromising on the tenant screening.
Now, we’ll focus on the best way to screen for great tenants and not the ones that party like it’s 1999 or leave your house looking like a scene from The Walking Dead.
Traditional tenant screening methods such as credit score, eviction reports and background checks are helpful but have failed many landlords, including us! Through trial and error, I discovered one key element that is often missing from traditional screening…the TRUTH. How do you know a previous landlord isn’t mom or uncle pretending just to help “Bad Jr.” get approved? This is just one of many ways tenants deceive landlords. I’ve found that focusing on obtaining accurate rental history is a necessity to ensure you’re not getting duped. Next, let’s break down why traditional tenant screening isn’t enough.
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Tenant screening relies on credit scores, court evictions, and background checks. However, credit scores are not the best indicator of how good a tenant will be. In my experience working at Wells Fargo, I saw firsthand how one missed payment could cause a score to drop 50-80 points. A simple mistake could lead to good tenants being passed over or bad tenants being selected. Instead, landlords should focus on a tenant’s income to debt ratio and the standard rule of thumb of income being three times the rent. Also, when reviewing a credit report, consider the type of debt a person carries. For instance, carrying a high balance on a Macy’s credit card while neglecting other creditors could be a sign of poor money management.
While there is no perfect way to design a scoring system, here are two examples of how credit scores were not the best way to evaluate applicants:
Example 1: Despite a low credit score of 580, I decided to rent to a tenant with a low debt to income ratio, consistent debt repayment, and a new job earning $80K per year. The tenant proved to be reliable, consistently paying rent on time and maintaining the property in excellent condition for two years before relocating for work.
Example 2: Two brothers with credit scores of 680 and 700 and low debt to income ratios, proved to be less desirable despite consistently paying rent on time. They neglected the property, causing damage that cost about a year’s worth of profit to repair.
These examples highlight the importance of considering not just credit score and payment history, but also the tenant’s willingness to take care of the property. This blog provides a solution to this challenge.
In addition to credit scores, traditional screening also looks at court eviction records. However, these searches only pull evictions that were fully processed through the courts. Many evictions are informal, meaning they were settled outside of court, and do not show on searches. This can lead to landlords being unaware of a tenant’s real eviction history. The Washington Post published an article on evictions in DC which revealed that 70% of evictions are informal, meaning they were settled outside of court even after hearings are held. Tenants will often agree to move out to prevent having an eviction on their record or landlords sometimes use questionable tactics to pressure a tenant to leave.
Background and criminal checks are sufficient with most screening companies, no issues here.
As you can see, traditional tenant screening has its flaws. This is why we created Rent Resumé, a tenant rental history verification service that addresses the flaws of traditional screening. Let’s delve into our innovative process and its ability to provide a more accurate and comprehensive way of evaluating potential tenants.
Our service focuses on 3 aspects:
1) Verifying rental history
2) Verifying rent payments
3) How well tenants maintain properties.
First, Rent Resumé prioritizes obtaining a comprehensive and accurate rental history. Tenants may attempt to conceal negative history by providing false information about past residences, landlords or conduct. We have safeguards in place to verify this information by requiring applicants to provide proof of residency and landlord information for all current and previous addresses. This proof can include paystubs, bills, tax returns, leases, or any other official documents that include the applicant’s name and address. Additionally, Section 8 tenants can provide a letter from Section 8 that includes their addresses.
To verify landlord information, we contact landlords and ask them to provide official documents that demonstrate ownership. It’s important to consider that current landlords may not provide negative information about a tenant if they want them to leave their property. Therefore, it’s best to obtain the information from least two landlords.
In addition to proof of ownership, landlords are asked to provide information about the lease timeframe, security deposit, late rent payments and evictions. This information is crucial in evaluating a tenant’s suitability as a renter. Example, multiple short lease periods (0-1 years) could be an indication of rental issues, as most people don’t like moving frequently.
Second, to determine how well a tenant pays rent, we request the number of times the tenant was 30 days or more late and if eviction was required.
Third, we ask landlords whether the tenant was reimbursed the full amount of the security deposit, and if not, to provide the reason. This information provides insight into a tenant’s ability to maintain properties. If there was damage to the property it will be deducted from the deposit. Landlord contact info is provided as well for direct communication if needed.
As you can see, Rent Resumé is the only service that allows you to verify the most important information. It provides a clearer picture of the tenant’s history, potentially offsetting negative factors such as credit score. “Our goal is to serve both landlords and tenants by helping responsible renters stand out and providing more options for those with a blemished record.” CEO of Rent Resume
By adding Rent Resumé to traditional tenant screening, the rental market can become more transparent and accountable. Imagine the satisfaction of knowing that your properties are in the hands of responsible tenants that treat them like their own.
Our user-friendly platform does all the work for you and there’s no cost to landlords. All you have to do is direct your applicants to our site to complete a resumé. By leveraging the value of our system, you can turn your rental dreams into a reality as you build a stress-free portfolio.
Don’t just take our word for it – try Rent Resumé for yourself and share it with others. Together, we can improve the rental experience for all.