How to do Tenant Screenings as a Landlord

In my article “Steps to a Successful Deal,” one of the most over looked points is tenant screening. Yet this is one of the most important parts of the successful deal.

Why does this happen? I believe when inexperienced and beginner investors go out, find a house, evaluate a house, get the financing and get it closed they are just plain exhausted emotionally. Then fear, greed and laziness set in.

“What if I can’t lease it?”
“I want the money now and this person has it right now.”
“I can trust this person. I am good at judging character.”

With these three working against them, the new investor makes the classic non-mentored beginner mistake. Taking the money without running a complete screening of the prospective tenant.

In 20 years of mentoring over 10,000 members (and countless case studies on the radio shows) I have found 99% of the time the owner, not the tenant, was responsible for a bad rental experience. Yes. In over 20 years.

You cannot let these three things get in the way of the effective business model. It is simple and clear cut. Run a credit and criminal report on every prospective tenant and talk to the present employer and present landlord.

When you follow these simple rules, you eliminate 99% of the problems that landlords have with tenants.

Now combine that with the “best product, best price” approach and you are going to be highly effective in your market place.

Simply put, “best product” means you make the house perfect before you lease it and “best price” means you rent the property at or a little below the market rent. You can read more and learn more about this part of the business model.

Step 1:

Collect the deposit and the $35 application fee. In single-family the deposit would be equal to one months rent and on multifamily it could be whatever the market will bear.

Special Tip From Mentor Jeff Smith
Be careful about taking more than one application deposit from different individuals. Accepting more than one deposit can create a misunderstanding so get everything in writing as part of the agreement.

Step 2:

Get them to sign the Prospective Tenant Qualifications sheet.

Step 3:

Run credit and criminal report. We use National Tenant Network and Zip Reports.

Step 4:

Confirm rental history with present landlord.

Special Tips From Mentor Jeff Smith:
In addition to calling current landlord call previous landlord as well. The current landlord might be so happy they’re leaving he’ll say anything to expedite their departure.
If the tenant is moving from a house, I also verify that the landlord named is the property owner via the county appraisal district (CAD) records.

Step 5:

Confirm employment history and income for the last two years. As a rule make sure they have 3 times the rent in income. More is better.

Special Tip From Jeff Smith:
Make 2 calls to the current employer and landlord.
They could be faking on the first, might not expect the second.

Step 6:

Make your decision and collect the first month’s rent from the first approved prospect and refund any other deposits you have taken.

With your “best product, best price” product, you now have the perfect tenant. Time to head out to buy your next income-producing asset.

Take time to read carefully the attached “Rental Application Qualifications.” This will explain more of the requirements and help you understand the whole process more clearly.

The last page of this document is a check-list that you can use on each application as you go through the application process. Cut and paste this into your favorite word processor and edit it as you customize your screening process.

Comments

  1. Great article, I would add two quick items:
    1. Mike Stout with http://www.ntnonline.com is a very nice guy, he spent awhile with me on the phone and walked me through the process of registering with them and then screening my tenants. It’s a great service and it’s reasonably priced.
    2. I liked one tip I heard at a RICH Club meeting from the former president, James Smith, he suggested going to meet your prospective tenant at their present home to sign the paperwork. He said “you want to see what your house is going to look like in a year? Go sign the papers where they live now.”

  2. I got a tip from a friend who runs dozens of rentals. He said to get a look at how they take care of their car, that is how they will treat your house.

  3. Christen Crum says

    Steve,

    How do I get copies of the documents you mention in this article such as the tenant qualification sheet and rental application qualifications? Thanks!

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