This past weekend, I was scheduled to show a foreclosed property that one of my clients was looking to buy. I arrived about 15 minutes early and was walking through the property when someone knocked at the door. It was a neighbor who was a little curious about what was going on with the house because it had been vacant for so long. He gave me a pretty good history of the house. I told him that I had a client coming to see it and possibly buy it and that he was an investor looking to buy it as a rental property. This gentleman let me know that he had four rentals locally and how bad tenants were in that area. When I asked him to explain, he told me about all the bad things his tenants had done. Security deposit never covers the damages they create. I was a little blunt; I asked him why he rented to them in the first place? He said they show up and have the money so he rents to them. I let him know that I’m a property manager and we perform background checks on all tenants and asked him how he performed his background checks. His response was not surprising. He said he didn’t have time to do background checks.
Taking a little time to do background checks would certainly save him a lot of money. I’m of the belief that, for the most part, bad tenants were bad tenants before you rented to them. Our background checks consist of a credit check, employment or income verification, rental history, and criminal background checks. We let our prospective tenants know what is required to rent from us and disclose this as part of our application packet. If you don’t meet these requirements, you shouldn’t even bother applying. This landlord saw that they have money and that was good enough for him. We’ve had prospective tenants tell us they have the money now, and sometimes enough to pay a couple months rent in advance and they need to move in today. We politely tell them that we have to run a background check on everybody and they will have to wait to see if they’re approved. EVERYBODY goes through a background check and has to wait for the results. We have lost tenants because they’ve found something else before the results have come back. That’s a risk we’re willing to take.
All landlords should make it a priority to screen their tenants. If they don’t have time, there are companies out there that will do it for you for a fee. You can pass that fee on to the tenants if you want. Some landlords may absorb the cost of the service looking at it as a worthwhile expense, some refund the cost back to the tenant if they are approved and sign a lease by way of a reduction of the first months rent. We charge the fee to the applicant. This is part of our screening process. If someone knows that they will not pass our background check, they won’t waste their money or time applying.
My client ended up making an offer on the property and, hopefully, he’ll get it and we’ll put a good tenant in place. The neighbor will see that there are good tenants in that area and we’ll get a new management contract. He has my business card.
Here’s to keeping cash flow positive,
Dave
