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Well, good morning and welcome, everyone.I am your host, James Orr, and this is another module in the Real Estate Investing Secrets course.Today, we're going to do secrets to tenant screening.So let's kind of jump right into it today.
First acknowledgement, So previously, my friend Brian Williams had taught a lot of the content in this class for our local real estate investor club.And I have since purchased the rights to the content that he has created for our investor club.
And I have heavily modified this particular presentation.But a lot of the slides were based on an original presentation he had done previously.And so I just wanted to acknowledge the hard work that he put into creating the presentation.
to let you know that some of the work here is from him and it was not created by me.So thanks again to Brian for creating that stuff.All right, so let's jump right into it.So property management series.
So previously in the last module, we went over marketing to find tenants, all the different marketing things that we do in order to find tenants. for our rental properties.Today, we're going to take the next step and go over screening tenants.
How do you find a tenant that is qualified to rent your property?We've already determined how to find them.Now we're actually going to go through the process for screening them in order to determine if they're qualified to rent the property.
And then in the future, we've got property management coming up, which is all this different stuff you do when the tenant is in the property.And then we've got a completely separate module on overcoming all of the tenant challenges.
What do you do if a tenant can't pay rent?What do you do if the tenant isn't following the rules of the lease?All of those things, overcoming specific tenant challenges, we'll cover in a separate module.
And then we've got two additional classes in kind of like the property management mastery subset of this whole real estate investing course.And that is hiring and managing a property manager.Like what are the criteria?
How does hiring a property manager work?How do they get paid?How do you think about that?How do you manage them once you've got them hired and all that different stuff?That's a separate module.
And then we've got one on how do you determine what rent is on a particular property?
Really good for deal analysis and also for when you are about to start marketing to find a new tenant, you want to know what the current fair market rent is for that particular property so that you can do that.
And we'll cover that in detail in the rent comps module.But today we're doing screening tenants.And so we're going to do that. So this is just a really big picture, 30,000 feet overview of what the property management process looks like.
First of all, there's preparing the property, which I have a single slide on that today, just like a quick list of some of the things you want to check out on the property before you start marketing it for sale or marketing for for renting on this on this particular kind of like process.
And then we've got the marketing for tenants, which we've covered in a previous module.We're not going to cover that again today.We're going to talk about tenant screening primarily.
Then there's a whole section on leasing, which is signing the lease, lease signing ceremony, stuff like that.I don't think we plan on teaching an entire module on that.
Maybe I'll do that as kind of like a bonus course later or something else for the kind of like subscriptions for Substack or whatever we're doing there. So we'll do that as part of leasing.
And then finally, we do have a property management module about all the different things you do while the property is occupied by a tenant there.So this is sort of like the 30,000 foot view of what the process looks like for property management.
You prepare the property, you market for tenants, you screen the tenants, you lease them the property, and then you do property management.That's the process.So preparation. So get ready for rent.
Here's a quick checklist for things that you want to definitely look at when you're preparing your property for rent.Number one, make sure that your property has carbon monoxide detectors and smoke detectors.This is a major liability piece for you.
If heaven forbid, the tenant starts a fire in the property and someone dies, if you did not provide carbon monoxide and smoke detectors or the
The furnace has a malfunction and it fills the entire basement with carbon monoxide and people actually go down there and they end up passing out and dying because no one knows that they're down there.That's on you as the landlord.
It's a massive liability for you if you don't provide them carbon monoxide and smoke detectors.It's relatively inexpensive and it's something that you should definitely do and definitely check.
Um, so make sure that they work, change the batteries, um, install new ones.
If they're more than, I think it's like five years is what the recommended, you know, check the packaging, but I believe it's five years for what the, uh, uh, kind of like things.
If you have a smoke detector or fire or carbon monoxide detector, smoke detector that is more than five years old, you're supposed to replace it with a brand new one.So definitely want to go do that to make sure that you are reducing liability.
This is part of your asset protection plan. which is part of the asset protection module we'll cover in detail.But these are part of what you should be doing for every property getting it ready to go.
Next thing, make sure the furnace and the AC has been serviced.You want to make sure that that's in good working order.Again, part of this is liability.
The other part of it is minimizing maintenance and frustration and having the tenant try to say, I'm not paying you rent because the furnace wasn't working the way it was supposed to. Just have the furnace and AC service regularly.
Make sure that everything is working in your rental property.I think it's just the best practice.
And you don't want to have an issue where, you know, there's some type of carbon monoxide problem with the furnace and it's causing a massive problem and it's going to cause you a major liability with your particular situation in that particular property.
So make sure you get the first AC service.Change the locks from the previous tenant.You don't want the liability of the tenant saying, hey, look, you know, I was
someone broke into my house and stole all my stuff because you didn't actually change the locks when you turned the property and there were 14 other keys roaming around from the previous tenants who may have not been the nicest person.
Maybe it wasn't even your tenant, maybe it was the previous owner's tenant and they let anybody in there and now all of a sudden you've got some liability because you didn't change the locks.
And the other thing that I think a lot of people forget is make sure you reset the garage key code.
Because anyone could have their old car programmed, know that they've got like three blanks and a lot of the new cars for three different garage doors.They just kind of keep the old one there.
And they're thinking, you know, six months from now, I'm going to go open the garage door when I know they're not home and I'm going to rob them.So make sure you reset the garage key code.
Make sure you change the locks on all the doors to have that done.Then go walk the property inside and out, making sure that you are visually inspecting things.Make sure you know the condition of the property.Anything needs to be fixed.
Make sure you fix it. Look at the carpet interior paint that needs to be recarpeted or needs to be painted inside.Make sure you take care of that.Look at the exterior of the house, the yard, the siding, the roof, the windows, the doors of the paint.
This is just all your general maintenance stuff on your particular property, making sure that everything's fixed in a good working order.
Uh, and make sure you look at the bathrooms and kitchens, caulk in the kitchen, make sure that all that's done, fix any grout issues, plumbing and any water issues.This is a major expense.
If you don't catch these early, it could cost you very dearly cause molds, which could be a massive liability for you.So you want to make sure that you're on top of all of these plumbing and water issues on all the kitchens and bathrooms.
And anytime there's any type of leak or anything, definitely want to be on top of that.Make sure it's fixed.Everything's a good working order there.
Check the appliances, washer and dryer if you're providing those, and or the refrigerator if you're doing that.
Any other appliances that you're providing a property, make sure that you're checking, make sure they're in good working order as well there.And then any inspection items from the inspection report when you purchase a property.
So if you're buying a property for the first time and you had the property inspected during your inspection period when you're under contract to buy the property, this is your time to fix that stuff.
You know, go and have a handyman go through and spend a day or two, whatever it takes in order to have all the different things that are on that list addressed so that your tenant is getting a property in really good condition and you're able to do that.
And then this one is really important.Document everything. take lots of before and after photos and walkthrough video, make sure you document the condition of the property.This is not only to protect you, but it's also to protect the tenant.
You don't want you to have, you don't find out that, you know, something was wrong with the property and then the tenant comes in and they move out and you're like, hey, what's up with this?And they're like, that was there when I moved in.
Well, if you have a lot of photos documenting everything as part of the property and you just store them in your like Dropbox folder for this particular property and you date it as to when it happened,
you'll have proof that that was not in that condition when you gave the tenant the property, or you can prove them and say, yeah, tenant, you're right, that was, I forgot about that.You're right, that wasn't the property.I can look back there.
And so you're protecting you and you're protecting the tenant by doing that.And then when the tenant moves out, of course, you want to document the condition of the property.
So that you have a, before they moved in, after they moved in, which is then becomes the before of the new tenant moving in.
And of course, if you do any fix up after the old tenant moves out, like if you take photos after the tenant moves out and then you fix something, make sure you take new photos of the thing that is fixed so that you could document that that was happening there as well.
So this is sort of like the preparation to make sure your house is ready to go for your tenant sort of checklist. All right, now we're moving on to the tenant screening.This is the majority of what we plan to cover today in this module.
So tenant screening process.These are the basic five steps of the tenant screening process.Number one, you're going to take the initial call.All the marketing we did in marketing to find tenants gets you to the point where they're contacting you.
They're reaching out via email.Ideally, they're calling you because you want to talk to them on a phone.This is a sales skill.You are selling them on renting your property versus all the other options that they have available to them.
So it's a salesmanship type of thing.You want to talk to them on a phone.You want to sell them on why they should rent from you and not everybody else.So ideally, you get an initial call coming in.
Then we're going to talk about the showing, actually meeting them at the property and showing them around and what happens there.We'll talk about the application itself.
And then we'll talk about processing the application and your written criteria for evaluating a tenant, which is very important for complying with fair housing.
And then the approval process, how it works when we say, OK, Mr. Mrs. Tenant, you are qualified for the property.What are the steps we need to do in order to get you to the point where you're about to sign a lease?
So that's what we're going to cover as part of the tenant screening process.So in my mind, you want to begin with the end in mind.This is a Stephen Covey quote.
And remember, you're about to loan someone an asset worth $400,000, $250,000, $500,000, whatever the value of your property is, you're about to loan them something that is worth that amount of money.
You want to consider whether they have demonstrated the ability to, number one, pay their bills on time and specifically the rent.
If you go look back at their history and you want to inspect their history in order to see if they're qualified, you want to see Have they been paying their bills?Have they been paying the rent on previous properties?
Or if they had a mortgage, have they been paying their mortgage on time?You want to look at that and see, because history is one of the best indicators for what someone is likely to do in the future.
It's not always perfect, but it is one of the best ways to determine if, are these the type of people that always pay their rent?Because that's likely what's going to happen with you and your property. Are they the type of person who keep their word?
You know, credit score is a measure of whether people keep their word.They get bills, they get a credit card bill, they get a medical bill, they get some type of installment loan or whatever.
You know, a credit score tells you how likely is this person to honor their previous commitments, honor their financial obligations and do that.Sure, things can happen.
Good things, bad things can happen to good people and people can have their credit score kind of like damaged or let something happen because of something unexpected.
I totally get that that happens, but this is a type of measure of whether or not someone is going to keep their promises that they made to you.And so we look at credit score as a way to do that.
That's what we're looking to see if they demonstrated that ability.And do they take care of a property?
So a lot of times we're going to look at all the different things that we can see to see if they are the type of people that are going to take care of the $400,000 asset or whatever price of the property that you're going to rent to them is.
You want to make sure that they are going to take care of it.We can look at their car as a proxy, how well they take care of their car.
because someone who takes care of their car doesn't have all sorts of trash and stuff in the property, in the car itself, is more likely to take care of their property.
If they've got a lot of trash, if the thing is all dirty, if it's not really well maintained, that's a sign of what your property may look like.
So we're going to look at all the different clues, all the different evidence we have presented to us as to whether or not they've demonstrated their ability to be trusted with a $400,000 asset.
Now I want to talk to you a little bit about charitability. and charity.And so the idea is this, I know that you're going to hear sob stories.I know that you're going to hear tenants tell you about how, you know, they just need a hand up.
They just need a little bit of help getting into a situation they've had, you know, some really rough periods.And I totally understand that is why one of the reasons why I don't manage my own properties anymore is that I'm a softie.
And so I think though, You should choose to be charitable.You should be very deliberate about where you are charitable with your money and your time and your resources.
You know, if you're concerned about homelessness, donate your money and or your time to homeless charities where you can help more people with a reasonable amount of money.
In my opinion, and you can choose to ignore this advice, but I'm telling you where I'm coming from here.Don't be charitable with your rental property and your rental business.
If you're willing to donate $1,000 per year or $10,000 a year, $100,000 a year to the homeless charity to do that over putting a questionable tenant in the property, I think that is a much better, much more productive use of your money.
Putting someone who's really not qualified in your property where they damage your property, they are in the property for one, two, three, six months without paying rent on the property.
This could cost you $5,000, $10,000, $15,000 or more depending on the price of the property and how much damage they might do while they're in the property.
Do you know how much better, how much more use could be to more people taking that same amount of money and donating it to someplace where they're really helping people?That can be so much more productive and useful rather than this one person
who you're kind of like helping out and they kind of like, I mean, you knew that they were not qualified and that's why you kind of bent the rules in order to let them in the first place.
So don't let a poorly qualified tenant move into your property and take advantage of your charitable nature, take advantage of your goodwill, take advantage of your kind of like your good side and everything like that.
I think you want to be much more deliberate in your budgeting.
for being charitable, be charitable in your own way with your own, you know, very deliberate charitable causes rather than putting a tenant who's unqualified in your property and trying to help someone out and then end up paying $10,000 when you only expected to donate, you know, a thousand or $2,000 that year to charity, to your charitable causes.
Don't let that happen to you.Treat your rental business as a business and do your charitable stuff elsewhere.And that's my opinion.You can decide to ignore that advice, but I'm talking from experience.
People have taken advantage of my willingness to help someone out.
And I'd rather be very deliberate with my charity than to have someone who was borderline going to my property when I knew it was a mistake and put them in the property and they were not qualified, they could not pay the rent, and then they ended up damaging the property on the way out because they were upset that I was evicting them because they hadn't paid rent in six months.
I mean, I don't know how else to look at that.So I think you'd be much better off doing charity.Okay, I'm off my soapbox.That's kind of my talk on there for that. All right, so initial call and screening.
Initial call sets the tone for the entire relationship.What type of relationships do you want to have with your tenants?I personally think you should have what I would consider to be a fatherly relationship with your tenants.Firm, but fair.
I think you want to be firm with the rules, establish what they are, have everybody understand what the guidelines are there. but be fair with executing them.
Treat them with respect, but tell them, look, these are the rules we all agreed to when you came into the property.I'm upholding my end of it.I'm providing you a quality property.I'm doing maintenance.
I'm responding to any requests you have for maintenance on the property.I'm doing everything I can in order to do this.I expect you to pay on time and to follow the rules of the lease.
So I think you want to set that tone early because it's hard for you to come in and be disorganized and be wishy-washy at the very beginning and then expect to be very firm but fair later on in the relationship.
I think that all of this starts with the initial call you have.
And so if you've got people that you're listening to this after you've got some tenants in there and you haven't been firm but fair in the beginning and consistent, then I think you're going to have some trouble switching people over to that.
Not that it can't be done, but I think it's hard a lot of times when you go from acting one way to acting another.
So the time to establish this is on the first calls when you're talking to a potential tenant that you're going to be a firm but fair landlord. And I think that that's where you want to do it.
And that's what you want to maintain throughout the entire relationship.All right.So let's talk about the landlord tenant relationship, set expectations for them and hold to them.It's not just expectations for them.
I should say set expectations for what expectations are from you as a landlord to the tenant and what the expectations from the tenant are to you as a landlord.I think that that's what it is.
And you expect to both agree to abide by whatever those are.Documents. video and photo, everything.It protects you and it also protects the tenant.
It's a best practice for you to document everything that you're doing, put it all in writing, make sure everyone understands what the obligations are.Anything that could possibly come up should be handled in your lease in some way.
or other related paperwork.
And you should photo the property before the lieutenant moves in to understand exactly what's going on, the condition you give it to them, and then photo it when they move out so that they understand the condition that they left it in so that you could show them the difference.
This is the wall that we looked at before you moved in.This is the wall when you moved out.You see why we're not giving you back your entire security deposit because there's damage that you left in the particular property.
But if you don't have the before photo and you don't have the after photo, There's room for you to get in some trouble with that.So document, video, photo, everything protects you from the tenant.Build trust and rapport.
Do what you say you're gonna do.Show up on time.If you expect them to pay their rent on time, you probably should expect to show up on time.
If you expect them to pay rent on time, you probably should expect to take phone calls for maintenance in a reasonable amount of time.
Maybe not instantly pick up the phone, but it's reasonable for them to get a call back that same day if they're calling about a maintenance issue on their property.
And maybe you're not gonna fix the property that day because the person who needs to come fix it is not available, but you can call them back and say, hey, listen, I got your call.I understand we've got this issue going on here.
I've called the plumber, I've called the A.C.repairman, I've called the roofer, I've called whatever we need to do.They're telling me it's going to take two days.What can we do in the meantime to mitigate your inconvenience and stuff like that?
How can we resolve this to make sure it's worked?And then, of course, in two days, they'll come out there and they're going to fix it.So what can we do to kind of minimize the hassle for you and do that?
I think if you set that tone, then they're much more likely to agree to abide by the lease terms, provide the property in a good condition because you're maintaining it too.You care about it.You show your care about it.
And you know, they're likely to pay their rent on time without any hassle.So I think build trust and rapport with the tenant, communicate regularly.So be in touch with them, be accessible.If they call you, call them back.
If they email you, email them back.If they text you, text them back.I think this regular communication and keeping them informed of what's going on is gonna be highly important.Respond quickly.
It is not acceptable, in my opinion, if someone calls you on Monday for you to not call them back till the weekend.That's not okay.I wouldn't expect that of my landlord if I was renting a property.
I don't rent a property, but if I was, that would be unacceptable to me.So I think you wanna actually understand how you'd wanna be treated if you were the tenant in this situation and respond appropriately. I handle reasonable requests.
If they've got maintenance requests, that is part of your role.If it's something you're supposed to handle, you should handle it and handle it properly and handle it with, you know, good customer service with a smile. Be firm, but fair.
Understand what the relationship is, what your obligations are as the landlord.It's all should be outlined in your lease and be firm with them, but be fair with them.
You know, if there's a weird situation that was not really, you know, kind of like an unusual case, you know, be fair about it.I think that's a reasonable thing to do.Remain calm, even, and especially if they aren't calm.
So you're going to find people are emotionally charged.They're going to think that you're taking advantage of them when you're not.
And so I think that it's really important for you to remain calm as the landlord, especially if they are not calm because you want to deescalate the situation.And if you can't do these things.
If I like give you this list and you're like, you know, that's going to be really hard for me or no, there's no way I'm going to be able to do that.You know, I can't return a phone call in a reasonable amount of time.
I travel for like, you know, work and I'm going to be gone for seven days at a time or whatever it is.Right.
Like if you are unable to abide by these particular landlord relationship kind of standards, then you should hire a property manager if you're unable to do it.
Screaming tenants play such a huge role in how you're kind of like overall investment is going to perform.
So I think you want to make sure that you've got this particular job handled correctly, whether that's you and you train yourself and you kind of get really, really good at the skill set.
Or as I probably would recommend, try to hire a professional who is skilled at doing this and it's going to represent you well and do the things that they're supposed to do.So I think that's really, really important. All right, answer your phone.
I think we talked about this, but people expect to be able to reach you.This sets the tone for the relationship.So answer your phone when someone is calling about a property you have listed for rent.A lot of people are going to text you.
A lot of people are going to email you if you provide them the opportunity to do it that way.But if someone calls you, answer the phone. It's gonna set the tone for the entire relationship.
If they kind of like say, hey, look, this landlord won't even call me back when they got a property for rent, they're never gonna call me back if I've got a maintenance request or if I've got an issue with the property.
So return calls and emails promptly, answer questions that they may have, and be prepared for questions that could be answered by them reading the ad.It's inevitable.
You're gonna post an ad on, you know, all these different websites for having your property for rent.They're gonna call up and say, is the property still available?Yes, the property's still available.
I would have pulled it down if it wasn't still available. How much is the rent?It's listed on there, but the rent is two thousand dollars a month.OK, how many bedrooms does that listed on the ad?
But as for betters, you're going to get those types of questions.Realize they're looking at a ton of different properties.They don't know this.And honestly, they're just trying to kind of like establish, you know, verify.
Yeah, you put this three bedrooms, but really it's two bedrooms and it's kind of like janky closet.That's a quasi bedroom under the stairs in the basement.Well, they want to know that.
And so they're giving you an opportunity to tell you, you know, you really want to go and Do good customer service.And this is part of salesmanship.You're selling your property.You're selling your property management.
You're selling your landlord skills to them.They're looking for a relationship.
You know, someone who's going to pay your mortgage down to your property, give you some profit in the form of cashflow on this particular property, allow your property to go up in value.Like they are part of your kind of like.
Your team that is helping you grow wealth by paying this asset down for you, continue to support it and maintain it while you're there in the property to a certain grade and allow it to grow becomes asset.
They're not like a partner in the formal sense, but they are your partner.They're like your financial partner who's supporting you in this just kind of like real estate investing business.Think of it that way too.
They're probably looking at a number of different properties and so They're calling and they're kind of like, oh, is this the four bedroom one we were looking at?Is this the three bedroom one?How much to rent on this one again?I forget.
So realize they're shopping and seeing other properties.That's one of the reasons why they may be asking these questions.All right, so let's talk about the initial screening.You really should do your screening early.
Don't meet unqualified people at the property. Now, some people prefer to ask the tenant permission to be able to ask some of these harder questions, and that's probably what I would do.
So when a tenant calls in, they're going to have a lot of questions.They're going to be rapid firing.They may be a little bit nervous to be on the phone.So answer whatever questions they have.
And then when there's a little pause in it, say, you know, I'd be happy to answer any questions you have about the property.Then if you don't mind, I'd like to ask you a few questions to see if you qualify for the property.
And if you qualify, then we can schedule a time for you to see the property. Will that work for you?And that's a way to get permission to ask them some hard questions to see if they're qualified to rent the property from you.
And then you can determine if they qualify, then you should meet them at the property and look at it and go from there.
So what I would recommend if you write down your questions, and I'll go over some questions to ask on the next slide, and their answers to your questions.
And the reason why you wanna have written questions written down, questions written down, and also write down their answers to the questions, is it helps protect you
Should you be kind of accused of violating fair housing that you've actually documented, not just their call, but all of the calls you have to say, look, no, it is my procedure.It's my system.
It's my process that anytime someone comes in, I have this printed sheet of paper that has a list of all the different questions I normally ask tenants on the phone. Here are the questions.Here's the person who called.Here's the phone number.
Here's the date and time.And then here are the answers they gave me to those questions.And this is my written criteria for what someone needs to have in order to rent my property.They told me on the phone that they only make $2,000 a month.
This particular property is, you know, $2,000 a month in rent. So they did not qualify to rent this property.
My criteria is that they need to earn at least three times the amount of the monthly rents or four times the amount of monthly rent, whatever your system actually says in order to actually rent the property.
That's why I told them they were not qualified, has nothing to do with their accent, has nothing to do with anything else.
They told me about, you know, their relationships, who's living in the property, their kind of like implied gender orientation, their kind of gender identity or their sexual orientation had nothing to do with anything like that.
It was all because of this one question they answered.And I told them at the time, hey, look, you know, this particular property rent is two thousand dollars a month.It says you say you only make two thousand dollars a month in income.
You're not going to qualify for this particular property because we have a rule that says you need to make three times as much rent on the property.Sorry, you don't qualify for this particular property.And then you can move on to the next one.
But save those sheets, save your written questions and save their answers to protect yourself from being accused of fair housing, because if they come after you, you want to have this documentation handy to protect yourself.
All right, so here are some of the initial screening questions you might have.Get their name, their phone, their email address.
Obviously, if you're going to kind of move forward with them, meeting them at the property, you're going to want to get all that information anyway.
If they're not qualified, you know, definitely get the bare minimum, you know, write down the phone number they're calling from. and their names so that you know who it is when they do that.Well, who will be living in the property besides yourself?
So ask them who's going to be living in the property, and you'll know based on your written criteria whether that's going to be problematic for you or not.
They tell you there's going to be 14 people living there, and there's an occupancy limit on that property that could be potentially an issue for you. Do you have any pets?How many?What breeds?What size?Neutered spade?
Do you have good landlord references?You're going to need good landlord references in order to rent this property.Are you renting now?How much do you pay now?And why are you moving?What is your approximate gross monthly income?
Do you have any evictions?How was your credit?How long are you looking to stay in the property?When are you looking to move?
So you can use some of these initial screening questions to determine if this person is likely going to be a qualified candidate for your property.
If there are ones in the air that are like automatic no's for you, if they tell you they have an eviction and part of your written criteria as to whether someone qualifies to rent your property is no evictions, period, end of story, no exceptions.
then you know that you could tell them, unfortunately, we don't rent to people who have had evictions in the past.So I apologize, but this is not going to be a good rental for you.
If anything changes in the future, I guess nothing would change in the case of eviction.But you could tell them that this would not be a good rental for you.Sorry about that. So you can use this as your initial criteria.
Do they pass the initial screening questions?Do they answer all the questions and they are such that you would consider renting to them?At that point, you may want to consider emailing them a walkthrough video of the property.
You're going to have the photos on the website so they could see the photos, but you can email them a walkthrough video.It's like, you know,
a three minute tour of you videotaping or a video with your camera, the the actual tour of the property so they could see what it was, a copy of the application.
So if they have that and set a showing time or you could say, you know, watch the video and here's the application we're going to have.If after watching the video, it looks like something you definitely want to see.Let's go ahead and set a time.
But for now, let's do something on Thursday. Would Thursday work for you?Great.OK.And then you go and send them the video link.
You send them the application and you can say, you know, let me know, reply back and let me know that if you watch the video and if you want to go see it and we'll set a time for Thursday.And then if they reply to confirm their showing time.Great.
If they don't like the video or they haven't watched the video, don't waste your time and don't waste their time meeting them at the property.
I think you're much more likely to have someone no show on you if they don't reply and you had set up something that says, OK, I'll meet you there Thursday, too.
You send them the video and say, look, you know, let me know if you like the video and we could definitely confirm that we're meeting and they don't watch the video.They don't reply to your email, confirm that they've seen it.
The likelihood of them not showing is much higher.So don't waste your time, don't waste theirs.You want to make sure that they watch the video, that they like the video, like what they see.
If they've got any problems with it, you know, address that before you go out there, save yourself some time doing it. All right, so we talked about the initial call.Now we're going to talk about showing the property.
So there are a lot of different variations of how you can set up showing your property.Everything from you put a lockbox on the property, you have people show it to show it themselves.
You know, I've done this mostly for rent to own properties when I was doing a lot more creative financing, real estate entrepreneurship type stuff as you kind of do that particular strategy.
But most of the time, especially if you've got a tenant in the property, you're not doing to put a lockbox on it, having to show it themselves. You could, if the property is vacant, decide to do an open house.
You'll be there from one to three on Saturday.
You may not want to do this when the property is tenant occupied because you don't want to have five different groups show up and one of them is going to the tenant's medicine cabinet looking for their prescription drugs while you're talking to another tenant in the front living room.
It's probably less than ideal to set up an open house situation to do this.Property is vacant, much more likely to be able to do it that way.Say, I'm going to be here from one to three on Saturday, although
I think it's better if you actually do one-on-one salesmanship.And I think you'll see what I mean here in a little bit, but this is a sales process.
You are a salesperson selling a tenant on why they should rent your property versus all the other options that they have available.So I think one-on-one makes the most sense.
You can schedule individual showings, Tuesday at 5 p.m., Wednesday at 7 p.m., Thursday at 10 a.m., and meet an individual tenant at that particular time.
Or probably the most preferred way is to schedule back-to-back showings saying, hey, look, I'm going to be showing some other people the property on Wednesday.I've got some appointments before you, but how about we do 10-15 on Wednesday morning?
You do them every 15 minutes for like two or three hours in one big time block.You drive to the property once, you've got all your showing schedule back to back to back, 15 minutes to 30 minutes apart, and you could do it that way.
That way you have one-on-one time with each prospective tenant.
They also know that if they're waiting to get into the property because there's another tenant in there while they're waiting for that, then you know that there's some demand for the property, which could give a little bit of a scarcity thing going on and encourage them to act quickly if they're interested in renting the property.
And then one of the things you're looking for is do they show up on time? Have they got a clean car, which we talked about looking at their car, because that's how your property is going to look.How is their attitude?How is their behavior?
And making sure that you're using these as part of your screening process, because how they treat you now, how they treat their current property, whether they show up on time, are all indications of how the relationship is going to go with you.
All right, so prepare for the showings.Number one, you're preparing for a showing where you're meeting the tenant, the prospective tenant at the property.Show up early yourself.
You don't want to be showing up late because that indicates to the particular tenant that you're not going to be the type of person that honors your agreements.You're not going to be there to do the maintenance when they expect you to do.
So show up early, turn on all the lights, adjust the temperature, you know, turn the AC a little bit cooler in the summer, turn the heat up to be a little bit warmer in the winter so that they know that it's a comfortable house.
Open the windows if it's vacant and stuffy or even if it's not vacant, but it is stuffy.So crack the windows a little bit, a cross breeze go through.Sometimes, you know, certain tenants that kind of live in more of a stuffy place.
Sometimes there's some. more unusual scents on a property.So open the windows, get a little bit of breeze going through there to make sure that it's nice and airy and it smells fresh.And then replace any missing marketing materials.
If you're keeping a yard sign there or any flyers at the property, go ahead and update those while you're preparing for the showing and then wait for the tenants to come.And when you see them coming up to the door, you want to go there.
So at the showing, greet them outside.And this is your opportunity to say, hey, welcome.Come on in.We're going to look at the property.And you want to go up and shake their hands as they're getting out of the car.
eek in their car, if possible, to see how they maintain their car.That's how your house will look if, you know, they've got trash all over it and it's really dirty.And, you know, they've you know, they're just they treat their stuff poorly.
That's how they're going to treat your property.It's an indication of how the things are going to go.Introduce yourself and invite them inside the home. Give them a quick tour, commenting on the best features.
Show them things that they may not have noticed.If you're a nomad or a house hacker and you've lived in the property before, you want to tell them all the things that you loved about the property when you lived there.Oh, you know, this is great.
You know, I'd go down and I'd run in the park.It's really close. Very convenient, very convenient to all the shopping.Do you do any rock climbing?It's right by the rock climbing gym.Or, you know, do you do this?
You're just asking them questions about stuff and letting them know all the things you loved about the property.Why did you buy the property if you didn't actually live in there?You know, why'd you buy the property?It had these great features.
I love the quality of, you know, the kitchen, the kitchen layout's awesome.
You know, whatever you liked about the property, you want to point that out and show them why it's better than all the other properties that they are looking at when they're considering. Invite them to take their time and look around.
If you're showing a property with a tenant living there, do not let the tenant applicants out of your site.Watch out for people looking at medicine cabinets or current tenants' personal stuff.
They could be like, you know, scoping the place for robbing it later.You don't want to do that.You really want to follow people around.This is sort of like a real estate agent skill. It's the it's the skill of being there, but not really being there.
So you want to be kind of like watching them and letting them do that, but giving them enough space where they feel like they're able to inspect the property in peace and do that.
You do not you've not run a background check on these folks at this point, so you don't really know that you maybe you have their name, maybe you have their telephone number, but this is a new person, basically a stranger that you've met one time before.
So be careful and definitely look out for this. they have any questions while they're looking around the property.
And then at this point, especially if they express some interest, if there's no interest that you'd like to do this, but if they've, if they've expressed some interest in the property, they've shown any buying signals, any interest signals, then explain to them your pet, your pet fee, your pet policy, um, your utilities, the utility fee policy and utility averages, how all that stuff works, discuss the next steps with them, show them that, you know, they fill out an application, how the application process goes, walk them through that, which we'll talk about here in a little bit.
how you would notify them if they've been approved or if they've been declined, how the reservation deposit works for the putting the reservation deposit on the property, when the property is available, all that stuff.
Kind of reconfirm those things with them and then walk them out to their car as they're leaving.Make sure you thank them for coming.And again, look inside their car because that's how your property will look. All right, following up from showings.
So what if people meet you at the property for a showing and they express some interest, but they haven't submitted their application? What do you do?My personal belief is don't chase people.Let them chase you.
You don't want to try to convince somebody that they need to rent your particular property when they don't love your property.I think you're setting yourself up for failure.
I think you're setting yourself up for, well, they didn't love it enough to kind of go home and say, let's fill an application.I really, really want this property.You're like, you know, their property is okay.
And then now you follow up and you chase them down.And now they're like, you know, we never really liked this property.Let's go ahead and move really, really quick.You know, find something else in six months.We'll break the lease.It's not a big deal.
We'll go ahead and do that.You know, just go start doing more marketing.If they were interested, they'll follow up.They'll call you and say, look, you know, we're interested in the property.
We had this, we ran into this small delay where we were going to get our security deposit from, you know, we had the delay with that or unexpected car repair.And now we don't have this anymore.
Let them tell you don't chase them for renting your particular property.You want someone who loves the home and wants to live there.That is the philosophy I think you should adopt, because I think it helps you minimize vacancy, minimize downtime.
And I think it's just a good practice overall.
All right, collecting the application, we're going to cover what you need to collect on the next slide, but offer to go pick up the application if they say it's done at their current residence, ideally with little notice.
Drive close to the property and say, look, I just happen to be in your neighborhood.I can stop by and pick it up right now.And then this gives you an opportunity to see how they currently live.
Go look at their current residence, where they're living in the particular property, and how they're maintaining that.If you look at the yard and it's in really, really bad shape, if they're They're really not maintaining things well.
If they open the door in order to give you the application, you can see inside there's like trash all over the kitchen and there's like dirty stuff all over the floor.
And, you know, they've got their shoes on in the house with the mud all tracked through.That's how your property will look. So if you can get a view of where they're currently living, this is an advantage to you.
So you'll go offer to go pick up their application in person.If they've got pets, it gives you a chance to meet their pets.You're going to need to do that anyway.Is there any pet damage to their house?
You can kind of see if there's a lot scratches on the front door or scratches on the side door or. You know, kind of like damage to the flooring.It's a yard all dug up.Is there kind of like all sorts of trash in the yard?
You know, how is the cleanliness of their entire property?When you walk into the front door, you may be able to see multiple cars.We only saw one before.You know, how is the outside maintained?
Did they meet you outside the property and close the door, you know, really, really fast?Well, that's suspicious.Maybe ask them if you can use the bathroom or, you know, get a drink of water or whatever it is so that you can try to see inside.
You know, this is you. with the mentality that you're about to loan someone a $400,000 asset.And you want to get a gauge as to whether or not they're going to maintain your stuff.So ideally you want to do some Intel.
You want to go look and see what their current living situation is, how they're living and how they're taking care of stuff.
Because that's going to be an indication, maybe not exactly, but it's going to be an indication of how they're going to treat your stuff.All right.What is required to process the application?
So the application fee you're going to want to collect in certified funds, like a cashier's check or a money order, do not accept a personal check.Ask me how I know. because there's a good chance they may actually bounce the personal check.
So do not accept the personal check.Require that they have certified funds.Some people say, what about cash?Can I accept cash?I personally don't want to be walking around with $1,000 or $2,000 in cash, especially if they're the ones giving it to me.
And maybe they're going to tell somebody, hey, look, I just gave this guy $1,000 in cash.Go ahead and rob him.But I just don't think it's a good idea to do cash.I'd rather see some type of certified funds, cashier's check, or money order.
That way, you also have a paper trail. Give them a receipt for their application fee as well.Get a copy of their valid driver's license or state issued photo ID if they don't have a driver's license.
Make sure that you look at the photo and verify that it is them.Make sure that the name that they gave you is the same name, but also look at the photo and say, wow, you're really different looking, or wow, you look so much younger in your photos.
Make sure you look at the photo and make sure that it is that.
Then you're also going to want to collect proof of their current balances and their checking and savings accounts, because that's going to be part of your qualification criteria, and the previous three months of statements for their checking and savings accounts, because you're going to want to verify the deposits they're making, their income and expenses that they told you about on their application.
and then their latest W-2 from their job, and their most recent two months of pay stubs from their job, or if they're self-employed, you want the last two years of tax returns.That's what you need to collect in order to process the application.
So their application fee, their photo IDs, proof of current balances, and their checking savings accounts, previous three months of savings from checking savings accounts, and their latest W-2 and most recent W-2 pay stubs, two months of pay stubs, or self-employed, their two years of tax returns.
That's what you're gonna need in order to process your application. Once they're unwilling to give that to you. an incomplete application, you do not process incomplete applications.
So you're going to want to look at the application that they give you.They're filled out application.
Make sure that all of the blanks are filled in and that you can read it because you're going to need to use that information in order to verify different things.So if they have blanks on there, it's not like they well, I should say it this way.
In a lot of cases, it's not that they forgot to fill it in.It's that what they had to fill in there is probably not a good reflection of them.And they may have. left it blank intentionally.
Okay, because it doesn't, it's a poor reflection on something that's going on.Ask for clarification. complete any missing questions or correct any incorrect info.
So you want to take your time, go really slow, look at every blank, make sure that everything's filled in and do this while you're standing with the tenant.
Just look it over and say, Hey, so I make sure this is complete so I don't get back to my office.And, uh, you know, I find out that I need more information from you.Let me look through this.Yep.That looks good.This looks good.Okay.Uh, just say this.
Okay.Yep.I can read your handwriting.That's awesome.Great.Perfect.And then make sure you look at the photo and their driver's license.Does it look like them?And is it the same name that's on the application?
You know, some people go by nicknames or whatever it is, make sure that it looks reasonable as to what the name that they're using on their application, what the name on their driver's license or their photo ID, that it's the same there.
OK, so let's now talk about the application itself.Application fate. So in order to process the application, we usually run a credit and criminal background check, and we recommend it's about $30, give or take, depending on what service you use.
There's a lot of different services out there now.They recommend it's about $30 per applicant that you collect per person over 18 years old.You are going to have an application
And you're going to run the criminal background check and everything else from every person who's over 18.What if they have a child who turned 18 and they're still in high school?Yup.You're getting an application from that.
What about it's, you know, their grandmother who just happens to be living with them?Yup.You get an application from them as well.
Anyone who is over 18, who's going to be living in the property, you need an application from, and you need to run a criminal background check and a credit report on that particular person.It is also non-refundable.So.
If for some reason they're giving you something and something's gonna come up that they didn't tell you about, you're gonna run their credit, you're gonna find it, you don't get their money back if they didn't do that.
So have them be honest with you, but also don't take their money if you know they're not gonna qualify.If you know your criteria is no evictions and they tell you they had an eviction, don't take their $30 application fee.
Tell them you're not gonna qualify, I'm not gonna run your credit reports, keep your money because I know you're not gonna pass my qualification on this particular property, okay? Tell them what your qualification is.
Tell them what your qualification criteria is before collecting your application fee.That's going to help eliminate unqualified people from applying.
It saves them $30 per applicant, and it saves you the time and frustration of processing unqualified applicants.So let them know how you're going to use it and have these discussions.Affirm but fair.
Tell them what the rules are, and then say, let's fairly look through these together and see if you qualify.In some cases, you may decide to apply the $30 application fee toward their security deposit or rent.
I don't usually recommend doing this, but some people choose to do that.They'll be like, look, it's $30 per applicant, but that's going to count towards your security deposit.I don't think you need to do it, but some people will choose to do that.
There is a movement in some markets for saving tenants the fee when they apply to more than one place.And so you may be required by local statute or local law to actually accept
credit reports or criminal background checks that they've run for other applicants, as long as it's within a certain time period.So understand what your local laws are and your local rules are for doing that.
It really is a way to save the tenants from having to pay application fees for applying for local places. All right, who completes the application?
I think we talked about this a little bit, but just to make it clear, any person that is 18 years old or older that will be in the property must complete an application.That includes children that are 18 or older.That includes all parents.So,
I would also recommend strongly that you treat married couples as if they were unmarried roommates.They each must qualify on their own merits.You can't have, you know, and it's not a gender thing, you know, the wife or the husband.
actually be the only one who is applying for the property and the other spouse is not on the lease or doesn't fill out an application because they had three evictions and the other spouse is the one that has good credit and is kind of like using that.
You want to look at everybody and qualify them all. Okay.Warning, beware of tenants that fill out an application for one person and the other person that plans to live there has multiple evictions or whatever you're doing there.
There are some people who use almost like professional applicants to get them apartments, you know, for landlords that are kind of lazy, they'll say, Oh yeah, I just need one application.They have someone who they know from.
wherever that comes in and actually has good credit, good income, and they qualify, but they're never intending to live in the property.It's always the other person that plans on living in the property.
They're just sort of applying because they've got good credit and good background information and good income.
And then the person who's got the bad credit and has all these evictions is really not on there because they've found a friend who's willing to apply for them.Be super careful about that.
Require applications from everyone who is living in the property. All right, only accept complete applications.If an application is not complete, do not process it.
You need all that stuff I told you before, all the bank statements and all that other stuff.What if they push back and they're like, I'm not giving you my bank statement? Fine.I mean, they're not your tenant.
You want to be able to verify this information.You're about to loan them a $400,000 asset.You want to look at everything.You want to make sure that they're qualified.If it's not complete, do not process the application.They are not your tenant.
Send it back to them to complete.Make sure that you are acting firmly, but fairly.This is not like a mean thing.You're just telling, look, you know, I need this stuff in order to process the application.It's part of our process to do this.
That's what we require in order to have you rent this particular property. If approved, the tenant will rent the property.So this is not like a, I'm applying for four places.Once I find out which ones are approved for, we're going to decide.No.
Our process is when the tenant fills out the application, they are agreeing to rent the property if they are approved. Do not process applications from tenants that want to apply just in case something else doesn't work out.
You really want to find the tenant who wants your property, not just wants anyone else.You tell them, look, apply to the other one.If you don't get that one and you want to come back and apply to us, that sounds great.
I don't want to take your money and process your application.Hold on to it.If something changes, you don't get into the place that you really, really want, then, you know, we're here.
But don't go and, you know, like submit this application and tell me, oh, no, I don't want the property anymore.I ended up getting accepted somewhere else. get an authorization to release information.
You want to get written permission from the tenant.This is part of the application process, a big block of text at the bottom.
You want to get permission from the tenant to release their credit, their personal information, criminal records, present and former landlords, employers, and personal references.
Not just the ones that they list, but anyone else you may want to call to get information.
You don't want them to list, you know, contact any of the landlords on my application, but they forget to list their current landlord or the previous landlord where they were evicted from.
You want to be able to call any person, any landlord, to get information, to get references, to have them be able to release information to you about their situation to qualify them. Okay.
And at any time, not just part of the application process, you want to be able to call up three months, six months, you know, nine months down the road in case they failed to pay their rent or they have a rent violation or whatever it is.
You want to be able to have this release of information, like for the duration that they are a tenant in your property, not just at the time of application.
And for any application or any agreement with the property manager, not just this application.
So you want to make sure you're covered in case you want to do this for a payment plan that they go on later because they end up getting behind on rent or damages to the property or collections or whatever it is they want to do.
You want to make sure that you have the rights to do this after the fact, not just part of the initial application process. Okay, what if they provided false information on the application?In my opinion, that is an automatic disqualification.
If you find out they provided false information on their application after they've been approved and renting, you also have the right to terminate the rental agreement.I think that you should have that in your lease, okay?
The application, where do you get an application from?You can do some online searches.The applications are also, um, web services nowadays that allow you to have people apply digitally online.
So you can kind of like apply the, the online variation of these rules to doing it that way.Or if you purchase the real estate investing course or whatever, you can get an application that way.Those are probably some of your best bets.If you, uh,
If you've paid for this and you are trying to get an application from me, you can reach out.Maybe I'll post a copy of my old application on there.I don't manage my own properties anymore.
We have our property manager do it, but I had applications for when I was actively doing it.All right, processing the tenant's application.So we've talked about the initial call, what you do when someone calls you for your marketing.
Talked about the showing, you need to let the property do that.Talked about the application itself.Now let's talk about processing the application.Document your process.I cannot overstate this enough. You need to have a written process.
You need to have objective approval criteria and scoring to make sure that you are fair, you're complying with fair housing and that you're not violating fair housing and saying, yeah, I'm going to accept this Senate, but not this Senate.
And someone come and say, well, you didn't accept me because I am blanked. and that be a protected fair housing criteria.
So you wanna have written criteria that measures certain things, and that you can say, this person did not qualify because of this particular criteria I have, or the sum of all of their criteria didn't add up to enough to be passing for me.
You want to have something written in place.Do not collect applications and pick the best one.
Don't say, we're going to be collecting applications for the next 24, 48 hours, and then I'm going to look at the one, I'm going to pick the best one that I want to rent to, and I'm going to go do that.That is not a best practice.
I think you're asking for trouble to do that.In some markets, it's actually not allowed.It's illegal to do. But I think it's the best practice for you to have written criteria.You process applications as you receive them.You go through an order.
Once someone meets your written criteria, they qualify to rent the property.You offer them the ability to rent the property.If they decline, you go to the next person in line and do that.
Be consistent in your written process, in your written objective approval criteria.Be firm, but fair.Process completed applications as you receive them.That is the best practice. All right, fair housing.
I think last time in the marketing, I told you about some fair housing stuff because you want to be super careful when you're marketing that you don't violate fair housing.
But also when you are screening tenants, it's also really important they don't violate fair housing.And so I'm going to read you a little bit of information about fair housing.But this is not a course on fair housing.
You really should go to the fair housing website and read through and understand if you're not willing or you're not able to read through and understand all the fair housing stuff.You should hire a property manager who is this is serious stuff.
Don't mess around with fair housing, okay?
So Fair Housing Act says a landlord cannot, one, refuse to rent housing, negotiate for housing, or make housing unavailable, two, deny a dwelling, three, set different terms, different rents, different conditions, you must do this, or privileges for sale or rental of a dwelling, provide different housing services or facilities, so you can only rent this particular unit,
Falsely deny that housing is available for inspection, sale, or rental.Tell them, oh no, that rental is not available anymore, but it really is.
For profit, persuade owners to sell or rent, blockbusting, or deny anyone access to or membership in a facility or service related to the sale or rental of housing, plus more.See the website for additional details.
But all of these things they cannot do based on any of the following.Number one, race. color, national origin, religion, sex, and that includes gender identity and sexual orientation, familial status, or disability.
And you need to really understand this well if you're doing your own property management.Go read this.I have a link on there.It's REFP.info forward slash FH for fair housing.
But REFP.info forward slash FH will take you straight to the, excuse me, the HUD website The department of housing and urban development, it's a government website where it goes over a fair housing.It's a, it's the real deal.It has teeth.
Do not want to mess around with this.Don't mess around with fair housing.Now there are some very rare exemptions to fair housing.And here's a quote straight from that website.Rep.info forward slash FH the feds, the, uh, HUD website.
This is a quote says the fair housing act covers most housing period. Fair Housing Act covers most housing.
In very limited circumstances, the Act exempts owner-occupied buildings with no more than four units, single-family houses sold or rented by an owner without the use of an agent, and housing operated by religious organizations and private clubs that limit occupancy to members.
And if you go to the HUD website, you'll be able to read more about the different exemptions they have in there.But in general, it is a best practice for you to just agree to abide by the Fair Housing.
Even if you follow, even if you fall into one of these really rare, very unusual exemptions to Fair Housing, you should just follow Fair Housing rules, okay?
And I will even go further and say, if you think you're going to go ahead and, you know, kind of like be under an exemption for fair housing, you probably should talk to an attorney before you do it.
Because better to have an attorney lined up for when you're inevitably going to get your call about a fair housing violation so that you have someone who can defend you.
And I'd get it in writing from the attorney so that it's covered under their errors and missions insurance.And you have some liability protection from them for following their advice about how you were exempt.
because you're probably, maybe you're not exempt.That's kind of my suggestion there, okay?All right, so alcohol and drug use.
Here's an interesting case with fair housing and why it's really important for you to understand it or hire someone who does understand it.The Fair Housing Act prohibits discrimination in housing on the basis of disability.We just talked about that.
A disability is defined as a physical or mental impairment that substantially limits one or more of a person's major life activities.This definition covers people recovering from alcoholism or drug addiction.
So individuals who have successfully completed a drug treatment program are protected under the disability provisions of the Fair Housing Act.
A landlord cannot refuse to rent to you solely because of a history of drug addiction since you are in recovery.Your history of abusing drugs in the past may not be an accurate measure of your current ability to be a good tenant.
However, the law does not protect people who are currently using illegal drugs or people who cause a direct threat to the health or safety of other residents.The challenge is that the prior drug use resulted in a criminal conviction.
So you need to understand you cannot discriminate people for alcohol or drug use if they're in recovery.
And be really, really careful about how you apply this to people that are currently actively using illegal drugs, because it's this very fine line and you probably should get legal advice if you're going to do that.Okay.
Disabled tenants, if you or someone associated with you have a physical or mental disability, including hearing, mobility or visual impairments, chronic alcoholism, chronic mental illness, AIDS, AIDS related complex and mental retardation that substantially limits one or more major life activities.
If you have a record of such a disability or are regarded as having such a disability, the landlord may not refuse to let you make reasonable modifications to your dwelling or common use areas at your expense.
The landlord is not responsible for paying for that.If necessary, for the disabled person to use the housing.Where reasonable, the landlord may permit changes only if you agree to restore the property to its original condition when you move out.
landlord may not refuse to make reasonable accommodations and rules, policies, practices, or services if necessary for the disabled person to use the housing.
Just because your lease says this doesn't mean that you don't have to change the rules slightly for someone who has this disability.
However, housing need not be made available to a person who is a direct threat to the health or safety of others or who currently uses illegal drugs. Let's talk a little bit about service animals.
And I'll also mention that service animals are not emotional support animals.They are different.But these rules and laws are changing.
And I'm not aware because I'm not actively managing my properties and I'm not up on all the laws, but I'm not aware of any. actual tested cases that have gone very far in court to find out like where the lines are drawn for these things.
OK, so realize this is a gray area.
You should get the advice of counsel and keep abreast of all the local laws, especially local laws and any federal laws that come into play regarding service animals and emotional support animals, which are different.
The Fair Housing Amendments Act, FHAA, gives individuals the right to live with their emotional support animal, regardless of any building or residences with a no pet policy.
So just because you say there's no pets allowed in the property, and just because the condo unit itself says there are no dogs or cats or whatever allowed in a particular property, does not mean that that supersedes someone's ability to move into a property and have a service animal or emotional support animal.
Building managers or landlords may not refuse your emotional support animal.
you are required to have a current within the past year letter from a doctor or mental health professional recommending that you have an emotional support animal for your condition.
So it's not enough for you to just say, yes, it's an emotional support animal.You need to provide documentation that is required that you have emotional support animal.And.
There are some, I don't know, kind of like sketchy gray area websites where people can pay forty dollars and get a letter from the website that says that it's an emotional support animal.That's different than having a doctor note or a mental health
doctor basically saying that you need to have an emotional support animal.In my mind, there's a different, but again, gray area, go check with your attorney, make sure that you're kind of following those rules.
I'd strongly recommend talking to your attorney about this.There may be new legislation that I'm not aware of.Section eight. All right, federally funded kind of program by the government administered by local housing authority.
The applicants must earn less than 50 percent of the area median income in order to qualify for that guaranteed rent from the government.
So if you want to accept Section eight, you know, the government program that where the government pays some of the rent. or all of the rent in some cases, you can decide to opt in to use that.The voucher has a maximum payment.
It must include the utilities unless the tenant earns enough where they can pay a part of that.And screen section eight, prospective tenants, just like you would the rest. So use your normal screening criteria.
And then you may choose to document your process to look at income differently as rent is paid by the government.So you may want to make some modifications.If section eight, then I don't require three times the income.
I require X amount of the income or for someone to do that. All right, informal background check.
So we're going to do a like formal credit and background check on a particular tenant coming into a property, but you should also maybe even before in fact, I would recommend before you go and spend the money, the $30 or so to actually do the thing is search for their name on Google, search for their name on Facebook, search for their name on LinkedIn, like look them up, try to determine what their situation is and also search for all of their references names.
Birds of a feather flock together.If someone is using as a reference someone who just got out of prison for murder, they get to choose who they write down as their reference.That's the person they chose.
That speaks volumes about the type of person you're letting into your property.So just be super careful.Do some informal background checks and understand who you're dealing with. All right, application evaluation process.
So use like a written application evaluation worksheet.An alternative version of this is the qualification checklist.It's just which way you want to do it and make sure that they hit all the items on your checklist.
If they pass, just kind of look through and document what you have for this.So I'm going to give you an example of some of the things on here and how we might score these.This is just an example.
You can use your own, create your own criteria for what someone needs to do in order to qualify.
And then as you go through and process an application, print that one, write their name and address, the name, the property address that they're applying for, and the date that you're doing it, and then document what you've worked through in order to score them on that particular process.
So process everything except the credit check and eviction report, go through this.If it looks like they're qualified, then run their credit check and eviction report, and then Google tenant screening services.
If you want to use some of those, for example, my smart move.com is one where some of my clients have used those in order to do their own tenant screening, but there are a lot now.
There's a lot of services that they integrate this as part of their online application and management and rent collection systems.So there are a lot of like all in one tools these days for doing that.Okay.
So here's a couple examples of tenant criteria that you may want to have on your own application evaluation worksheet.So this is an example, but build your own.Okay.
So for example, applicant name, property address, verification dates, the criteria and scoring system, and then set your own minimum score that they need to have in order to pass for your particular property.For example, for income requirement.
If the total verified income is greater than rent times three or rent times four, whatever you decide to set it up as rent, rent times 3.5.If it's greater than or equal to rent times three, they get three points.
If it's greater than or equal to rent times two, they get one point.If it's less than, if it's less than the rent, they get zero points.
And then as we add up all the different points for all the different things that are criteria for you, if they don't have the minimum number of points, they don't qualify to rent your property. This is how this sort of works.
You could change how you score based on your criteria, but it should be in writing, be objective and be consistent.Don't say, hey, I really like this person.I'm going to sort of ignore this.
You want to have something written objective where you can document it and you have a leg to stand on in case you get, you know, investigated by the Fair Housing. Desired occupancy, our desired lease term compared to their desired lease term.
So for properties that we want to lease forever, if they desire more than a year long, they get three points.They desire a year long lease and might consider staying longer at two points.They'll accept a year long lease, one point.
If they will not consider a year lease, then zero points. their current employment, call their current supervisor and verify their salary and their references.
If the salary is the same or more as an application, as on the application, and they have excellent references, they get three points.
If either their salary is lower, but within 10% of that state on application, or their reference was just okay, then do two points.
If any of the following, if the salary was lower than 90% of that state on the application, or they have a poor reference, or if they're unable to get a work reference at all, then zero points. And these are just examples, right?
If you don't like the way that I'm laying this out, this would be what mine would look like if I were doing my own property management these days, then go ahead and change them for whatever makes sense for you.
Maybe you don't care about their previous employment or their current employment.I don't know.It's up to you, right?I think you should, but that's really your call.
Previous employment, calling their supervisor and verify their salary and their reference.If the salary is the same or more as an application, excellent reference, three points.
If either their salary was lower, but within 10% of that stated on the application, or if their reference was just okay, maybe that's two points.
If there's no previous work experience, for example, it's their first job ever, give them a point for that.
If any of the following, their salary is lower than 90% of that stated in the application, or they get a poor reference, or they're unable to get a work reference and they had one, then zero points.
Landlord reference, be careful of good landlord references from the current landlord.Imagine for a minute that you've got a tenant in your property and they haven't paid rent in three months and they have a lot of damage to the property.
You'd see that's just a really poor condition, but they can't get out and get into a new property because if you give them a bad reference, the new landlord's never going to approve that. You're in this sort of weird catch 22.
So the temptation for a lot of landlords is I'm going to give them a really good reference.I love these guys.They take awesome care of the property, never late on any rents, right?
They're going to lie to you because they want to get them out of their property, stop the bleeding on their property, and they're going to pass it on to you, the next landlord, right?So there's a temptation for current landlords to do that.
But once someone has already moved out of their property, the previous landlord, not the current one, then they're going to give you the true story.
So they maybe wanted to get rid of a non-paying landlord, not paying tenant, and they realized they need to give them a good reference to get them out of the property.
So be super careful with the reference and how much credibility and trust you put into the reference from their current landlord.Get at least two former addresses and landlord contact information.
Previous landlords are more prone to tell you the truth. Verify it's the current landlord by verifying the correct rental amount.
So when you call up the current landlord, one of the little tips is to ask the landlord, are they paying $1,800 per month in rent?And have the rent be wrong.
Landlords say, no, yeah, they're paying $1,800 a month rent, when the rent is actually $2,200 a month.
Ask them and give them a false number to see if the landlord is telling you the truth, or if maybe they have their friend acting as their old landlord. Okay.So be, be super careful about that.
Consider checking public records to verify that they are the owner.
Like they give you the name and number of someone to call, go look them up and go look up the property that they were supposed to have rented before on public record, make sure that they were the current owner of that particular property.
And then maybe even look up a secondary number to verify that you're calling the right number.Like don't just trust their number.No, be careful.
The current landlord, calling the current landlord, verify rental dates, the rent and the payment history and the landlord reference, you know, how's their housekeeping, how they can take care of the yard, you know, do they have any pets, how are the pets with the, you know, keeping the property in good condition, have they ever had any non-payments, they ran any damage, you ever had to evict them or you're evicting them now, any other issues, ask about each one, understand the current situation.
Important, if evicted, non-payment of rent or left damages beyond normal wear and tear, my preference might be automatically decline that person.
but it's up to you as to whether or not you're willing to accept people that have had evictions, non-payment of rent, or left damages beyond normal wear and tear on a property.Do not rent to those people is how I would normally work that.
If they get an excellent reference, three points, mediocre reference, two, unable to reach reference, one point, or bad reference, zero. is rent less than 25% higher than the current rent.
I don't want a tenant to move into a property that is way beyond what they were paying previously.It could be a shock to their finances.
And so, you know, 25% is just some arbitrary number that said, look, you know, if it's more than 25%, then I don't want to like, they need to be a really strong candidate otherwise.
So if it's more than 25 points, more than 25% higher than I say, no, then that's zero points.If it is less than 25% higher, then I give them three points for that.
A previous landlord calling their previous landlord, verify rental dates, rent to payment history, landlord reference, ask all the same questions about the housing, housekeeping rather, yard care, pets, non-payment, damage, eviction, other issues.
And if they were evicted, had non-payment of rent or left damages behind normal wear and tear, it's an automatic decline, don't rent to them.
That they get an excellent reference, three points, mediocre reference, two points, unable to reach a reference, one point, or a bad reference, zero.
Their credit report, if no credit entry over 30 days late in the last 12 months, they get three points.So no, like, you know, late payments or anything like that to get the maximum points there.
If no more than two credit entries over the last 30 days, late in the 30 and the last 12 months, two points.If they have no credit at all, they only get one point.
If they have more than two credit entries over 30 days late in the last 12 months, they get zero points. Any evictions?My policy is if they've been evicted, automatic decline.Do not rent to them.I don't wanna deal with evictions.
They've already showed that they are willing to not pay rent on a property.Collections.If no collections, three points.If no collections in the last five years, two points.If no collections in the last one year, one point.
And it's important, if they are in current collections, it's an automatic decline.Why would I voluntarily put someone in a property when they're not even paying their current bills?Their current bills are in collections. that's asking for trouble.
So you could decide if that's your policy or not, but that's how I look at it.Social security number, if the social security number for credit and background check does not match the applicant, that's an automatic decline.It's a big red flag for me.
I don't deal with people that give me bad social security numbers. Previous addresses, if there's an unexplained gap in previous addresses, more than three months.And the key here is unexplained.
If they like were traveling around the country or they were, you know, doing a mission somewhere or whatever they were doing there, they had an explained gap.That's different.
Unexplained gaps where they're not able to tell me where they were or what they were doing.That's a huge red flag for me.It's an automatic decline.I don't rent to them.
I don't know what they were doing, but they're unwilling to tell me that's a big red flag. Checking account.If they have one, one point.If they have no NSF, non-sufficient funds or overdraft fees the last 12 months, they get an additional point.
Same thing for savings accounts.If they have one, one point.If they have no non-sufficient funds or overdraft fees the last 12 months, they get an additional point.Investment accounts, if they have one, bonus, one point.
If they have no NSF or overdraft fees the last 12 months, another point for that.Account balances.
So look at their balances to include all checking savings and investment accounts in the applicant's name, but excluding retirement investment accounts.
So we're just looking at all the ones that are not their retirement money, money that they could use if they got behind on rent is really what we're looking at.If they have six months of expenses, including rent, then they get three points.
If they have three full months of expenses, including rent and security deposit, they get two points.If they have one full month of expenses and rent and security deposit, they only get one point for that. Emergency contact.
So this is an idea from Jeffrey Taylor's, the Landlord Survival Guide.Jeffrey Taylor's like mrlandlord.com.He's got some really good stuff on there about landlording. There's a quote from him.
In the event of some emergency that would prevent you from paying rent, please provide the name of at least one person or agency that could be called on for assistance.
So when you call them to verify that reference, you're saying you were listed as an emergency contact by tenant name as someone who could help them if they were unable to pay the rent.I am calling to verify this.
The idea is if you ask someone in advance, the chance of them being willing to do it, should the need arise later, greatly increases.So if they list their mother and they say, mom could help me if I got to a point where I was unable to pay the rent.
And now you call up mom and you say, mom, you were listed as an emergency contact by little Joey. as someone who could help him if they were unable to pay the rent.I'm calling to verify this.And mom says, there's no way I'm giving Joey another penny.
He just stiffed me with X, Y, Z. And, you know, he's been a bad boy or bad girl.And, you know, that's not going to happen.Then now, you know, and you've got to make a decision as to whether or not you're willing to, you know, rent to Joey or not.
based on other criteria, primarily.References and or emergency contacts.
So for two references, including one that will help with rent in the event of an emergency, excellent reference, three points, mediocre reference, two points, unable to reach that reference, one point, and a bad reference, like mom saying, no, I'm not helping out, that'd be zero.
Interviewer's impression.Your opinion from your interactions with them at the show and picking up the application, etc.If you have an excellent reference for them, that's three points.A mediocre reference, two points.
If you have a bad reference, zero.Scoring overrides.As an example, if someone did not qualify because they had no income, but otherwise they would qualify.
Would you consider renting to them if they put up two times a security deposit and paid 10% more in rent as a risk premium?And under which circumstances would you allow a scoring override?Write those down.
And here are some examples of those you might want to consider.So for example, someone's moving to town.They don't have a job yet.Well, do they have backup income?Can they get a cosigner?And would they consider a higher deposit?
That's something that you may consider as the override if they don't have a job.If their income is not three times rent, can they get a co-signer and consider a higher deposit?
What if they've got a million dollars in the bank, but their income is only two times what the rent is?I probably would rent to them, right?So how would you rent to them?
You'd want a co-signer, someone that could guarantee it if they couldn't pay and consider a higher deposit in case something happens. What if they had no rental history?They're a first-time tenant.Higher deposit and need a cosigner.
Those are reasonable things to put in there as overrides for that.What if they have credit issues?Would you consider renting to them if they had a higher deposit and or a cosigner?
What about not enough money for the deposit and or the first month's rents?They come in there like, Hey, look, you know, I have all the criteria to do this.
I just don't have a security deposit or I only have half a security deposit and I don't have a full month's rent or I only have partial full month's rent.What would you do in that situation?Are there overrides you would do?
In my case, no, there's that's denied.There's no installment plans.Can't pay now.How are you going to get caught up and paid later?Come back when you're ready to pay.So no, I would say no, there's no override for that.Don't settle.
just to get it rented.I know there's a tendency of people like, hey, you know, I'm paying whatever it is, $1,500 or $2,000 a month on this property.
You know, my mortgage and taxes and insurance and, you know, maintenance on it and the utilities while it's vacant there.You know, I just want to get someone in there so I can stop the bleeding.That's a mistake.That mentality there is a huge mistake.
Advertise early.That's why we start 90 days in advance and lower the rent if needed instead. At $50 per month less in rent, it takes a long time to add up to the eviction and damage cost you could have by putting the wrong tenant in there.
That could easily be 5K, easily be 10K. Okay.Once everything is said and done with, you know, the loss rent for a couple of months, paying an attorney, getting them evicted, getting the property back, it's in really rough shape.
It's got a lot of damage.They're really pissed off.They did a lot of damage on the way out.And now you've got to repair the property that could easily be $10,000.$50 per month goes a long ways.
Lower the rent, get someone qualified in your property who can do it. All right, so we covered initial call, we've covered the showing, we've covered the application, we've covered processing the application.Now let's talk about the approval.
So the reservation deposit agreement, when someone is finally approved, they want, you want them to put down a reservation deposit in order to say, I'm renting the property.
So here's an example of some text you might have on your reservation deposit agreement.
It says, the undersigned applicants have applied for and been approved for the rental property at, whatever the address is, one, two, three, four, main street, um, city, state, etc.
A reservation fee of $2,395 includes $300 extra for pets, half of which is non-refundable, in the form of a cashier's check or bank deposit is required to reserve the property and is being paid herewith.
The undersigned applicants expressly agree to rent the property at the discounted rental rate of $2,095 per month plus $50 per month for water, sewer, storm, paid directly to the landlord, and $50 per month per pet rent.
With two pets, the total discounted monthly rent is $2,145.The first month's full rent is due prior to move in in the form of a cashier's check.
The undersigned applicants further agree that if, for any reason, the undersigned applicants decide not to move into the premises, then all monies paid herewith shall be retained as liquidated damages since other prospective tenants may have been turned away and it may be necessary for management to re-advertise the property and evaluate other applicants.
So you're asking them to commit that they are renting the property by putting up money to reserve the property, okay?
So they're paying money to do that, and if they decide they don't end up wanting to rent it, then you've got some liquidated damages, you could start marketing the property again at that point. Okay.Notify the tenants that they've been approved.
If they're approved, notify them, call and or email, send them a copy of the lease to review, collect the reservation deposit, keep running applications and marketing until you've collected the reservation deposit for backup position.Okay.
Once you've collected it, pause marketing and running more applications, then coordinate the lease signing ceremony.
We're going to get together with them, go over all the rules of the house, the lease signing, go over all the kind of policies you have about renting the property.That's when you go over everything all together at a lease signing ceremony.
And then if you have to decline the tenant, If they've not been approved, you need to notify them that they've been declined.Hey, listen, we ran your application.Unfortunately, you didn't qualify for the property.Here's why.
If you denied them due to a credit report, if somebody came up with a credit report that you denied them and they no longer qualify because of that, you must, required by law, send them a letter stating that. Okay.
Some landlords prefer to let tenants disqualify themselves by telling the tenant that they would be willing to do based on written objective criteria.Hey, your income was a little bit too low.
That was a major factor in why you didn't qualify for this.However, if you put up two times the security deposit and get a co-signer, we wouldn't be willing to rent for you.
Are you willing to do that and let them, you know, basically disqualify themselves by telling them what you are willing to do based on your written criteria that complies with fair housing.All right. Final slide.
What do you do when you're buying a property for the first time and you kind of have this kind of like tenant screening process?
Well, if the property is vacant, make sure you get permission from the seller and possibly their agent who may own the photos to market the property before closing.We talked about that a little bit.We talked about marketing the property.
If the property is tenant occupied, Like there's a current tenant in the property from the previous one.If you do not want them to renew, give them notice of non-renewal.
And by the way, there's recent laws that are being passed in some markets, in my market in particular, where they're talking about you cannot not renew a lease for specific reasons.You almost need to like not renew a lease for cause.
And so this may change a lot of different things.It's currently being voted on right now, but that's change that may be coming.
So, if you don't want to renew them though, give them notice of non-renewal and check with your local laws to make sure that you're in compliance with that.
If you do want the current tenant to renew, but they're on an old lease from a previous landlord that is not yours, doesn't have all your rules, discuss your new lease, what the rents are, what the billbacks are, what the house rules are, et cetera, with them.
and 90 days prior to their lease expiration, start working your renewal process.
Now, for the period of time when you take over the property, unless they're willing to re-sign a lease with you, which canceled their previous lease, they're going to be operating under the old landlord's lease, which may have terms in there which you don't agree with, which you would normally do in your properties, may have different policies in there.
So you want to get them on your lease if they're going to renew after their lease expires.So 90 days prior to their lease expiration, start working your normal renewal process.
You know, show them the deadline for signing the renewal is 60 days prior to the lease expiration.If it's not signed, start marketing the property to find that new tenant.
If someone applies, then the renewal offer to the current tenant is no longer valid.So you might offer them, hey, look, we're willing to renew your lease. Market rent is $2,000.
You're currently paying $1,600 because it was under-marketed, under-leased from the prior landlord.We're only going to raise your rent about to $1,800 if you do a lease renewal.
However, if we market the property and we get someone applying to the property, that $1,800 offer comes off the table and then you're at the $2,000 a month, the fair market value of the property we're currently renting it for would be.
So realize if you don't sign it by this date, that $1,800 offer is going away. Okay.Uh, if not signed somewhere, you probably find a new tenant.Someone applies, then the renewal offer to the current tenor is no longer valid.Remove that.
The new rental rate will be market rental rate, not the renewal rate that you got there.A lot of times when we're renewing a lease, we're not usually bumping it up to the full fair market rent.We're increasing it some small amount.
because it's easier to keep a current tenant and not have to do a lot of maintenance and a turn than it is to kind of get the absolute top of the market there.
But when the tenant moves out, then we bump it up to what the full market rent is, do all the stuff required for the turn on the property and do it that way.OK, so that's all I got for you.Hopefully you enjoyed this module on tenant screening.
And this is module, I think it's module four at this point.We've got, oh man, I forget now, 46 something modules planned.So stay tuned for that.This has been James Orr.Have a great day, everybody.
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