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Tenant Red Flags

Tenant Red Flags

So, here’s a list of thirteen red flags that we all need to look out at when selecting tenants:

1.Are they on time for the appointment? If they can’t even be on time for the appointment, it’s likely that their rent won’t be on time either.

2.What type of first impression did they make?

3.What was their personal appearance and what did their car look like? How they take care of their personal belongings is probably how they’ll take care of the unit.

4.Are there gaps in rental history? This could signify that were incarcerated or in a facility of some sort for a period of time. Ask questions.

5.Did you see where they live now? That’s what your unit will look like.

6.How many occupants will there be? This helps you predict the level of wear and tear to the unit.

7.Any pets (or other dangerous animals)? Townships may have ordinances that only allow certain pets.

8.Any long-term guests or adult children? What’s your policy? For example, are the people on the lease the only ones allowed to live there? Or, will the rent increase if an adult child moves home?

9.Will they take the unit sight unseen? If they don’t seem to care about where they’re living, how well do you think they’ll take care of it?

10.Are they flashing cash? This could signify that that the person is selling a drug or product illegally, has received some type of settlement (who you may have to evict later, if they don’t have a steady income), or maybe the previous landlord paid them to leave and they’re using that to money to get the new place.

11.Do they want to pay the security deposit in installments? If they’re having trouble paying the security deposit, they may have trouble paying the rent. Of course, this isn’t always the case.

12.Did they get upset you’re considering others? If they’re too aggressive, or get upset easily, they may get in your face or be very hard to please during their leasing period.

13.Do they whine and complain about their current landlord? They could’ve had an awful landlord, or they may whine and complain about everything.

These are just some of the many red flags I’ve seen over the years, although not all of them will lead indefinitely to troublesome tenant situations. To conduct a full series of tenant checks, we use a pre-approved screening company. You can go to http://PittsburghREIA.com and hit the “Tenant Screening” page for a full menu of screening options.

Setting Your Minimum Requirements for Tenants

One of the most important steps in screening your tenants and finding the best qualified is by coming up with your list of minimum requirements for the property. This list of standards should be told to the tenant on the telephone, placed on the application, placed on your Craigslist ad, and told in person to eliminate those who simply will not qualify.

The following four standards are commonly used by landlords

Income Must Be Three Times the Monthly Rent Tenants rarely know how much they can afford. By giving an exact minimum income requirement, you can keep out those who might believe they can afford to pay the rent but really can’t. Requiring income to be three times the monthly rent has been used by landlords for many years – as well as banks and other financial institutions that supply loans.

Tenant Must Have Good References The references you receive from past landlords are the best indication of the way the tenant will behave for you. A bad review from a past landlord is a huge red flag for most landlords. Also – bad references from personal friends or family are also huge red flags.

No Evictions A tenant who recently faced an eviction is unlikely to ever rent from me. I realize that many people change – but I’m not willing to take that risk.

Clean Background Check I want tenants not problems. If a tenant has a background filled with criminal activity, I am very hesitant to rent to them. Again – people do change, but it is not a risk I’m willing to take. Pre-Screening Potential Tenants

You’ve begun advertising for your property and have begun receiving calls. Contrary to popular opinion – screening doesn’t begin with a background check or an application – it begins with the initial contact. This is known as “pre-screening.”

As you can probably tell by the length of this guide – screening is not a flippant activity that you can do in a few seconds. Screening can take a considerable amount of time – and you don’t want to waste that time on every person who shows interest in your property. This is why pre-screening is so important. Think of the screening process as a funnel – like the kind you would use to pour oil into your vehicle. At each step of the process, you are able to narrow down the pool of applicants until only a small few – or just one – match. Pre-screening is the widest part of that funnel and will help to keep away those who obviously won’t qualify.

Pre-screening Through Your Advertising

Your pre-screening efforts begin with your advertisement. Whether you are using the newspaper, Craigslist, Zillow, or another service to market your property – the information in your advertisement can help to weed out time wasters. For example, by placing the location in your ad, you are able to screen out individuals who are looking for another location (don’t worry – if you don’t feel comfortable putting in your exact address, just put a general location or a nearby landmark.)

Also – putting the price in the advertisement also helps to keep those who can’t afford that price range from calling. I often see ads with no monthly rent listed – and have to wonder how many wasted calls they are receiving or how many potentially great tenants they are missing out on.

Pre-Screening Through Your First Phone Call

The initial phone call is the next logical step in screening tenants. The first thing you hear is often an indication (though, not proof) of the kind of tenant they might be. If the first words you hear after saying hello is a voice yelling into the phone

“How much do I have to have to move in?”

You can assume the tenant might not be a great fit. After all – they are more concerned with getting in anywhere than even asking to look at the property.

When a tenant calls about a property I have for rent, I like to ask them “What can I tell you about the property?”

This open ended question allows the tenant to begin talking and asking questions. The typical questions are generally,

  • “How much is it?” (Even though I always include it in the advertising)
  • “What’s the address?”
  • “Do you accept Pets?”
  • “How much is the security deposit?”
  • “Will you work with me on my security deposit” (No.) (actually HELL NO)
  • “Can I get inside to see it?”

The kind of questions asked by the tenant are great indications of the kind of tenant they are going to be. I’m not suggesting that you judge a tenant solely on their ability to ask good questions – but it does help point me in the right direction as to the type of person they are. Are they orderly? Do they care about where they are going to live? Do they sound broke?

In the conversation, I also always include a few of my minimum requirements, as we discussed earlier. Usually, this is easily worked into the conversation such as, “Now, the property does have a minimum income requirement of $____ per month and we do a full background and criminal check to make sure we only rent to upstanding people.”

Many, many times I simply get a *click* after stating this information. If not, they usually will volunteer how much money they actually make and re-assure me that they have never done anything bad in their entire life.

This simple two-minute phone call does two great things:

1. Get’s rid of 80% of the “bad apples” and prevents them from wasting my time.

2. Let’s the good tenants know I am not a slumlord and only rent to good people.

In both cases – a win for me. This is what makes pre-screening so important. It allows you to save time, avoid nuisances, and project a good image. I’d also recommend leaving your minimum requirements on your voicemail as well – so when you can’t get to the phone, your tenants still get the message and your pre-screening still works.

Screening a Tenant In Person

The next step of the screening funnel is to meet with tenants and show them the property. This is also a great opportunity to screen the tenant before any paperwork is done. I always re-state my minimum requirements to the tenant in person, just in case they didn’t understand (or chose to ignore) when I told them over the phone.

At this point, many tenants will admit that they don’t quite meet the requirements but ask if I’ll work with them anyways. If I need time to think about it – I always tell them that I will have to check with the owner (or partner, or any other higher authority) and let them know. If I know they immediately won’t qualify, I let them know why but still offer the opportunity to apply. Why? I don’t ever want to be accused of being discriminatory for any of the protected classes. Let’s talk about those now.

Protected Classes

It’s okay to screen people upon some criteria but not other.

For example – discriminating against someone who won’t pay rent is acceptable, as is discriminating against someone with a violent criminal history. However, discrimination against someone in a protected class is not only morally wrong – it’s also illegal. This section will let you know what those protected classes are.

Federal Fair Housing Laws

The following was taken directing from the US Department of Housing and Urban Development’s Fair Housing Website, which states (emphasis mine):

In the Sale and Rental of Housing: No one may take any of the following actions based on race, color, national origin, religion, sex, familial status or handicap:

  • Refuse to rent or sell housing
  • Refuse to negotiate for housing
  • Make housing unavailable
  • Deny a dwelling
  • Set different terms, conditions or privileges for sale or rental of a dwelling
  • Provide different housing services or facilities
  • Falsely deny that housing is available for inspection, sale, or rental
  • For profit, persuade owners to sell or rent (blockbusting) or
  • Deny anyone access to or membership in a facility or service (such as a multiple listing service) related to the sale or rental of housing.

In case you missed it, here are those classes again:

  • Race
  • Color
  • National origin
  • Religion
  • Sex
    Familial status
  • Handicap

While it is vitally important that you don’t discriminate against those classes, it is also important that you don’t even ask questions about those topics. This means don’t ask what their race is, how many children they have (you can ask how many people will be living there,) or if they have a husband or wife. Save yourself the legal trouble and simply do not ask. This also applies for advertising: DO NOT advertise for “no kids,” “great Hispanic neighborhood,” or “home great for families.” This is against federal law.

State and Local Fair Housing Laws

In addition to Federal Fair Housing Laws – your state may also have laws that must be followed regarding fair housing, which might include:

  • marital status
  • sexual orientation
  • gender identity
  • age
  • participation in the Section 8 Program or other subsidy programs

Be sure to check with your State and local laws to ensure compliance to your fair housing standards. A simple Google search for “your state” and “fair housing” should give you the answers you need.

A Note on Age and Children Discrimination

As mentioned above, Federal Fair Housing laws prevent discrimination against family status and it is illegal to prohibit children. However – there is an exception to the law which states that certain properties that are designated as a “55+ Community.” According to HUD:

In order to qualify for the exemption, the housing community/facility must satisfy each of the following requirements:

1.At least 80 percent of the occupied units must be occupied by at least one person 55 years of age or older per unit;

2.The owner or management of the housing facility/community must publish and adhere to policies and procedures that demonstrate an intent to provide housing for persons 55 years or older; and

3.The facility/community must comply with rules issued by the Secretary for verification of occupancy through reliable surveys and affidavits.

In other words – if 80% of the units in a community owned by you have someone older than 55 living in them, and your visible intent is to provide housing for an older age bracket, and you abide by the laws that govern this exemption – you have the ability to exclude a familial status to include only those who are 55+ in age – thus discriminating legally against those with young children.

For more information on Fair Housing laws – see How to Market Properties without Violating the Fair Housing Act and speak to a qualified attorney.

The Application: Six Must-Include Sections for Proper Tenant Screening

The application is the window into your tenant’s life. It is important that you ask the right questions – and don’t ask the wrong ones (see Fair Housing, above.) The following is a list of must-have sections to include and ask on your application:

1.Name, address, phone number, driver’s license number.

2.Social security number and date of birth.

3.Current and past landlords with contact info.

4.Employer and job details with contact info.

5.Have they ever had an eviction filed upon them or broken a lease?

6.Release of information signature

These questions are the most important for knowing the past history of your potential tenant. A good strategy to use is to not ask “have you” but instead “how many” or “when.” This makes it tougher for a tenant to lie. For example, by writing “have you been evicted” a tenant will more easily write “no” than if it said “how many evictions have been filed against you?”

Other Questions to Ask

The following is a list of other questions you may want to ask your tenant to find out more about them:

  • Requested move in date?
  • How many animals do you have and what kind?
  • What may interrupt your ability to pay rent?
  • Are you on Section 8?
  • How much money do you have?
  • How many felonies do you have?
  • Do you have enough cash to pay the first month’s rent and security deposit?
  • What kind of car do you drive?
  • Do you have a checking account? Savings Account?
  • How many people will be living here?
  • Emergency contacts?
  • How is your credit? Explain…
  • How did you hear about this listing?

The application must be completed completely. If it is not, I send it back to the tenant and ask them to finish it. Obviously, if they forgot one small section, I can make a phone call to find out – but I believe training your tenant to follow your policies begins here.

How to Run a Background and Credit Check

Let’s get down to the nuts and bolts of running background and credit checks – but first, allow me to explain the difference.

A background check looks at the tenant’s criminal and eviction history, as well as looking for fraud or deception.

A credit check looks at the tenant’s ability to pay their bills and obligations responsibly.

Several years ago, a law was passed in the United States that made checking the credit of a tenant much more difficult and cumbersome. Where before any landlord could simply enter in the applicant’s information and get back their credit report – there are now several hoops a landlord needs to jump through, including an on-site inspection. If this is an approach you want to take, there are several reputable companies you can use.

To Conduct a full series of tenant checks, we use a pre-approved screening company. You can go to http://PittsburghREIA.com and hit the “Tenant Screening” page for a full menu of screening options.

(May 2014 Newsletter)

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