SS189: Tenant Screening Questions

SS189: Tenant Screening Questions

Tenant screening is an essential role in making your rental property a success. In this episode, Charles discusses how to screen potential tenants.

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Talking Points:

  • When screening potential tenants for your rental property, it’s imperative that they complete a full evaluation, including a full background check, that starts with them completing a rental application. This application lists their basic information, employment and income information, and financial and credit history. The application will have a section for the potential tenant to authorize a credit check and background check. The background check comprises a credit check, a criminal check, and a sex offender check. Once the application is submitted, property managers can review this information, verify their employment and income, and make their final decision. Tenant fraud is a real problem, so I would ask for some supporting documents, including copies of pay stubs and IDs, and possibly more if there is a red flag.
  • But this is all normal and pretty straightforward. Several online services will handle most of this for you, and they usually charge your tenant the fee.
  • The main point of this episode is how to filter out less-than-ideal tenants from the beginning, before they apply, or within the first minute on the phone with them, but hopefully before you even speak to them.
  • I self-managed my first portfolio of multifamily properties for 6 years before handing over the keys to my property manager but, for years afterward, I would be involved in the marketing of those units and would handle some incoming rental inquiries and calls myself or have an assistant of mine handle them; since we did so much marketing, we were inundated with dozens, sometimes hundreds of leads within 1-2 weeks and we needed a way of sorting them so we could only send the best ones to our property manager’s leasing agent.
  • Why would I do this instead of having our manager handle everything, you ask? Our manager was very good at all property management tasks except marketing. They would put out one ad and wait for calls. Their fees were very reasonable, so we took a hands-on approach when units needed to be rented.
  • Before we start, a disclaimer: Ensure you understand your city and state’s tenant laws and do not discriminate against or violate any protected classes.
  • How do you word your ad?
    • Wording your ad is very important. I always include all of the rental requirements in the ad. How much income do they need, what deposits are required, what type of credit score and criminal history are allowed?
    • Many will not read this, but those who actually want to live on your property will read it, and if they don’t qualify, they usually will not waste their time applying. Filter number1.
    • Within the ad, it is best to add near the end of the listing, add a phrase that states, “Please acknowledge in your showing request that the property is not available until September 1st” or that the property does not allow pets or that they have read and agree to the terms or that they understand that tenants will pay for their own water usage. You can easily sift through showing requests and delete those that don’t contain this phrase. Filter number 2.
      • As a side note, I also use this tactic when creating virtual assistant listings. It filters out 75% of the applicants immediately.
    • Bad tenants who know they are bad will contact dozens of landlords, trying to find one who doesn’t know any better, never reading more than a couple of sentences into any one listing.
    • Good tenants will read the listing fully and several times. When I am searching property listings for a primary residence, I will read that listing several times and then send it to my wife for her to read. That is the sign of someone who really wants what you are offering.
  • What happens if they slip through the cracks or call you immediately?
    • You might avoid adding your phone number to the listing altogether, but I want to speak to them before I send them to the leasing agent, so getting on a call at some point is really important.
    • I will ask them where they live now and if they have been driven by the property. Driving by the property moves this tenant immediately up the list. Do they work in the area? Are you having an issue with your current landlord? When are they looking to move?
    • Asking these questions and waiting for the tenant to speak for as long as they want will provide you with a pretty accurate picture of this tenant. Filter number 3.
    • If they sound good so far, review your leasing requirements with them on the phone and have them verbally agree. Do you understand that the required income is 3x of the monthly rent? The unit is for rent at $1,500; do you make at least $4,500 monthly, and can you provide pay stubs showing this? People will say yes or tell you a story, which will answer the question. Filter number 4.
    • We have a minimum credit score 650; is your credit score over 650? Do you understand that no pets are allowed? Do you have a criminal record?
    • You do not have to go through all of these questions with every call; just until they unqualify themselves or you decide they are not the right fit.
    • At that time, I will confirm their name and phone number and tell them that the property manager will contact them to schedule a showing in the next 48 hours. It is much easier and quicker to tell them you will call them back than explain why you have an instinct that they are not a good tenant.
  • In closing
    • Try to vet potential tenants by having them provide a phrase that was inserted at the end of your rental listing. This will remove at least 50% of the inquiries, upwards of 90%, with some C-class properties.
    • When/if you speak with them, confirm they meet the rental requirements individually.
    • The tenants that make it through these filters are worth your time or your team’s time to show the unit and accept an application.
    • I only send applications to potential tenants who have made it through the filters. I do not want to accept an application from a renter who does not have a very high chance of approval.

These questions aim to comprehensively understand the applicant’s background, financial stability, and suitability for the rental property. To avoid discrimination, ensure your screening process complies with local, state, and federal fair housing laws.

Transcript:

Charles:
Welcome to Strategy Saturday; I’m Charles Carillo, and today we’re going to be discussing tenant screening questions.

Charles:
So when screening potential tenants for your rental property, it’s imperative that they complete a full evaluation, including a full background check, and that starts with them completing a rental application. This application lists their basic information, employment and income information and financial and credit history. The application will have a section for the potential tenant to authorize a credit check and a background check and the background check comprises of a credit check, a criminal check, and a sex offender check. Once the application is submitted, property managers can then review this information, verify their employment and income, and make their final decision. Now, tenant fraud is a real problem these days, so I would ask for some supporting documents including copies of pay stubs and IDs and possibly more if there’s any type of red flag that comes up.

Charles:
But this is all pretty normal and straightforward. Several online services will handle most of this for you and they usually will charge your tent to fee directly so it doesn’t even cost the landlord anything. The main point of this episode is how to filter out less than ideal tenants from the beginning before they apply or within the first minute on the phone with them, but hopefully before you even have to speak with them. So I self-manage my first portfolio of multi-family properties for six years before handing over my keys to a property manager. But for years afterward, I would be involved in the marketing of those units and I would handle some incoming rental inquiries and calls myself or have an assistant of mine handle them. Since we did so much marketing, we were inundated with dozens, sometimes hundreds of leads within one to two weeks, and we needed a way of sorting through them so we could send only the best ones to our property manager’s leasing agent.

Charles:
So why would I do this? Instead of having our manager handle everything from the marketing to the leasing, et cetera, our manager was very good at all property management tasks except marketing. They would put out one ad and wage for calls and their fees were very reasonable. So we took a kind of hands-on approach when we needed units to be rented. Before we started a disclaimer, I mean, ensure you understand your city and state’s tenant laws and do not discriminate against or violate any protected classes. So how do you word your ad? Well, this is like, this is the first part of how we’re gonna filter out people. Wording your ad is very important. I always include all the rental requirements in the ad. How much income do they need? What deposits are required, what type of credit score and criminal history are allowed? And many will not read this, but those who actually wanna live near property will read it.

Charles:
And if they don’t qualify, they usually will not waste their time in applying. So filter number one is that Number two though is with the ad. It is best to add near the end of the listing at our phrase that states, please acknowledge in your showing requests the property is not available until September 1st, for example, or that the property does not allow pets or that they have read and agreed to the terms or that they understand that tenants will pay for their own water usage. And you know, any of these will work and you can easily sift through showing requests and delete those that don’t contain that phrase. And this is the second filter. Now, as a side note, I also use this tactic when creating virtual assistant listings. It filters out about 75% of applicants immediately. And when I’ve done any type of job hiring it’s something that we’ll put a note all the way at the bottom of the listing that says, don’t wanna apply through the platform and it’ll have directions for alternative ways of contacting us.

Charles:
When people do that, then, you know, without even having to check anything that those people have read the ad, they’ve read the listing, they know exactly what’s going on and those are the people that you want in your properties. And also to work for you. Though bad tenants know they are bad and they’ll contact dozens of landlords trying to find one who doesn’t know any better, never reading more than a couple sentences into anyone listing. Good tenants will read the listing fully in several times. Now, when I’m searching for a property listings for a primary residence, I will read that listing several times and then send it to my wife for her to read. And that is the sign of someone who really wants to buy that property and really wants to stay at that property, whatever it might be. Those are the people you want at your property.

Charles:
You don’t want someone that’s gonna read a couple sentences or just fires off a hundred inquiries to try to find a place that will let them in. Now, what happens if they slip through the cracks or they call you immediately? So sometimes you might have your phone number in the listing, this is good, this could be bad. It really depends on what you like to do. It’s great to filter ’em first and then try to get on the phone call with them after they’re filtered. But you might avoid adding your phone number to the listing altogether. But I wanna speak to them before I send them to a leasing agent. This is, this is key. So getting on a call at some point is really important to us. Now I’ll ask where they live now, if they have been, if they’ve driven by the property, that’s super important as well, especially with c class properties.

Charles:
You might find someone that’s looking to stay in an area and they don’t know the area and they really wanna stay in a b class property and they’re gonna waste your time if they keep buying. ’cause They’re gonna talk to leasing agent, they’re gonna go out there, everything’s gonna be a waste because when they get to the property, they drive around the property, they, oh, no, no, no, no, you know, this isn’t for us. We want it. This, you know, a different area. So ask them where they live now and if they’ve driven by the property and it really shows that they’re getting moved up in the list if they’ve actually seen the property physically, and do they work in the area? Are they having an issue with their current landlord? You know, when are they looking to move? Asking these questions and waiting for the tenant to speak for as long as they want will provide you with an accurate picture of this tenant.

Charles:
So it’s filter number three. If they sound good so far, review your leasing requirements with them on the phone and have them verbally agree. So do you understand that the required income is three x of the monthly rent, the units for rent for 1500? Do you make at least $4,500 a month? And can you provide pay stubs showing this? People will say yes or tell you a story which will answer the question itself, which is filter number four. Now we have a minimum credit score of six 50. Is your credit score over six 50? Do you understand that no pets are allowed? Do you have a criminal record? These questions, ask ’em right away. And most people will tell you the truth and be honest with you. Usually people won’t say, I don’t have that. They’ll give you some sort of a story and you’ll know right off the bat that if they don’t say yes, then it’s, it’s a, it’s a check in the negative comment for column for that.

Charles:
Now, you do not have to go through all these questions with every call just until they unqualify themselves or you decide they’re not the right fit at that time. And this is key. I will confirm their name and phone number and tell them, the property manager will contact them to schedule a showing in the next 48 hours. It’s much easier and quicker to tell them that you will call them back than explain why you have an instinct that they’re down to good tenant. Okay? So that’s the best way of doing it and that’s what I found overall the years is once you go through, go through all the requirements, you’ll find people that will fly right through those comments. They’ve read the ad. Now the people, if you go through the filtering process like this, as I’ve I’ve stated, you’re gonna, when you’re talking to people on the phone, they’re gonna be more than likely going to be good tenants that you wanna show the property to, right?

Charles:
If they’ve already read the ad and they’ve already put in that phrase or the term in there, they’re most likely the ones that you wanna be showing anyway. Getting on the phone with them is just really just one or two minutes. And this way when you provide your leasing agent or whoever doing leasing, or if you’re doing yourself, now what you can do is you add ’em on to listen. You know, usually what we would do is one or two showings a week, right? And we don’t do it every time. We probably say, Hey, we’re gonna show this property three to five on this day, or we’re showing this property four to six on this day. Because if people are off by a little bit of time, then you can set ’em up by 15 minute increments, but people will come wherever they want, right?

Charles:
So it’s easier just to, I set ’em up by 15 minutes, have them come. If people are late, people are early, it is what it’s right. Have a whole stack of applications. Talk to people little by little you’ll people that go in and go out. But knowing this upfront that people only good tenants that have really gone through all of your processes are gonna be the ones that are showing up, is really the best way. So try to vet potential tenants by having them provide a phrase that is inserted into the end of your rental listing. This will move at least 50% of the inquiries upwards of 90% with some C class properties. ’cause People just don’t read the listings when if you speak with them, confirm they meet the rental requirements individually. So every requirement speak about it, ask them about it and have them confirm it.

Charles:
If they don’t confirm it, they’re gone. Next is attendance that make it through. These filters are worth your time or your team’s time to show the unit and accept an application. And I only send applications to potential tenants who have made it through the filters. I do not wanna accept an application from a renter who does not have a very high chance of approval. Now this is another important part as I close up here, because you might have people ask for an application or how they can apply. You don’t wanna be getting applications into people’s hands that aren’t really going to qualify If someone tells you a story about their credit and then you know, the significant other has a felony from last year and all these things that might be red flags that you don’t wanna rent anybody for. These are things where I don’t want them applying.

Charles:
I don’t want them to have to pay an application fee because of that point. It sounds like I’ve, it’s, it’s some sort of scam, right? I, I don’t want people applying unless they have a very, very good chance of getting approved. And that’s why when someone applies, I mean, when I manage myself, it would be like over a 90% approval rating on those applications, maybe even higher because it’s, I just don’t want people wasting their money. So this is a really important thing because if someone comes back to you and goes, well, I didn’t, I told you about that. I told you that I had a bad credit. I told you this, you might not remember everybody that came through. So now it’s really, Hey, tough luck. Sorry, I don’t remember that and I’m sorry you wasted a hundred dollars. Or it’s now you feel bad and you have to give the money back.

Charles:
You know what I mean? So, which is probably something I would’ve done. So the key is once they’ve, they, they don’t get an application in their hands or a way to apply until you have checked off on all those boxes. I’ll sometimes see it on some of these listing sites where they just send out links to people to spend money. You’re just asking for problems with tenants. And it’s not something, it’s not the way that I wanna run my business. I wanna speak to them. I wanna go through the whole process with them. And when I know there’s a very, very, very high chance of them getting approved, I will then provide ’em the application so that when I take that application fee or the service that we’re using takes that application fee I know that they’re not wasting their money. There’s a very good chance that they’re gonna get approved.

Charles:
Now these questions aimed to comprehensively understand the applicant’s background, financial stability and the suitability for the rental property. To avoid discrimination, ensure your screen process compiles with all local, state, and federal fair housing laws. Now please remember to rate reviews, subscribe, submit comments and potential show topics at global and investors podcast.com. If you’re interested in actively investing in real estate, please check out our courses and mentoring programs@syndicationsuperstars.com. That is syndication superstars.com. Look forward to two more episodes next week. See you then.

Charles:
Have you always wanted to invest in real estate, but didn’t have the time, didn’t know where to find the deals, couldn’t get the funding and didn’t want tenants calling you. Since 2006, I’ve been buying income producing properties and great locations that provide us with consistent passive income. While we wait for appreciation in the future and take advantage of tax laws while we’re waiting and unlike your financial advisor, we invest alongside our investors in every property we purchase. Check out to investwithharborside.com. If you like the idea of investing real estate, if you like the idea of passive income partner with us at investwithharborside.com, that’s investwithharborside.com.

Announcer:
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar, LLC, exclusively.

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