When you need to rent a unit, how well do you screen tenants? Do you screen them at all?
Are you just happy that somebody was interested in renting from you, so you can stop the negative cash flow each month?
If that describes you, it’s only a matter of time before you pay the price of not checking out your tenants before handing them the keys.
I learned this the hard way multiple times when I first got started in real estate. Over time, I figured out ways to protect myself and how to have my property manager help protect me too.
Here are a few methods that will go a long way to helping you screen out the bad tenants…
1) Use Rent Check Credit Bureau
One of the first services I discovered was from a company called Rent Check Corp. They’ve been in business since 1976 and they were the first company to provide tenant screening services, and now have over 6 million files.
Here are some of the services they provide for screening tenants…
This service provides a full credit check at one or both of Canada’s credit reporting agencies: Equifax and TransUnion. It includes a listing of all credit lines, loans, car leases, and more, along with their loan limits, payment history, etc.
This is the same information that many banks, credit card companies, and other vendors use to assess the credit-worthiness of an individual.
Many landlords use this information to look for unpaid bills and bankruptcies, but that doesn’t necessarily mean that tenant will be a bad one. Most people will pay their rent before they pay their utilities and other bills.
Remember: A credit check only shows if the applicant is credit-worthy, and is just one part of the picture to screen tenants.
This service is the second part of the picture and is critical for landlords: whether or not a tenant has been evicted, or is going through an eviction.
Without this information, you are gambling with your tenants!
I’ve rented to tenants many times who have had imperfect credit ratings, yet who had pristine tenant checks.
But I’ve never rented to one with a pristine credit check and a bad tenant check. Don’t forget to review this important information before renting to your next tenant.
Some landlords go one step further and run a criminal check on every tenant they are seriously considering. I personally haven’t done this, but I know others who have, including a major rental company in Ottawa.
In fact, this company advertises some of their buildings as being ‘crime-free’ because each tenant goes through a criminal check, and they have other security measures in place.
While not necessary for every town or city, it can be very effective if you own property in low-income areas, where crime tends to be more prevalent.
2) Call All References
This may seem like something obvious, but you’d be surprise how many people collect reference information on a rental application, yet don’t follow up with each reference.
Keep in mind that most people will not put bad references on an application, so you should expect to hear ‘glowing testimonials’ about the tenant.
What you’re looking for are inconsistencies in the story. If the tenant told you one thing, yet the reference tells you something else, that’s a red flag.
One way to get people to make mistakes in their stories is to phrase wrong information as truth. For example, if the tenant stated they’ve known someone for 10 years, you can say,
“I understand you’ve known Joe for about 4 years now. Is that correct?”
If it’s wrong, they will tell you. Otherwise, they might just agree with your statement and move on to the next question (if they do, you know they’re lying!)
I also recommend calling ALL past landlords – at a minimum, go back at least 2. Otherwise, you might find yourself dealing with a current landlord who will say anything to get rid of the tenant.
3) Surprise Visit
This is an easy one and surprisingly effective. Consider dropping in for a surprise visit at the tenant’s home.
Do not tell them you are coming!
Tell them you forgot to have them sign a document, you forgot to give them some information, or that you were in the neighbourhood and wanted to say hello (just make something up).
While walking up to the house, look inside their car. If it’s messy, you house or apartment may end up the same way.
While standing at the door, look into their home. If it’s messy and not taken care of, you can bet your house or apartment will end up the same and you might want to think twice about renting to them.
4) Trust Your Gut Instinct
This can work really well if your gut instinct has proven itself right in the past when dealing with people. Some people have a knack for this, others do not.
Personally, I don’t have a knack for it and it cost me big-time when I first started investing.
If that sounds like you, find a friend or family member to give you their opinion or tell you what their ‘instincts’ tell you.
Doing all of these methods may sound like work, but believe me, it’s MUCH cheaper to properly screen tenants and leave an apartment vacant a little longer than it is to put the wrong tenant in and then be forced to evict them.
Anyone who has ever evicted a tenant can confirm this…
- It takes longer than you expect,
- Costs more than you think, and
- Does more damage to the house or apartment than you anticipate
Don’t be the next landlord victim!
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