“Ask Kari!” »
By Kari Negri, CEO, Sky Properties, Inc.
Dear Kari, I’m worried about who I’m renting from. What is the best way to select only “excellent” tenants for my property?
It is often said that there are only two times when rental housing providers have trouble screening tenants: (i) when they are rushing to rent quickly and (ii) when they feel sorry for a candidate. When choosing your tenants, always remember to rent from someone who can and will pay your rent on time, take care of their civic duties, and take care of their home. As a general rule, it is better to have no tenant than a bad tenant. There’s another problem you may face, but it’s unpopular to say it out loud, so I’ll “not” mention that renting from a family member or friend is an incredibly bad idea.
There are a few basic steps you can follow to select a good tenant. The first step is to validate everything they provided in their application. Validate information such as phone numbers (call their work number and ask for them) and addresses (for example, does their driver’s license and utility bill have the same name and address as the application ?). If you can’t verify the information by matching a utility bill to the address on a prospect’s application or if you find any inconsistencies matching the net pay from their pay stub to their bank deposits, this are grounds for rejection in my experience.
The second step is to have tenancy policies and standards that all tenants must adhere to. For example, set an appropriate income level for your building. Examples include requiring minimum credit scores or triple (3x) the income of the monthly rental amount. Only offer reasonable accommodations when appropriate. For example, if a potential tenant doesn’t earn three times the rent but has other assets (e.g. a substantial savings account), you might want to relax your requirements and although I don’t really recommend do, in some cases, accommodation may be required by law (e.g. Section 8 or other rental voucher holders). It is acceptable to refuse to accept a tenant who has been evicted or who owes money to a housing provider or who has had a history with convictions related to illegal activities such as drugs or violence.
Also, make sure that any applications you receive have been completely fulfilled. If the application is not completed to your satisfaction, the application may be returned to the applicant for complete completion. Before accepting an application, go through it to ensure that none of the required information is missing. All fields must be filled in, checked or marked “not applicable”. You don’t want to have to call the applicant for any incomplete information. Backup documentation is also very important. It’s a good idea, for example, to ask for several months of past bank statements or proof of employment such as pay stubs – you should use these to verify that paychecks are received and deposited, and that deposits match pay stubs. With bank statements, you can also check that the rent is paid on time for the amount indicated in the application. You can also request a copy of a current utility in their name to see if it matches the address on the application, pay stubs, and/or tax returns (if you are self-employed).
A while ago a woman came to one of our buildings and asked to see a unit, and although we didn’t have a vacant unit in that building, we had a vacant unit in our apartment building. across the street. We asked her if she wanted to go and watch and she did. It is our policy to not only look at the driver’s license, but also to take a picture of it and send it to our rental office, so that we have a record of who has been to our building, plus , it’s safest to keep track of who our rental agent or manager is on site with. The manager across the street assumed the other building had already checked this person’s ID and didn’t look at the woman’s driver’s license, so it was never verified that the person standing in front of them was the same person asking for the apartment. This turned out to be a big problem as the person on the papers was not the same person who would physically occupy the apartment. Going forward, we are not renting an apartment to anyone we have never met in person and seen their identity in person. We also always check the website of the company they work for, call them and ask to be connected to them. If we had done that in this case, we would have been connected to the real person who could have told us that they weren’t applying for an apartment in California.
It’s a good idea to keep checklists to help you stay focused on your task. The best time to go through your checklists is when you receive a new move in or application. Just go through your list to make sure you don’t skip any steps that may be crucial to the move-in/new application process. Be thorough, but try to speed up as we’ve found that if you don’t act quickly, your potential tenant might just move on to the next apartment; however, don’t let anyone rush you through the move-in process.
Many problems can be avoided by ensuring you have provided a qualifying list before a tenant applies and by defining your rental criteria before running the applicant’s credit report, so you don’t waste time and his money or yours. . Your hiring criteria sheet should outline what you’ll be looking for and what your expectations are for the ideal candidate. This must be done in accordance with fair housing laws, which means you must be familiar with applicable laws and take ongoing training to stay up to date on fair housing – these courses are held regularly at the Greater Apartment Association Los Angeles (AAGLA).
On your rental criteria, you should also state your income and credit requirements, occupancy limits, pet policy, insurance requirements, security deposit policy, and any another relevant thing that a potential resident should know before moving in. Even though the credit report gives information on how someone pays their bills, it also provides information that you can use to verify that their application is accurate and gives you an idea of the income to expense ratio.
The most important thing you can do when dealing with potential tenants is to treat them fairly, be consistent, and use the same criteria every time you rent. Exceptions should only be made if they relate to a request for reasonable accommodation. It is perfectly acceptable to judge potential tenants by their ability to pay rent; however, you must be able to document in writing the criteria that were used to make your decision. It’s really about having procedures in place, so you don’t accidentally break any laws. Unlawful discrimination may consist of race, religion, national origin, family status, color, ethnic origin, disabilities and others as the list may change as new laws pass – stay updated . Legal discrimination includes poor rental history, bad credit, insufficient income, lying on an application, and past evictions, to name a few.
Although it may seem obvious, you should use an extraordinarily strong and well-drafted lease that covers the local jurisdiction where you own property. If you use the wrong lease, you might not be able to evict a tenant for not paying rent, or for certain damages, or for too many people moving in, etc.
In conclusion, selecting tenants is one of the most important tasks of a housing provider. A bad tenant occupies space that could be used by a good tenant. A bad tenant can also cost you dearly by losing good tenants in your property. Finally, good tenants can lead to future financial stability and a bad tenant can cost you dearly.
At SKY Properties, we sincerely believe that this is one of our best qualities and it is one of the best things we can do for you; place good tenants in your property – this has paid off for us during the pandemic more than anything else.
Kari Negri is CEO of Sky Property Management and a board member of the Greater Los Angeles Apartment Association. Do you have a question for me? Please send your questions and comments to me at [email protected].