How to Avoid Problem Tenants: Have a Good Apartment Screening Process
Good tenants are the best way to protect your investment! Choose wisely
Picking good tenants is almost as important as getting a good deal on a building. Quality tenants will help keep your rental building profitable. They protect your investment and determine the quality of your life as a landlord. All the more reason to choose carefully!
Here are some best practices for stream-lining your tenant selection process.
Without a doubt, the most common question I get asked from students and newbie investors is: “How do I deal with problem-tenants?”
It’s a question I usually answer with a question.
The real conundrum should be: “Why did you rent to problem tenants?”
To avoid renting to problem-people, you need a steam-lined and thorough tenant screening. Your tenants determine the quality of your life as a landlord. So listen carefully! And don’t leave things to chance. This article is the first in a series of 4 that will show you how to run an effective tenant-selection operation.
Advertise in the Right Place
The best way to set up a winning tenant-selection process is to have the biggest possible pool of candidates to choose from. You do this with effective advertising. Onlineis the way to go these days. Forget about newspaper Ads!
Pick the Right Platform
The first thing to do is to determine which platform works best in your area. In Montreal, we use www.kijiji.ca : 98% of our rental are concluded this way. Other platforms are Craigslist (which also attracts a lot of scammers) and MLS (www.realtor.com). Usually we only use them because a client asks us to. They’re anyway redundant with kijiji.ca in our area.
For MLS, you need an agent to list a property. A professional rental service will cost you one-month’s rent, so you may want to think twice before doing this. In my experience, MLS works best for unique- or very high-end properties.
Facebook posts can yield some leads, but in my experience not very good ones.
A good way to test which platform works is to ask a few people who’ve recently been in the rental market. They’ll know which platforms yield the best results.
Market Your Unit Properly
Unit marketing basics are: awesome photos, the right price, and a clear, truthful description. These are the keys to effective online marketing for rental units. They’re also really straight-forward.
My advice on photos: pay the 100$ it costs to get a professional to photograph the unit when it is clean and presentable. These photos will serve as a marketing tool for the next 5 to 10 years. They can also easily add 50$-100$ on the value of the rent you can demand. In our high-traffic, saturated media environment, you really can’t attract decent attention without awesome pics.
Rent is a very price-sensitive. 50$ up or down can make an huge difference. Most tenants shop on a budget.
A tip: start your advertising early. This lets you be optimistic and a bit greedy 🙂 Always post a higher rent amount that you think your unit is worth. If after a week or two you’re not satisfied with the number of responses, lower the price. It’s the best way to make sure you’re not leaving money on the table.
Another tip: if your unit isn’t renting, consider dropping the price by 50$-100$. When you weigh the alternatives with your calculator: major renovations, or having the unit empty for a month, you’ll see how cost-effective it is to adjust your rent downwards. (50$ x 12 months = 600$). Depending on your unit price, dropping the rent by 50$ will probably make more sense than having the unit empty.
Phone Screening Script
Don’t waste time on useless visits. Don’t get into silly conflicts or interminable discussions with bad candidates.
I don’t get off my ass to open a unit unless I’m convinced the people can:
- afford the place
- speak to me in a courteous and efficient way
- tell me a coherent story about who they are and why they want to rent the place
I don’t want to waste my time running back and forth to open doors. And – perhaps more importantly – I don’t want to have fights when I refuse unqualified potential tenants because I let them see a place they fell in love with.
The gate-keeper to useless door-opening is a good phone-screening script. You want to find out:
- who will live in the unit (how many people | are all adults on the lease) ? is the number of occupants appropriate to the size of the place ?)
- do they have good credit ? a history at the rental board ? references from a previous landlord ?
- what type of income do they have (does everyone work? | are Mum & Dad paying the rent? | are they on social assistance?)
- why are they moving (relocation | divorce | new baby | unhappy with their last place) ?
If any of these answers make you uncomfortable, take down their number and tell them you’ll return a call at a later time. In my experience, it’s a better alternative than the shouting match that can ensure from refusing an application live on the phone 🙂
Set Up A Winning Visit
Sounds self-evident, right? Here are a few things to watch out for. When you’re planning on showing a unit, be aware of what things can turn candidates off a place.
- bad smells (buy a candle | show up 5 minutes early and open the windows)
- messy tenants (schedule visits with lots of notice & explain to the tenants that the faster they clean up, the faster you’ll stop your visits)
- existing tenants who’ve caused problems and who may run off their mouths to new candidates (plan visits when the tenants are not home)
- big dogs (some people don’t like dogs & they can have a bad visiting experience if one lives in the unit. Ask the tenants to go for a walk while you show the place)
Have a Thorough Application Form
- request social insurance number & bank account info; if the tenant defaults, you won’t have to hire a detective to get this info
- get a signed authorization to run a credit check
- request contact info of the previous landlord
- ask for a guarantor if the candidate has questionable credit, is from out of town, or doesn’t pay the rent him/herself
- request employment information
- take a small deposit while you do your background check. (You can deduct this from the first rent cheque, or else refund it if you refuse). A small amount of money makes the candidates more likely to commit and not waste your time running a check while they decide to rent elsewhere.
Do check all these points thoroughly!! Don’t forgo a credit check because it’s costly or complicated to obtain one. In my experience, credit history is the single best predictor of what kind of person you’re dealing with.
- let the candidates leave out information
- not give you the deposit
- get away with anything you wouldn’t want to accept later on in your relationship; the application process is your time to set the tone
Trust Your Gut
As a candidate jumps through different hoops and you have multiple interactions, pay attention to what your gut says.
- Are your requests handled in a courteous and timely manner?
- Is this the kind of person you want to deal with regularly for the next few years?
- Do they quickly return phone calls or force you to make multiple requests for simple things?
Your tenants are your quality of life. If there are behavioral red-flags at the beginning, think twice. Do you really want someone harassing you every 5 minutes with silly requests? Not returning your calls when you have urgent requests? Being unpleasant or incoherent on the phone?
A final word: tenant selection is like dating. If it’s complicated from the start, maybe it’s not meant to be 🙂