Choosing good tenants is the key to sleeping well. Sleeping well is fantastic!!

Let’s face it. Tenants pay the rent. Tenants are helping you to pay down the mortgage, if you have one. Tenants are providing a nice extra income as well. Tenants pay the associated bills with the rental property. As long as the Tenants pay the rent everything is generally smooth sailing.

Good Screening of Tenants are the Keys to a Solid Rental Portfolio.

The basics of Tenant Screening encompasses credit check, rental verification, criminal background checks, income verification.

Credit Check: One wants to make sure that the tenant has been responsible. To be sure though, some folks have crappy credit but have excellent rental history. Some folks make sure that the rent is paid every month on the first or even before the first of the month but they can’t seem to pay the time warner bill or the credit card bill on time or whatever.
Sometimes they have a dispute over a bill and they choose to walk away from it instead of paying the bill. They may simply be too timid to fight the big companies with massive Attorney Firms on Retainer. Credit check, I believe is not as important as the basics as rental history. Thus, the credit check is important to get an overall view of a person but its not the end all.

Rental Verification. One needs to ascertain how this prospective tenant has been paying his/her rents. One needs to go back several years to get a really good idea. The information on the application is good but not necessarily the best source of information sometimes. One needs to have a bit of street smart to figure out if the prospective tenant is telling the truth. For example, they say that they have been paying rent to John Smith and has paid rent on time for the last few years. So we call up John Smith and ask him to fill out a written form that we have designed. Hopefully, they will email it back to us. Sometimes they don’t have time (folks get crazy busy sometimes) and we will then ask the basic questions over the telephone. If John Smith says that Joe Whippersnapper is an excellent Tenant, paid his rent on time, didn’t throw toga parties and would rent to him again then that is most excellent news. But what if Joe’s credit is crap then, hopefully, red flags go up. At that point a good manager will check property tax rolls to verify that John Smith is the owner of the property and not simply a friend of Joe Whippersnapper. Sometimes it makes sense to drive by that former rental house to see the condition of the property. If the property is in poor condition then I am going to ask a few more questions of Joe Whippersnapper. One has to know if a person is spinning a story or not.

Criminal Background. There are many pros and cons of this one, tongue in cheek joke.. It really depends upon their background. One can discriminate in Texas based upon Criminal background. I know of some solid people that did time when they were kids and they learned from their mistakes. Now they are productive members of society but they still can’t vote which is interesting. Things happen. Some folks get busted or unlucky and some don’t. For example, what if the iconic Willie Nelson is taking a road trip and has brought a bunch of marijuana with him for the trip. He happens to be speeding in a part of the country where they frown upon marijuana users.  A cop pulls him over. Now Willie Nelson is in jail and facing several charges. But I would rent to Willie Nelson in a heartbeat!!!!!!

Income Verification. One needs to ascertain whether the prospective tenant has the ability to pay the rent. I have seen folks requiring income to be at least 2x rent, sometimes 3.5 x rent, sometimes 4 x rent but the majority in Austin is 3x rent. Pay stubs are key. Even better are tax returns although many folks don’t have that readily available. Another question is the length of employment. Have they been bouncing around? One needs to make sure that pay stubs are bonafide as well and not something fabricated from a photoshop program. Its called bs detector.

Those are the basics of choosing a good tenant. One must document everything to remove liability as well. As you can tell there are several steps for a good property manager to take.

If you have any questions or concerns about any of this article feel free to call us to discuss or email us.

“Be Slow of Tongue and Quick of Eye”

Miguel de Cervantes