” Background and Credit Checks “

If the tenant’s income is high enough and you feel confident moving forward, it’s time to dig deeper.

There are many different sources you can use to run a background or credit check on a tenant, but I recommend using Smart Move. Smart Move is offered as a service through Trans Union and is great because all you need is your tenants email address. Smart Move will email your prospective tenant and that individual will enter their information online; you’ll receive the results of the background check in hours and can make your decision.

Deciding what kind of “background” or “credit history” you’ll allow is largely dependent on your location and the strength of your market. If you have a lot of applicants to choose from, you can be pickier and only accept the highest qualified tenant. However, if you are struggling to get applicants, you may need to loosen your standards slightly (and I mean slightly) in order to move someone in.

For me, I look at the rental history and income with a lot higher regard than I do credit – because I live in a lower income area where the vast majority of prospective tenants have terrible credit. Your area might be different, so if possible, talk with other landlords in your area or ask for advice on the Edward Casey.

The things I look closely at on the background and credit checks are:

  • Prior felonies
  • Prior evictions filed
  • Prior evictions carried out
  • Bankruptcy
  • Judgments
  • Other criminal or bad financial history

I make it a policy to never rent to a person with an eviction on their record or recent felony (within 7 years.) Yes, people do change – but I don’t find the risk worth taking. I’ll leave that risk to other landlords.

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” How to Sign a Lease Agreement “

Schedule a time for the tenant to meet with you at the property. Don’t sign at a coffee shop or via the mail/fax, but actually meet at the property on the day they will be moving in. I find it helpful to go through the lease ahead of time and mark all the signature or initial areas with post-it notes or a highlighter so nothing will be forgotten or missed.

When you meet with the tenant, walk them through each provision in the lease – step by step – and sign (with a blue pen) as you go. This may be time-consuming but will help protect you when the tenant says, “Well, I didn’t know that” months down the road. You may consider having the tenant initial next to important items as well, such as a “no pet” policy. It’s easy for a tenant to later forget details, so having an initial is helpful in jogging their memory later on.

” The Application Fee “

Always – I repeat- always take an application fee with the application. Don’t even bother processing any part of the application unless the tenant has paid the “application fee.” This amount can be whatever you’d like (and whatever the market will bear) but I recommend finding out what the local property management companies are charging and charge a similar amount. Currently, I charge $35 for the first adult and $20 each adult after this. Be sure to check with your State laws and make sure there are no laws dictating how much you can charge.

The application fee covers the cost of the background check, but it doesn’t have to be equal to that amount (you can get paid for the hassle of needing to check their background.) However, I recommend not being dishonest and don’t take advantage of tenants with this fee. The application fee should be reasonable.

” Don’t buy a house for its decor “

A home might have gorgeous furnishings at the showing, but it needs to accommodate your furnishings and lifestyle after the sellers pack up their sofa. Look past a home’s decor and make sure the space will accommodate your lifestyle and furnishings.

Are the spaces functional and efficient for your daily routine? You might love how a seller has transformed an extra bedroom into a crafting space, but will it be big enough for your twins’ bunk beds? Focus on the floor plan and the square footage to decide if a home is right for you.

” The Rental Lease Agreement “

In order to sign a rental lease with your tenants, you will need to have – of course – a rental lease. You can get a state-specific lease agreement from a number of sources, such as EZLandlordForms.com, USLegalForms.com, a local paper supply company like Staples or Office Depot, or your attorney. You can also download a free lease online in many places, including shs411.com, but be sure to run the lease past your attorney for review. Each state has different rules and laws that govern the landlord-tenant policies in that state, so chances are a lease found for free online may not be legally binding for you. Don’t skimp on the quality of a lease.

“Having a strong, loophole-free lease agreement is probably the most important aspect of maintaining good, long-term tenants who treat your property the way it deserves to the be treated (or pay the price if they don’t).” – J Scott

Before purchasing your lease agreement, however, you need to decide on whether you want a month-to-month rental agreement, a one-year lease, or something in between. Most landlords choose a one year lease in an effort keep their tenants in the home as long as possible and minimize turnover. Others choose to offer only month-to-month leases, to hold on to the ability to quickly and easily remove a tenant if things don’t work out right. Still others choose a six or nine month lease, which is often helpful for ensuring a lease doesn’t end during the holiday months of November through January, when vacancies are the most difficult to fill. This comes down to a personal choice that you can make, but with whatever lease term you chose, be sure to buy the correct lease agreement form.

While lease agreements generally vary in length and content, most lease agreements contain the following information:

  • Names of tenants
  • Address of the rental property
  • Lease term Length
  • Rent amount
  • Security deposit amount
  • Late fee description
  • The move-in condition report
  • Provisions for or against pets, utilities, smoking, and more

You may also need to provide certain State and Federal documents with your lease, depending on when your home was built and your State laws. The United States EPA requires that you give your tenant a pamphlet called “Protecting Your Family from Lead in the Home” if your home was built prior to 1978. Check with your local attorney for state specific forms you may be required to provide.

” Verifying Income and Rental History “

People often lie, especially when they want to get into a new rental and cannot qualify. As such, it is vitally important that you verify everything that the tenant writes on their application. As discussed earlier, your application should include a “release of information” signature from your prospective tenant to allow you to properly check up on their claims.

Begin with their job. The application should include the name and phone number of their current employer, so call and speak with the manager, owner, or human resource manager. Many times you will be required to fax over the release of information signature. The important questions to ask are:

  • How much do they currently make?
  • How long have they worked there?
  • Is this job considered temporary?

Next, call their previous landlords. Don’t simply call their current landlord – because many landlords will lie or embellish the truth in an effort to get rid of bad tenants. Instead, call all the previous landlords for at least the previous five years. Be sure to check their background check and credit check to see if any other addresses appear that might indicate they conveniently “forgot” to include a landlord that they rented from. When talking with previous Landlords, you might want to consider asking the following questions:

  • How long did the tenant rent from you?
  • What was their monthly rent?
  • Did the tenant give proper notice when vacating?
  • Did the tenant receive back their security deposit?
  • Would you rent to this tenant again?

” Advertising for Tenants “

When it comes to attracting tenants to rent your house, you will want to reach the most potential tenants as possible so you have the largest pool to choose from. The following are three easy ways to attract tenants.

 

  1. Newspaper: Though a quickly fading and expensive marketing technique, your town’s local newspaper may be a great way to attract tenants. Learn the common abbreviations  in order to minimize the length of your ad, but be sure to include all the important information. I recommend NOT putting the address in the newspaper, so people are forced to call (no text or email either) and talk with you first.
  2. Craigslist.org: Craigslist.org is one of the internet’s largest websites and best places to find tenants. Perhaps the best part? Craigslist is free (unless you are a Property Manager in New York City.) Don’t list the address here either. You can also place your ad in other online rental submission sites, like Trulia.com, Zillow.com, or PadMapper.com.
  3. Yard Signs: One of the oldest, but most successful ways to market your rental is with a simple “For Rent” sign in the yard. The biggest drawback to a sign, however, is instant notification of a vacant house to anyone driving by.