Landlording: The Art of Screening An Applicant

One key facet to being a successful landlord is effectively screening your future residents. Failure to choosing a stable, on-time,  rent paying citizens of our society will only cost you time, money, and un-needed aggravation.   I don’t care whether one is filling a $300/mo or a $3,000/mo rental nor if the applicant is a $7/hr worker or president of a Fortune 500 company.  Knowledge is power; therefore, it is critical that one pull a full credit, criminal, and eviction report. You see just because you find some negative things doesn’t’ mean one turns them down.  The key is that you match the story that the reports tell you with the applicant interview and employment/landlord references.  With all the information out front, one can make an educated decision if an applicant has the financial and moral responsibility to pay in a timely manner…

Recommended Steps for Screening a Rental Applicant:

  • Interview -
  • Credit Report
  • Criminal Report
  • Eviction Report
  • Employment History
  • Landlord References

Each one of these critical steps is an article in itself; however, I will tell you that it is the nuances of  illiciting & interpreting the information that each provides that is critical for success. We must remember that the $300/mo rental may attract a different applicant than the $3,000/mo rental.  Different criteria and microscope mentality is needed for each.

What might I concentrate more on with the $300/mo rental?  Employment, Eviction, and Criminal are most important to me. I want to verify length of employment (and prior if 1st employer is less than a year) and salary.   I’d like payroll stubs as a cross-check.   Having the earning ability to pay rent is critical.   If your applicant doesn’t understand the importance of long-term consistent pay than more than likely they won’t understand your need for consistent monthly rental payments.   Eviction checks are key -i can handle filings from two+ years ago; however, any current filing will require a verifiable explanation.    Eviction filings don’t lie; unfortunately, fellow landlord references can.   Criminal reports let you know if somebody has a recent, consistent, or a long-time ago bad habit.   Habitual problems (even traffic/no-license or insurance) only highlight the applicants instability in life let alone major issues.   Each landlord has different views.   There might be certain issues I’ll overlook and vice-versa!   What’s important to me is a clear demonstration in change or perhaps a one-time hiccup.  I’m looking for applicants that have proven that they understand the importance of earning a living, keeping a roof over their head, and are not a rapist nor murderer.   Typically low income applicants will have poor and/or no credit.   Doesn’t mean I don’t pull all the other criteria -just means I focus more on these three issues.

How about the $3,000.00/mo rental?  Employment, Credit, and Eviction is my focus. I want to make sure this applicant has the capability of paying (via verifiable employment income), demonstrates this ability (and willingness) to paying via a credit report, and doesn’t show issues with paying with past landlords.   Of coarse the other area’s are just as important and need to be pulled; however, I find the biggest red flags tend to come up in these first three criteria first.   After-all if one cannot afford to pay the rent, then one cannot afford to pay rent and all the other data is almost immaterial at that point.

While I cannot hit on all the details of each subject, I will state that the applicant interview is critical. It is a time to look for signs of deception, honesty, and/or integrity.   It is when one should find out all the pros & cons of the applicants history, lifestyle, and philosophy of life.   I call it the gray area of the screening process.  There is an art to the interview and interpreting all nuances whether it be in facial expressions, body posture, and voice inflections -let alone what you are told.   It is the art of lining up this information with all the factual data and making and educated decision.

In the credit world we call it ‘the three C’s of credit’: Cashflow, Capacity, and Capability.   Take all the information.  Verify Income, any savings, and READ that credit report.  Learn how to read it -it is not that difficult.  After awhile, one will see that a story can be gleaned and you can almost instantly determine if the applicant can meet your financial obligation.   Remember there are no instant answers and the science of interpreting data that will place a successful resident into your rental may take some time.  Time well spent as this is essential in a landlords long term success to creating wealth with real estate.

Tyler McCracken – A NC Real Estate Investor

July 4th, 2010

1 comment to Landlording: The Art of Screening An Applicant

  • admin

    • Mike SWMO
    July 4th, 2010 at 1:33 PM • Edit | Delete | Spam
    Tyler
    Do you ever get tired of hearing people say that?
    You know, the words “Your Right”
    I read your blog post about the art of screening and it was such a good post I would like your permission to give it to the BCLA (Butler County Landlord Association).
    The BCLA is a fledging startup Association down in South East MO that I belong to (just goes to show how smart I really am – NOT). This BCLA is about 250 miles one way from me and I make the trip once a month to attend their meetings. Why. Well, one of these days I want to move back to the area and it would be a nice thing to have. I was down there, saw their notice in the paper about their organizational meet and attended. They got volunteers for President and Treasurer but not for secretary, so I volunteered. However I did let them know up front the distance for me and that I only wanted position for about 3 or 4 months until they could get established. Guess where I am now. Still there.
    Anyway, what say you about me making it available to the BCLA? About a third of them do not have computers or say they don’t use email. My thoughts are to give your contact info, either through ATL or your blog site or let the president supply it to them in best fashion she knows. Of course I would request that you, your blog site and ATL would get credit.
    Your thoughts please.
    • admin
    July 4th, 2010 at 4:14 PM • Edit | Delete | Spam
    Mike -I’d be honored for you to reprint my article to be used with your Local Landlord Association. Let me know if you’d like it in a PDF Format. I just ask that you reference:
    Authored by: Tyler McCracken -A NC Real Estate Investor
    http://www.CharlotteREblog.com
    • Mike SWMO
    July 4th, 2010 at 8:59 PM • Edit | Delete | Spam
    Tyler
    Thank you
    Sent it to members. put your “Authored by” and your “www site” and the ATL url in the post. Suggested members go and read your other articles. If I had your email address i would send you a copy. tried sending through ATL but wouldn’t let me send it as it looks in the original email to members.
    Take care. Hope to see you again
    Mike
    • Sean
    July 4th, 2010 at 10:36 PM • Edit | Delete | Spam
    Fantastic post Tyler and you hit the nail on the head.. Makes no difference if it is a $300 a month property or a $3000 a month property.. You absolutely need to be consistent in your screening.
    • admin
    July 5th, 2010 at 7:26 PM • Edit | Delete | Spam
    taken from http://www.askthelandlord.com regarding this article:
    xcellent article ,Tyler. Oh if only others around where I am would follow it. We don’t have a landlords association but if we did I would use your article and pound that info into their heads. So many landlords make that mistake.
    I must say I’ve followed that criteria you’ve written about but every once in awhile I lose my brains and stray from it. After 7 years , you’d think I would stop listening to sob stories . And for the most part I don’t. I’m having an issue now with a young tenant who has only been there 2 months. Eviction is imminent. If I had followed my head and the rules and not my emotions I wouldn’t be having to talk about eviction. It’s my own fault and I’m taking the blame. I know it will turn out okay in the end but I could have saved myself the hassle if I had just screened, screened, screened. Thanks again.
    Lori(NV)
    • Josh Stone
    July 6th, 2010 at 8:42 AM • Edit | Delete | Spam
    We could expand on each of the six steps. That would be great info for all LL’s. Experienced or New LL’s.
    • admin
    July 6th, 2010 at 9:26 PM • Edit | Delete | Spam
    Yes Josh…, I intend to create an article for each of the six steps. Was afraid it might of been to wordy (lengthy) had I lumped it all together.

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