Anybody who has owned an investment property and looked at it empty has experienced the certain panic that ensues as another month of expenses are paid out-of-pocket. The natural sense is to urgently accept the first prospective tenant that comes along who can fog a mirror. Unfortunately, when just any tenant is accepted you are often trading one set of headaches for another. Unfortunately, the bad tenant headaches are frequently more costly than letting the property sit vacant!
The best objective when leasing a vacant property is to properly screen prospective tenants so that your property is leased to a qualified party. There are actually five different checkpoints of contact that should be a part of any prospective tenant screening process. Some of these points of contact result in objective information, some are more subjective. It is through this process many decisions can be made and reviewed regarding an applicant.
During the inquiry we get basic information on the prospective tenant. It is not a good sign if the prospective tenant has problems answering basic questions like why are they moving, or can they provide references. Future great tenants are anxious to answer questions thoroughly..they have nothing they wish to hide. This includes willingness to thoroughly discuss issues that might be considered adversely for their application.
When we show the property we notice subjective things about the prospective tenant. Is their appearance well-kept? Their car? Do they have an attitude? Are they critical of the property or process? If it is a non-smoking property, do they smell of nicotine (smokers never realize they smell!)? What do they say about where they are currently renting?
The application process is where we hit both subjective and objective behaviors. Does the prospective tenant willingly provide the application information promptly or is obtaining the information difficult? Of course, this is where we also gather objective information in order to complete credit, criminal, and background checks. This objective information is provided within the privacy laws to the owner, along with our observations and any recommendation.
Letting a prospective tenant know that their application is approved and asking them to schedule the lease signing is another screening hurdle. This hurdle also includes specifically identifying the amount of funds required and how it is to be delivered. The security deposit is required immediately. These funds are to be presented in a cashiers check or money order within 48 hours of approval.
Finally, the execution of the lease is a surprising final screening moment for the prospective tenant. Up until the moment there is ink on a lease (or an electronic signature as we use today) certain types of behavior, incidents or new information, would allow us to determine this is not the right new tenant for your property. So the screening process continues until the lease is executed. I have had new tenants not show up, or show up several hours late, for the appointment. This is almost always a bad sign. I have had new tenants want to have a copy of the lease so their Uncle John, the Realtor, can review. This does not have to mean you are going to have problems, but it is also almost always going to produce further questions or requests. There is a huge difference between understanding the terms of the lease ( a good thing) and believing each clause may be negotiable (trouble). How the lease signing is completed will provide a good indications of what type of prospective-now new-tenant we are dealing with.
At any one of these five checkpoints we could determine that the prospective tenant is a bad choice and cease moving forward. When this difficult decision is made, it is done in the rental owner’s best interests. There are moments when it becomes clear that returning a security deposit and getting the property back on the market is the best alternative.
Prospective tenant screening is an ongoing process that we feel is very important to making sure we have a highly qualified tenant for your property. The headaches avoided by methodically screening any interested party are well worth the effort.