Tenant Screening

How to Select the Best Fit for your Rental Property
 
by Karina Gafford
MilitaryByOwner staff writer

"We’ve had people come up to us with a bag of cash to pay for six months of rent in advance…they want to move in today, but don’t want to fill out an [application]," Bruce Specter of Movement Mortgage, Nevada, told MilitaryByOwner of his experience as an independent landlord. "I would rather have a place sit empty for a month than act out of desperation!" he explained.  Specter, the first in his family to ever own property, has had his share of real estate misadventures from finding college students hosting wild parties to a tenant opening a new business of restoring junk cars in his front yard mid-lease. With almost two decades of experience owning and managing his own properties, Specter has learned quite a bit about tenant screening; it has made him not only more cynical when reviewing prospective tenants, but also more wise.  The key, he indicates, is upfront due diligence and a little common sense; if you cannot tell that an individual who foists cash in your hand and requests that you ask no questions is up to no good, then you clearly do not watch enough gangster movies.               
Common sense aside, understanding the due diligence required in the process of tenant screening is vital, though some aspects are left to the discretion and preferences of the independent landlord. Specter, for one, believes that the tenant screening process begins far before even purchasing the rental property, as he believes that property selection will dictate what type of renters will apply. Market prices in neighborhoods alone automatically qualify and disqualify prospective tenants, but Specter takes his purchase selection a step further in ensuring that he receives high quality applicants. He now only buys homes in neighborhoods that he would choose to live in with his family in the hopes that he will find tenants who value the same things he does—maintaining both the property and good relations with other neighbors. Specter also carefully appraises the level of maintenance of surrounding homes. "If one house is in disrepair," he notes, "…others may follow."  As Specter relays, the process of screening for tenants is lengthy and, at times, quite tedious. 

Only Renting to Active Duty Servicemembers
While selecting a neighborhood is an integral part of Specter’s screening, many military landlords limit their prospective pool of tenants even further. "I only rent to Active Duty," Servicemember Sally explains to Active Duty Adam, a fellow military rental owner who relayed to her that he has recently experienced some trouble collecting rent from his tenant, a civilian. "It’s easier that way," Sally explains, "…because I can always go to the tenant’s commander for support if they don’t pay rent on time." Sally, though purely a figment of my imagination (does anyone want to go on the record saying this? I didn’t think so), echoes the sentiments shared by military rental owners and civilian rental owners in military towns throughout the United States who believe that commanders will actively engage their troops on the state of their rental payment. While commanders may once have held sway over the personal finances of their subordinates, this is no longer the case, leaving property managers to now warn that renting to Active Duty no longer serves as a secure strategy in the rental market.
"Many homeowners automatically assume that [servicemembers] are held accountable for negligence by their command," explained a property manager near Shaw AFB in South Carolina.  However, she continues, "We are seeing the military command back further and further away from involvement in troop’s personal finances." Given that commands rarely intervene in such matters now, she explains that even active duty military should be screened in a manner equal to civilians because "[Renting off-base] is a civil matter," and any issues that arise will likely be dealt with in civil courts, not military ones.  

The Application is Critical: Credit Checks, Background Checks, and Additional References
 Former Marine and CEO of RentPrep, an online tenant screening service, Stephen White emphasizes the importance of the application in the rental process. "The most successful landlords we work with," he explained to MilitaryByOwner, have a "no-blank-spaces" policy on the rental application." Though not as worrisome as Specter’s cash only prospect, White highlights that blank spaces reflect intentional gaps; the applicant has not provided this information for a reason, and the reason is not that he ran out of ink. The application is critical in providing you with the information required to proceed with the remainder of the screening process, so requesting that the applicants answer every single question may help mitigate wasted time spent chasing down answers not provided. 

White also encourages landlords to not only charge an application fee but also to specify in writing that the fee is non-refundable. To avoid disputes, it is important to highlight that neither the application nor the background and credit checks are free for the landlord. MilitaryByOwner partners US Legal Forms and SmartMove provide rental applications for under $20 and comprehensive background and credit checks for $25, respectively. Therefore, if the applicant has any concerns about what his checks may show, then he should address them prior to paying the fee. Dale Howard, a renter in Reno, told MilitaryByOwner that he had experienced some credit concerns as a result of a medical issue. Howard paid about $250 in application fees to five separate rentals prior to finding one that would accept the score on his credit report. While it is regrettable that no central clearing house exists for prospective tenants to simply submit one payment for a credit report, it is advisable to discuss both the fee and reason for the fee to avoid such unfortunate situations.
While no standard exists for what credit score an independent landlord needs to accept, it is a good idea to establish a baseline score as a standard to which you can hold prospective tenants. Specter warns that landlords should not deem credit checks unnecessary based on the tailored business suit or flashy car of the applicant; perhaps both items take up disproportionate dollars in the applicant’s budget that may impede his ability to pay rent in a timely manner. Bennie Waller, a professor of finance and real estate at Longwood University’s College of Business and Economics who also owns several rentals, explained to MilitaryByOwner that, "I require an application and check credit, references and ask for previous landlords. Many times when you tell applicants that you will be doing these factors they walk away (which is what I want)." Experienced landlords like Specter and Waller maintain standards for their applicants, helping them both succeed in their real estate ventures; a wise man learns from the mistakes of others, so do not let the titled professional with impeccable dress sweet talk you into turning over the keys to your property—request a complete application!