Investors helping one another. Many investors perform some level of due diligence when screening potential renters or tenant-buyers, however few investors perform as thorough of a check as they know they could. We become lazy, complacent, and trust others are just as honest as us – many times they are not. Next time you screen a potential renter or tenant-buyer, make certain to verify rental history and rental experience with his/her previous landlords.
When performing due diligence on your renters or tenant-buyers do you…
- Perform a 3rd party background check (state and nationwide)?
- Check paystubs and W-2's? Verify sexual predator status?
- Verify condition of applicants current home? (organized home = organized-type of person)
- Call current boss(es) to verify work history?
- Call past/current landlords to verify rental status and history?
Pro Tip: Aim to make your prospective applicants jump through many hoops while becoming approved. Listen for complaints, lies, victim mentalities, frustrations or sounds of giving up. You want an applicant that will fight for this home and understand the opportunity they are getting,assuming of course the home is a decent value and appropriately priced. If these applicants get tired of the application process they may not be satisfactory long-term renters or tenant-buyers.
You want to hear the GOOD, but more importantly the BAD & UGLY..
A background check does not show a person’s attitudes, mental stability, rental payment history, temper, or kindness. Speaking to a previous or current landlord can have you peering into your potential future working with this applicant. How the applicant deals with these landlord is likely how they will treat you and your investment home.
Before the call…
1. Mindset from you.
Eager to call landlords for personal and heart-felt references about your applicants. You have every right to make this request of your applicant and their previous/current landlords. You have nothing to fear. You are an investor that is approaching another investor for help, and possible friendship.
Pro-Tip: Aim to make calls to landlords in the beginning of your screening process. Some management companies are slow to reply and may take a few days.
2. Mindset from your applicant.
Most applicants will not oppose this request and everything will proceed normally. Some applicants may be hesitant to share previous landlord information with you in fear the landlord will fairly or unfairly provide a negative referral. Occasionally you may have a prospective renter or tenant-buyer that provides you with a legitimate reason they do not want to provide you with their past landlord’s contact information. Push through these applicant’s fears and collect the needed information to call the landlords. Some non-important reasons a landlord may be upset and provide a poor review of the applicant:
- The landlord doesn't like foreigners.
- The landlord doesn't like people coming home after 10pm.
- The landlord doesn't like non-English speakers.
- The landlord doesn't like people complaining about real issues.
- The landlord doesn't like certain opposing political signs on the property.
In short, all the silly reasons above revolve around a controlling, over-protective, over-critical, unrealistic, emotional, unprofessional, or even racist landlord. When speaking to a landlord or management company aim to understand their professionalism and trustworthiness.
3. Get Permission.
A Release Of Rental History form is a separate form or a paragraph in your tenant application. This agreement gives you permission to ask questions about the applicant’s rental history from their past/current landlords. Some landlords and management companies require written proof the applicant agrees to their private information being shared.
Written consent from your applicant comes in many forms. A simple agreement signed by the applicant will do. If creating your own Release Of Rental History form, aim to include the following sections:
- Renters personal identifying information (SS#, DOB, Drivers License #)
- Previous property address and rental amount (Account for past 2 years)
- Landlord's contact phone number and details.
- A sentence naming you as authorized to ask questions about applicant.
- Dates and Signatures of applicants
Download this Form: Release Of Rental History
Reality: Personal experience has shown that many landlords will not require any written-proof before answering your questions. By confidently stating the applicant’s name and why you are calling, many landlords will openly talk about these past/current tenants.
Pro Tip: Regardless if needed or not, obtain a signed Release Of Rental History form to keep in this applicant’s folder if approved.
4. Does this property address match this landlord? (optional)
Your applicants may be lying to you with regards to the phone numbers and contact details provided about their past landlords. Let us do some quick research to try to verify if ownership and phone numbers are correct.
Quick steps to [try to] verify ownership and phone numbers:
- Step 1: Perform a reverse phone-number search using the phone number provided by the applicant on the Release of Rental History form. A website like http://www.whitepages.com will work fine for this task. Often times this search may come back without a name, only the location may be shown. However sometimes a name will be generated on this search. If a name is found, cross-check this name with the name provided by the applicant.
- Step 2: Let us use your local government property appraiser or tax collector website to search for property information on these landlords. Aim to search by "property address" on your county/parish's local property appraiser or tax assessor website if available. Enter the landlord's rental property address provided by your prospective applicant on the Release of Rental History form and search for the owner's name and mailing address. Cross-check this landlord's name with the name provided by the applicant.
5. Understanding your questions:
Know what questions you are going to ask once a landlord or management company agrees to speak with you. Create a list of questions to ask and keep on file for this potential future renter or tenant-buyer. Ask objective questions that can be answered with either concrete numbers or yes/no answers.
If you do not have a list of questions, consider the following to start:
- What were the dates when the tenant lived in your building?
- What was their rent rate at that time?
- Did they make all rent payments?
- Did they ever pay late? (How many times and how late?)
- Did you have to serve them with any notices?
- Did you have to evict them?
- Did you offer them a lease renewal?
- Has the tenant given notice of their move? If they are breaking a lease, what sort of penalty will be assessed?
- Did tenant observe all rules of the property?
Download this Form: Questions for Landlords When Screening Applicants
Pro Tip: Most investors grade their applicants on honesty, as well as their past history. For this reason, if someone lies about his/her history or omits major facts it may be prudent to pass on this applicant. Sometimes actions speak louder than words.
Making the call…
You: Hello. Is __(Landlord’s name)__ available?
Landlord: Who is this?
You: My name is __(Your name)__ and I’m a local real estate investor in the area. You do not know me but I was calling because I am working with a __(Applicant’s name)__ who claims to be a past tenant of yours at __(Address of rental property owned by this landlord. This address is listed on the Release of Rental Information form.)__. I was calling to hopefully get a reference from you concerning this past renter. If you do not feel comfortable answering a few simple questions I would happy to send you over a Release of Rental Information form first. Either way I just had a couple of questions for you. (wait for landlord to reply)
Landlord: 4 things may happen…
- The landlord or management company will now permit you to ask questions.
- The landlord or management company asks you to email/fax them the Release of Rental Information form signed by the applicant.
- The landlord or management company ask you to call back when they are in the office.
- You have the wrong number or a disconnected number.
Some landlords will be very professional and curt, while others will not stop talking about these past tenants and/or other issues in their life. Be polite, take notes, and ask follow-up questions. When speaking to a landlord or management company aim to understand their professionalism and trustworthiness.
Pro-Tip: Aim to make calls to landlords in the beginning of your applicant screening process. Some management companies or landlords are slow to reply and may take a few days to respond.
Making a friend & Asking for unwanted mobile home leads 🙂
Towards the end of this phone call try to get to know the landlord if possible. Asking questions like…
- Have they been investing in real estate in the area long?
- Is there anything you may do to help their business?
- Any type of leads they are looking for?
Before you get off the phone ask the landlord if they ever come across unwanted mobile home seller leads. Mention you would love an opportunity to call these sellers to work these unwanted mobile home leads and provide a finder’s fee if able to close any. An approximate finders fee for mobile home inside a park may be $500 if you plan to resell via payments. If reselling for cash or bank financing perhaps a fee closer to $1000-$3000 is in order depending on potential profit.
If you have not been making phone calls to verify past rental history of your prospective renters or tenant-buyers then please start doing so immediately. While most potential applicants are caring, hard-working and genuine folks – always treat potential applicants as risky until proven otherwise. Protect yourself and your property from unwanted headaches and dead-beat applicants that know just what to say to fool you into a disarmed and trusted attitude. Verify, Verify, Verify.
Love what you do daily,