3 Zero Tolerance Red Flags All Landlords Need to Look for when Screening a Tenant

Posted on: September 15, 2009

Categories: Profit, Things To Consider

Author: buyfixandprofit

There are certain items on a tenant’s screening report that should make any landlord deny the application immediately.  Once in a while the landlord will be presented with an exception to consider; be very careful and conservative in your decision.  Remember, once a tenant moves into your rental property, you cannot legally remove that tenant with a baseball bat for non-payment of rent (even though it can be very tempting).

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Deadbeat Tenant

Previous Evictions

Immediately throw this application in the garbage.  Any tenant with a previous eviction knows how to manipulate the tenant-landlord laws in their favor and will more than likely be a headache from day one.  An eviction on a tenant’s record means that they refused to move out, even after getting served the proper legal paperwork by the sheriff.  The landlord  had to actually go to court for a judge to order this tenant to move out.  Landlords and property managers should avoid tenants with evictions on their record like the plague.

Drugs or Violent Crimes

Draw a line in the sand and refuse all tenants with drug or violent crimes on their background check.  As real estate investors, we need to minimize our risk and a drug or violent crime conviction carries too much risk of a repeat offense.  Waiting an extra three months to rent a house to a qualified tenant is much less expensive than evicting a bad tenant.  Bad tenant costs involve lost rental income, eviction costs, property repairs from turnover, and finally the cost of waiting for another tenant to move in.

No Verifiable Employment or Income

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Tenant Screening

The landlord or property manager needs to be able to verify the tenant’s employment in order to make sure the tenant actually has a job.  Sounds simple, doesn’t it?  If the tenant is self employed and cannot provide paycheck stubs, then ask for their last 6 months of checking account statements to verify a stable income.  I had one tenant tell me they were self-employed and could not prove their income.  So they offered to pay the first 5 months of their rent upfront along with a security deposit because of the higher risk they posed.  I accepted the offer and they deposited all the money electronically into my account from several different credit cards.  As soon as the 5 months were up, I never received another rent payment and they moved out two months later leaving the property with $2,000 in repairs.  I’m sure these credit cards will never be paid off either.

Good Tenants can Make or Break your Investments

The tone of this article may seem harsh, but this is a serious issue that can cost a real estate investor thousands of dollars if the wrong person moves into your freshly rehabbed rental property.  Depending on the state you live in, it can take 4-6 months for the eviction process to get to the point where the sheriff comes out to physically remove the tenant.  There are many true stories of desperate landlords accepting an unqualified tenant to fill their vacancy and in return the tenant never pays a single penny of rent after moving in.

Buying and rehabbing foreclosures to be held as rentals can provide great tax benefits and a secure retirement cash flow for the smart real estate investors who are not afraid to seize the moment.  Great equity positions can be easily obtained and realized if you plan to hold for at least the next 5 -10 years.   Investors that accumulate rental properties in this market will become the quiet millionaires of tomorrow.  See you at the end of the rainbow.

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