Welcome to the StarPoint Tenant Screening Blog. This blog is dedicated to sharing valuable and helpful info with property managers and individual landlords about tenant screening, state tenant laws, useful forms and more.
As many of you know Equifax announced a cyber-security incident potentially impacting approximately 143 million U.S. consumers and some UK and Canadian residents. We at StarPoint Screening are aware of the situation and want to make our customers aware that we do not have a partnership with Equifax or use their services for consumer information.
From Mid-May through July of 2017 criminals exploited a U.S. website application vulnerability to gain access to certain files. The information accessed primarily includes names, Social Security numbers, birth dates, addresses and in some instances driver’s license numbers.
See if your personal information is potentially impacted.
Equifax has provided a link where you can enter your last name and the last six digits of your Social Security number and based on that information, you will receive a message indicating whether your personal information may have been impacted. If your information was impacted you will have the option to enroll in TrustedID Premier. The enrollment period ends on Tuesday, November 21, 2017.
Summer’s almost here, and that means it’s the peak of the rental season for homeowners and vacationers. Preparing your rental for the warm months ahead is a good idea for luring in prospective new tenants and making sure your property stays in optimal shape.
Before you begin preparing your property physically and restoring the inside and outside, you should think about how comprehensive your tenant screening process is. This process is the only chance you have to filter through tenant options and backgrounds to decide which tenants are the right choice for you.
Tenant screenings are important because the information it reveals can help you determine whether or not your new prospective tenant is trustworthy, able to pay their bills (and therefore, their rent), on time as well as previous addresses, rental references, and eviction information. It helps complete a clear picture of who they are overall as renters. It doesn’t tell the whole story, but it definitely tells a big part of it.
Inspect Your Air Conditioning Unit
Whether you have window units or a whole-house A/C duct system, it’s important to inspect them for proper operation before tenants start moving in. It helps your visitors stay happy and comfortable, even in the summer heat. For window units, check to be sure the exterior condenser has room to drain and breath by clearing any overgrown shrubs or plants that may be crowding the area. Also, replace and/or clean the filter for the unit. Make sure all interior ductwork is in proper order and that all vents are open and free of obstructions.
Check Battery-Operated Devices
Replace the batteries in your smoke detectors if they’re no longer working, and check your security system’s operation as well, if you have one. Some thermostats also run on batteries, so be sure those don’t need to be replaced either. Most thermostats will have a low battery indicator, so replace them if needed.
If you have a washer/dryer and offer laundry, be sure to clean out dryer vents outside the house. Many fires have started because of clogged dryer vents, so by taking this simple precaution, you can keep your tenants safe through the summer months.
Windows and Doors
Be sure doors and windows are sealed and optimized for A/C use. Open air gaps allows cold air to escape, increasing utility costs. By taking the extra time to seal gaps, you’ll keep your home energy-efficient.
If your summer rental hasn’t been opened or used for months, consider hiring a cleaning service to get it ready for new tenants. They can take care of things like mopping the floors, vacuuming carpets, dusting off ceiling fans, freshening up the furniture, and airing out the interior.
Sprucing up the yard can make a big difference with curb appeal and allows your summer tenants to enjoy your backyard in the nice weather. Do it yourself or hire landscapers to mow the lawn, clear brush and plant flowers if it’s feasible.
Owning investment real estate is a lucrative way to build wealth. Renting out to quality tenants means that you have another form of steady income. However, renting out to the wrong tenants can lead to frustrations and lost revenue. Learn about the tenant screening red flags to look out for as applicants inquire about your rental.
Part of your tenant background screening process must be running a credit check. Look for candidates with a high credit score. These applicants typically show a history of paying their debtors on time. Poor payment history, Bankruptcies, liens, judgements and other collections will all be present on the credit report. Allow this tenant screening strategy to guide your decision.
Verify if the applicants have a criminal history by purchasing a National Criminal Search with a vendor such as StarPoint Screening. As a landlord, you have a right to know if a person has a criminal background. Analyze the tenant background screening very carefully so that you don’t overlook any details. Serious charges, such as robbery or assault can appear as well as minor infractions, including traffic tickets. Multiple violations can mean that an applicant is prone to trouble regardless of the charges. Remember to always get the applicant’s signed authorization before running a criminal background check or credit report.
Any rental application should ask for an employment history and contacting those current and previous HR departments to complete a reference check is always a good idea. You want to be able to verify your applicant’s hire date, term date, salary, and position. Asking for a W2 or the last two paystubs is also a reliable way to verify salary and employment.
Completing a nationwide eviction search of you tenant is an inexpensive way to find out if any previous landlords, property managers or apartment complexes have had any issues with your applicant and had to take them to court. Eviction searches typically are under $10 and can save you thousands if you have to evict that tenant in the future.
StarPoint Tenant Screening, an accredited reseller for Trans Union and an information services company that delivers tenant credit reports and tenant background screening reports nationwide is proud to announce their redesigned Tenant Credit Report. StarPoint expects that the new report format will not only attract new landlords and property managers, but also offer their existing customers a streamlined, logical report format that eases the path to finding the perfect tenant.
“We designed the new report format to be more visually appealing and intuitive and expect the new format to make the tenant screening process a simpler and more informed experience.” Stated Kelly Gontarski, CEO.
Additional system features which benefit property managers include:
- Free online rental forms
- Printer friendly options for reports
- User Administration which allows the account admin to create multiple users accounts
- User Statuses which allows the account admin to change a user status (active, suspended, inactive)
- User Rights which allows the account admin to set other users as admins, give other users the ability/inability to view invoices and balance information, and make other users pay/not pay at time of order
- Viewing Rights which allows the account admin to allow other users to:View all reports ordered by this company, View only reports ordered by this location, View only reports ordered by this user
- Convenient billing options which include pay at time of order, monthly autopay, or monthly invoicing to be paid by check, ACH or credit card.
- Discounted volume pricing for property managers
Property managers need only to fulfill a few simple requirements from StarPoint and TransUnion to be compliant with the Fair Credit Reporting Act in order to be granted credit report access.
If you’re renting out a property, thorough tenant screening is a must. A bad tenant is not only a hassle to deal with, but can also cost you thousands of dollars.
Take a look at the true cost of eviction to see why you should always conduct tenant background screening.
If you need to evict a tenant, it won’t happen overnight. Eviction is a lengthy legal process, and it typically takes about 2 to 3 months from when you file the paperwork to when the eviction actually occurs. How much do you charge for rent on the unit? Multiply that by 2 or 3 and that’s about how much money you’ll already be out, and keep in mind that the process of evicting a tenant could take even longer.
Going to court isn’t free, and you can anticipate it costing about $100 to $300. If you need an attorney, and you will if you want to make this process go as quickly and efficiently as possible, those legal fees could be anywhere from $200 to $750.
Once the tenant is gone, you need to get the unit ready to rent again. That will likely run you between $500 and $2,000. Of course, if you had a bad tenant, there’s no telling how much damage they might have done. There’s no shortage of landlord horror stories about tenants who damaged walls, ruined appliances or let their pets destroy a unit. And don’t think that putting a “no pets” clause in the lease will always protect you, as plenty of tenants have chosen to ignore those kinds of restrictions.
There’s no telling how long the unit will be on the market after you put it up for rent again, but you should expect to lose about 1 month of revenue. You can also expect getting it rented to cost you about half a month’s rent, as you may need to provide concessions to a new tenant or advertise the unit. Even if you don’t do either and simply advertise your unit in free classified ads, you’ll still be losing money on the time you spend showing the unit to prospective tenants.
So, how much are you spending for all of that? Let’s say that you have a unit renting for $1,000 per month, you’re able to keep your costs to the low end of these estimates throughout the process and you find a new tenant within a month. You’ll be looking at:
$2,000 in lost rent while evicting the bad tenant
$1,000 in lost rent while finding a new tenant
$500 in make ready costs
$500 spent on finding a new tenant
$200 in attorney legal fees
$100 in court costs
That all comes out to a grand total of $4,300, which will take you over 4 months just to make back. And that’s if you’re able to minimize your costs. It’s obvious that each bad tenant comes at a huge price.
What is the Cost of Tenant Screening?
You can have a thorough credit check completed for as little as $10.95. That screening will provide information on the prospective tenant’s financial history, including their credit score and any bankruptcies, their payment history and verification on their ID.
It doesn’t cost much to screen a prospective tenant, especially compared to the cost of a bad tenant. Go through the screening process with any tenant you’re considering to give yourself peace of mind and minimize your risk.
Don’t let screening a tenant intimidate you. Follow the steps on this infographic and use StarPoint Screenings Free tenant screening forms to help you get the job done today! Tenant Screening can be one of the smartest steps you take in protecting your investment and making residual income.
Below you will find the top ten deductions for landlords that will decrease their tax liability. Before claiming any of these deductions, make sure to have receipts and files to back them up.
Interest can be one of the biggest tax deductions for a landlord. They can deduct interest from a mortgage loan or credit card interest from using the credit card for repairs on the property. Mortgage Interest (primary & secondary), HELOC Interest, Credit card interest on purchases or improvements on the property, and Mortgage Points to purchase or refinance the property all fall into this category.
You will not be able to do this in the year the property was bought but you can do it the following years when the property actually depreciates. The value of the structure and the value of the improvements can both be depreciated.
Repair costs are deductible in the year that they are done. The repairs have to be needed and the cost must be within reason. Repairs can also include any effort to maintain the current condition of the property. The type of repairs that fall into this category would be painting, plumbing, AC and Heat repairs, fixture repairs, fixing floors or the roof, and fixing windows. You can also deduct the Labor Costs for conducting these repairs.
4. Local Travel
You can deduct the mileage you incur from your rental activities such as going to the property, collect rent, dealing with a renters problems, and even going to the hardware store.
5. Long Distance Travel
Traveling a long distance for you rental duties can also be deducted. You deduct such things as airline fares, car rentals, taxis, uber, gas, 50 % of meals, hotel bills and more. You have to document your trip carefully as the IRS will look closely at this deduction.
6. Home Office
While meeting certain requirements, you home office and/or workspace used for your rental activities can be deducted. You can also depreciate certain equipment used in you rental business space including ink, paper, pens, rental software, legal documents, phone and internet, and the square footage of the home office. Be careful as that IRS says that one of the most commonly audited deductions is a home office.
7. Employees and Independent Contractors
Whether an employee or an independent contractor, you can claim their wages as a tax deduction as long as it is related to your rental business expenses.
8. Casualty and Theft Losses
If you property is damaged or destroyed by a flood or fire per se, you can deduct part but not all of the loss. This is dependent on whether you had insurance or not.
The premiums that you pay for almost any type of insurance related to you rental business can be deducted. You may also deduct your employees health and workers compensation insurance.
10. Legal and Professional Services
You can deduct legal and professional service fees. These fees are known as operating expenses and can be deducted as long as they are related to your rental business. These fees can include tax preparation and software, property management services or software, court filing fees and accounting advice.
Rental Property Forecast For 2017
Real estate analysts are still measuring the “Trump Effect” and the millennial effect on US housing and rentals. Most experts feel the housing market is “under-supplied” and that mortgage rates will remain favorable despite interest rate hikes from the Federal Reserve. And, with soft supply, the rental market is expected to remain strong, especially in busy metropolitan areas.
With Trump’s emphasis on growing the economy and implementing a more favorable tax structure, American millennials will have more money to spend. Zillow estimates that rents in metro areas will continue to climb another 1.7 percent in 2017, on par with 2016 growth. (http://www.thefiscaltimes.com/2016/11/22/10-Real-Estate-Trends-Watch-2017).
At the same time, Zillow projects home values will increase by 3.6 percent in 2017 and 2.97 percent in 2018. However, more take home pay may not translate to more ready, willing and able buyers. Analysts foresee many millennials packing their bags and moving away from their parents homes in 2017. This is expected to create more demand for rentals in 2017.
The Impact of Short Term Rentals
Short term rental demand through Airbnb is strong. However, a majority of analysts feel the impact of short term rental property on the overall housing market is negligible. However, the convenience of whole home or one room rentals is expected to have an impact on the hotel industry.
Presently, Zillow reports the cost of rental property in major metro areas like LA or NY can cost about 40 percent of the tenant’s income (http://www.zillow.com/research/short-term-home-rentals-zhpe-13927/). President Elect Trump may not have a solution for the rising cost of rental properties in large metro markets but a new income tax policy will be welcomed by big city tenants.
Millennials Will Drive Rental Supply and Demand
Millennials are expected to significantly impact demand fro housing and rental units. More millennials will apply for mortgages in 2017 than did in 2016. But, more millennials will also start living independently and increase demand for rental property.
As the President Elect promised more jobs and seems prepared to invest in the country’s lagging infrastructure, new jobs means more income for millennials. However, Zillow also predicts that many millennials will be willing to travel further to get to work. Look for growth in the suburban housing and rental market in 2017.
According to Forbes, the housing market only added 1.1 million units in 2016. However, 900,000 of those units were from previously vacant housing. Expect to see significant housing and rental unit construction in 2017.
New rental occupancy rates will still be affected by population growth, which accounts for 50 percent of demand. Adult children moving from their parent’s basements and high divorce rates will also contribute to the number of singles looking for rental units in 2017. These groups are more interested in housing for one or two years than in long term, more permanent housing investment (http://www.forbes.com/sites/billconerly/2015/12/10/housing-forecast-2016-2017-two-years-of-growth/#7505c0b37add).
Higher Rental Demand
Rental market prices will increase slowly. But, The Fiscal Times reports that 40 percent of Americans prefer to rent rather than buy. This demand will drive construction companies to invest in and build new apartment complexes in 2017 (http://www.thefiscaltimes.com/2016/11/22/10-Real-Estate-Trends-Watch-2017).
Again, President elect Trump’s new immigration policy may have a negative impact on the building industry. If labor costs rise, rents will also increase.
Zillow also predicts that more Americans will drive to work. This is a reversal of the housing trend of the past decade. With 80 million millennials considering their housing choices, they will not only drive rentals in 2017, but they will be driving or using public transport to get to work. The bottom line is that as our millennials get on their financial feet, housing and rental marketplaces will see increased demand which means prices and values will rise in 2017!
Purchasing a rental home is a big decision that requires a lot of planning and research. Aside from the big things tenants focus on, such as location, crime rate, job market, and local school district, it is the extra conveniences that make a property stand out. The features and amenities in a rental home create the highest potential return on investment.
Like all houses, there will always be something that someone feels should be replaced, fixed, or updated. While installing high-end molding may be a top priority for the owner, tenants care more about the condition of the appliances. Upgrading the current out-of-style washer and dryer to the newest model can easily increase rent by $100. Even though the performance of the two machines may be about the same, tenants feel more compelled to pay topnotch when the appliances are clean and look brand new.
While security features such as an alarm system, deadbolt, and door chime aren’t normally on the list of must-haves for future residents, they are an added bonus. Offering to pay for the alarm service gives the rental property a competitive advantage over similar homes in the area; this will not only generate more interest in the home, but the high demand will increase rent.
Aside from security and safety, another way to collect more rent is by replacing the carpet with laminate floors. This goes back to the idea that tenants want to live in a home that looks and feels clean. Carpeted floors collect dust, show signs of wear, require more upkeep, and stain easily. A reasonably priced laminate flooring is easy to maintain and gives the home a fresh look.
While all the upgrades and features mentioned above will maximize the rental property’s revenue potential, perhaps the most significant aspect of generating income is through outdoor living. Regardless of the size of the area or the level of privacy, having an outdoor space will add value to the house. A small patio, balcony, yard, or even just a bonfire pit will allow the property owner to collect more rent.
Whether you are an experienced landlord or property manager, or just getting your feet wet in the world of income producing properties, it only takes one cold season to learn the hard way that preparation is your friend. The following are a few suggestions to help you prevent costly repairs.
Exterior Property Attention
Save money and prevent vacancies by taking the time to address these exterior issues for a sound and more attractive exterior.
- Clean gutters. Trapped leaves hold water and drip causing wood rot under the roof edge.
- Sprinkler systems. Remove all parts and examine for damage and clean, then open feed valve to allow remaining water to drain off.
- Outdoor faucets. Search area around the pipe where is comes out of the wall or ground, and caulk around the pipe use Styrofoam cones to block off the wind.
- Exterior HVAC unit. Remove tree limbs and other debris from around the unit and inspect the inside for infestation nests of insects and windblown debris.
Interior Weatherizing and Rodent Prevention
Due to summer temperatures, the safe bet is to re-examine all entrances for security and weather issues as well as any damage.
- Windows and door seals. Direct sunlight deteriorate weather stripping, and new caulking prevents drafts and moisture damage.
- Fireplace maintenance. Examine the ends of chimney pipes for the excess collection of byproducts from the fire, and test existing gas lines for proper operation.
- Attic safety. Squirrels and other rodents find their way into the attic through eve vents. Search the attic for droppings and other debris and hire an exterminator if necessary to secure the attic from outside intruders.
- Smoke detectors. Contact the local fire department about smoke detector requirements and ask if they have programs to inspect these devices for you.
When it comes to saving money and increasing your profits on real estate investments, preventive maintenance takes first place on the To-Do list of any landlord or property manager.
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