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Tenant Screening 411 – What Info Should I Really Check?

Tenant Screening 411

Tenant Screening 411

With more rental property on the market than ever before, property managers are at their busiest. From showing properties to handling maintenance issues, you’ve got your hands full. The last thing you need is troublesome tenants on top of your daily stresses. Screening tenants thoroughly not only helps you make the best business decisions possible, it also creates a safer, happier living experience for everyone in the property’s community.

As the owner of StarPoint Tenant Screening, I’ve seen a lot of different information products over the last 15 years. It can get confusing for busy property managers to weed through it all. Here we’ll take a quick walk through the basics of the tenant screening process and give you some tips to help you save time, money and energy.

The Tenant Application

Whether you have an online application on your website or a standard form, make it as thorough as possible. This is a situation where more is definitely better. I’ve had many property managers that have had to waste time (which equals money) to track down applicants for additional information so the proper background screening information can be completed. Attached is a thorough application sample that includes all the items below.

Critical data:

First, middle and last name. Get that middle name! It can be a critical factor in returning the correct criminal information on an applicant. Surprisingly criminal and correctional records rarely contain a social security number for the offender. They typically have a fist name, middle name or initial, last name and the date of birth listed. By submitting both the middle name and data of birth, you ensure you’ll get the most accurate records back on your applicant.

Date of Birth. Like the middle name, providing the date of birth will keep you from getting inaccurate results on your criminal record searches.

Social Security Number. If you want to pull a credit report, employment verification or ID verification on an applicant, the social is a must. The credit bureaus cannot supply any data regarding your applicant’s credit history without this 9 digit number. Also, most employers will not verify any employment information without it nor can you verify identity with a social security database which can be valuable in some cases. Be sure that you can make out the numbers on a hand written application. I’ve seen too many property managers input wrong numbers from deciphering handwriting and then they get no data back on the reports.

Current Address. The credit bureaus require a current address be submitted with a request for a credit report. This is also necessary to verify the applicant’s history with the previous landlord.

Previous Landlord Information. One of the best sources for information on what kind of tenant you might have is the previous landlord. In processing these reports landlords have told me everything from “They paid early and made property improvements” to “their pet ruined the property and I would never rent to them again”.

Employment Information. This is critical if you want to verify the applicant’s current employment and salary. It’s also just good data to have in your data base if you choose to rent to them and need to contact them at work.

Signed Release/Disclosure. It is legally necessary to include a release/disclosure statement on your tenant application or as a separate document and the statement must be acknowledged with the tenant’s signature and date. It is a violation of the FCRA to request a consumer report without their consent. A consumer report can be a credit report or any prepared background or reference report.

Now Which Screening Reports do I Run and How?

My company like others offers a wide variety of tenant screening reports and searches. We pride ourselves in not overselling our clients. We want you to get what you need without ordering unnecessary data and increasing your costs. You’ve got a business to run. Here I’ll explain and recommend various reports.

Credit Report. I tell all my clients to start here. There is no better way to get an accurate indicator of an applicant’s probability to pay rent on time than the credit report. You’ll instantly get their entire credit history including their monthly payment obligations, number of collection accounts, amount of past due accounts and any liens of judgments on their file such as bankruptcies, etc. Evictions can show up on the credit report as a public record judgment, but it’s rare. The Eviction Report is your best bet to catch a filing but frankly I think the Previous Landlord Verification is more valuable. We’ll talk more about that below.

Criminal Searches. The criminal search can be the most important report to run next to the credit report. It’s a smart choice to do your due diligence when placing a tenant. These reports are instant, inexpensive and the data is abundant. You get an instant snap shot of an applicant’s criminal history from felonies and misdemeanors, to traffic violations and sex offender data. The draw back? As I mentioned earlier surprisingly criminal and correctional records rarely contain a social security number for the offender. This creates a problem on applicant searches for common names like John Smith. You can get a flood of records that match the name. By entering the middle name and data of birth, you can ensure you’ll get the most accurate records back on your applicant. The screening system my company provides also allows you to filter the data returned. You can view all data, or just records less than 10 years old plus you can view supplemental data for the offenses such as sentencing dates, prosecutor information and arrest dates.

Eviction Reports. The eviction report searches court records for eviction filings and reports them whether the tenant was judged or not. Again, this report is searched by name and date of birth only as social security numbers are not entered on the eviction filing.

Previous Landlord Verifications. I personally think the previous landlord verification is more useful than the eviction report. With this verification, the tenant’s landlord is personally contact by a company like mine and asked to verify lease dates, rent amount, if there were any late payments or returned checks, whether they would rent to the tenant again and more. We see that most landlord complaints are not severe enough for them to evict the tenant, but they are negative enough for them to never rent to the tenant again.

Employment Verification. This is a very important report which verifies the tenant has the salary they stated on their application and can meet your income to rent ratio criteria. The employer is personally contacted by a company like mine and asked to verify the applicant’s hire date, current status and salary.

ID Verification/SSN Verification. I would not run this report if you are also running a credit report as the social security number is verified by the credit bureaus. However if you are not running a credit report it can be useful to determine the applicant is who they claim to be.

All of the reports above can be ordered conveniently online with most vendors, including my company, StarPoint Tenant Screening. A very thorough screening can easily be done inexpensively and quickly helping you make sound decisions quickly. Making good tenant selections makes for a more profitable bottom line and a lot less headaches. We wish you happy leasing!

Questions? E-mail me at kgontarski@starpointscreening.com

8 Questionable Rental Fees to Avoid Charging

rental fees

Questionable Rental Fees

Not all fees are created equal. In fact, some stretch the law.

 1. Excessive late-rent fee
The Landlord Protection Agency, a website that provides advice for landlords, has this to say about late-rent fees: “Late charges should hurt. … It should be a painful enough fee that the tenant will not want to pay again. Ever.”

Although the site says its forms are legally credible, this free advice may have bypassed such review. Lawyers in any state will tell you that late-rent fees are not to be used as punishment or deterrent.

“The purpose of the late fee is an attempt to try and compensate the landlord for the inconvenience or cost associated with a late payment,” says Steven R. Kellman, director of the Tenants Legal Center of San Diego. “It is not meant to be a bully stick waved at the tenant. The idea that I’m going to whip you each day you don’t pay, that’s not the intent of the law.”

2. Overnight guest fee
Here’s another fee that doesn’t pass the test.

Plenty of landlord notices lay out a $25 charge for a tenant’s overnight guest, for example, or a $50 rent increase for an additional occupant.

There’s just one obstacle: federal law, says Kellman, who sees plenty of unenforceable lease provisions that naive landlords pull from the Web.

A landlord can limit total occupancy at a point set by law — typically two people per bedroom plus two — to protect his unit. He can also require that a permanent occupant pass a criminal background check. But he can’t tack on arbitrary charges, Kellman says.

“That’s illegal, because it’s discrimination under familial status,” he says. “If you want to have a relative move in or have a baby, that’s your right.”

If landlords are concerned about the extra cost of water or electricity, “then they need to get separate meters and you pay for what you use,” he says.

3. Unnecessary application fee
It’s OK for a landlord to pass along the cost he must incur to run credit and security checks. But some states limit the amount per tenant. And in all cases it is illegal for the landlord to take the fee and not run the check.

4. Repair fees
If you pay to rent an apartment, part of the deal is that the landlord keeps the property in working order. In fact, he is legally responsible for maintaining a fit and habitable dwelling. He cannot charge tenants for repairs.

The exception would be if a tenant broke something through blatant negligence. In that case, the tenant would have to fix it.

If landlords were allowed to charge for upkeep or make tenants do it, some might allow units to fall into disrepair, leaving tenants in substandard housing. Legislators passed laws to prevent that.

“It’s the same reason that we require people who make Cheerios to have clean factories, and why we don’t allow Pintos to have exploding gas tanks,” says Janet Portman, a housing lawyer with Nolo, a publisher of legal guides. “It just comes down to a legal principle that you just can’t do that.”

5. Redecorating or cleaning fee
This is essentially to pay for the extra fix-ups landlords do between tenants, maybe a deep carpet shampoo or repainting the walls. But this is not the tenant’s responsibility. The tenant has covered his own damage through the security deposit. Any scuffing or fading that’s the result of normal wear and tear should not come out of the tenant’s pocket.

This onerous fee might also be called an automatic damage fee, a refurbishing fee or a move-in fee.

“If a landlord generally cleans a unit after one tenant leaves and another tenant moves in, that’s not typically a fee a landlord can assess a tenant,” says Peter Iskin, a lawyer with the Legal Aid Society of Cleveland.

6. Administrative or processing fee
It costs money to advertise a unit, and some managers want to pass this cost along to tenants, although they’re often vague about just what this $50 to $300 is for.

Sometimes it’s used only in lieu of a credit-check fee; other times it’s applied toward advertising, staff and even printing-paper costs.

“There are an immense number of fees being added that 10 years ago we didn’t get from people,” said Del Walmsley, a landlord with multiunit buildings. And this one “is just garbage, a way to get upfront money from people.”

In some states, the law agrees. Massachusetts and California, for example, have strict regulations that prevent landlords from passing along basic overhead costs. Staff and office supplies dressed up as administrative fees? Those won’t get by a judge. Late fees that exceed the reasonable costs incurred by the landlord for that extra trip to the bank? Those also won’t fly.

 

7. Any fee called “a nonrefundable deposit”
A deposit, by definition, is returned when certain conditions are met. A security deposit, for example, is returned to the tenant if the unit is left in good condition. If it won’t be returned, it’s a fee, not a deposit.

If someone asks you for a “nonrefundable cleaning deposit,” for example, tell them that you’ve already given them a security deposit.

8. Finder’s fee or holding fee
This is a fee the tenant pays to supposedly hold the unit, but in many places they’re illegal, lawyers say.

Also, such fees don’t provide the tenant a legal guarantee that he will get the apartment. Landlords can also be harmed, by taking units off the market only to have a tenant change his mind.

“Making these types of agreements that are not clearly legal creates complex situations that very often cause a problem,” says Michael Kelley, director of rental housing resources for the city of Boston.

Only a licensed broker may charge a fee, and that’s for additional assistance in locating an apartment.

Check your state laws
See what fees are legal in your state by checking with the consumer-affairs division. The city, or a university housing office, may also list fees that landlords may legally charge tenants in your area.

“If it’s not listed as a legal fee, then it’s in fact an illegal fee — even if it’s not listed that way,” Kelley says

When to ask for help making rental improvements

rental_improvements

Help with your Rental Improvements

As a property investor, you may have your eye finely focused on your bottom line. You understand that maximizing your net income is directly related to how well your property is maintained as well as to how well you are able to control expenses. With this in mind, you may want to make as many rental improvements as possible on your property through your own efforts. However, it is not always feasible, practical or cost-effective to complete all required work on your rental home on your own.

Understanding what work to do on your rental home on your own and determining when to call a contractor for assistance are important to your overall success as an investor. Property improvements that you complete on your own should be commensurate with your skills and expertise. If you are not comfortable doing woodworking activities or working with a table saw, for example, property improvements related to building a deck or replacing the trim throughout the home should be contracted out. In addition, you should also consider the amount of time and effort that the project will take to complete. Ideally, you want complete the project in a minimal amount of time. You do not want to disrupt your tenants’ lives if the property is occupied. If the property is vacant, you may need to complete the project quickly so that a new tenant can move in.

Rental improvements can help you to maintain or improve property condition and value, and you certainly want to do what you can to keep costs as low as possible. However, in some cases, it can be a detriment to complete a project on your own, and it may be better overall to have a professional do the work for you. Before you move forward with your next project, you can review the skills that are required and estimate the amount of time and effort required. If you are not comfortable with any aspect of the project or if you believe that it would take you a long time to complete it, it may be best to request professional services with a contractor.

Purchasing Rental Property with Family or a Friend

Purchasing Rental Property with Family or a Friend

Purchasing Rental Property with Family or a Friend

Purchasing rental property can be a way to invest in real estate, and doing so with friends or relatives may seem like a good arrangement. However, a rental property investment carries a lot of risk, and there are some things you should consider before going into business with people with whom you have a personal relationship.

Perks
There are definitely some advantages to purchasing rental property along with family members and friends. If you have always wanted to start a family business, investing in rental properties could be a good start. And a partnership with a parent or sibling could allow you to spend more time together. You also might have an easier time convincing someone who knows you to enter a business relationships with you. If the venture is successful, it can be a good way to earn money and keep it in the family.

Pitfalls
Whenever you go into business with someone, there are always potential problems, and those potential problems can be magnified when your business partner is a family member. If the rental property is not successful, it can be difficult to end the business relationship and still have a personal relationship.

One thing you definitely have to avoid when purchasing rental property with a friend or relative is taking advantage or allowing yourself to take advantage of your personal relationship. Don’t make handshake deals; put everything in writing. That includes who owns how much of what, how profits will be distributed and under what circumstances the business can be dissolved. You also need to have official tenant screening procedures in place and not allow friends and family members to live in the property without going through tenant screening.

Keep in mind, too, that once you put your name on a mortgage, you can’t get out of it unless the other partners are willing to refinance and buy you out.

Ultimately, when purchasing rental property with friends or family members, you should treat it like any other business arrangement, do your due diligence and put everything in writing.

 

Earn Extra Cash by Renting your House During Events

Earn MoneyIf you have a vacant property, then there is a way that you can get some use of out it in the short term. By renting out your property when events like festivals and fairs are in progress, you can make your property work for you and gain you some much-needed income. Hotels, cabins, and campgrounds often fill up ahead of large events, so there are always people looking to find a place to stay who were not lucky enough to book accommodations in advance. If you advertise your property for rent during large local events, then you can cash in on some of the money that travelers already plan to spend in your area.

Experts recommend that if you own a rental property that you always screen your guests, even if they are only staying for a short period. The reason behind the advice is that screening temporary tenants helps prevent costly damages and repairs. It is always important to make sure that any renter is a responsible group instead of a possible threat to your rental property.

Some of the most popular events that people look to attend include air shows, trade exhibitions, and large festivals like Strawberry Festivals and popular music events. When a large event is happening in your town, you can do a quick background check online for the intended renters and ask for a deposit that is refunded when the property is left clean and undamaged. Offering cleaning services, use of appliances, extra beds like cots and roll-out beds are excellent ways to entice people to rent your property when they come to town.

When you offer services that other businesses do not have like complimentary breakfasts, hot tub access, or garage access, it helps make your rental property more appealing. The better appeal makes people want to come back the next time a large event is in town, and you can begin booking people in advance. Some renters may even ask to book for the next years event, so they never have to worry about finding a place to stay at the last minute again.

5 Tips for Purchasing a Rental Property

Female real estate agent giving house keys to a man

5 Tips for Purchasing Rental Property

Buying at the Right Price

Finding the right price is of paramount concern when it comes to closing the deal on an investment property. Properties that offer greater value will ensure that owners are better able to withstand fluctuations within the market that might otherwise result in diminishing returns. While larger properties that have the potential to provide superior rental income may be an attractive option, taking advantage of purchase costs that offer greater value means that even smaller properties can provide the best investment opportunities.

Selecting the Best Neighborhoods and Locations

Ensuring that neighbors will be more accepting of your rental property is not a concern that should escape notice. Residents of working-class neighborhoods and those found in lower income areas are often more understanding of neighbors who choose to rent their home rather than owning their property outright. The right location is also a key concern when it comes to attracting renters.

Selecting Properties That Offer Ample Parking

Growing families often require plenty of parking in order to accommodate their household. Unlike other issues and limitations may be easily addressed through renovation projects or upgrades, limited parking can be very difficult to address. A garage, driveway or ample curbside parking can make a world in ensuring the needs of tenants can be met.

Quality Construction and Simple Design

Lavish homes and locations that showcase sophisticated construction and design can be a nightmare in terms of maintenance and upkeep. Owners may find themselves faced with considerable expense should they elect to invest in a rental property that is not easily maintained. A simple layout and proven construction quality are never considerations that should go overlooked when selecting a rental property that can be maintained with a minimum of effort and expense.

Purchasing a Rental Property Close to Home

Meeting the needs of your tenants is far more difficult for those who purchase a rental property too far from home. The additional costs needed to employ a property management service or contractor will be easier to avoid for owners who can more easily and conveniently provide maintenance services and make themselves available to tenants.

 

Using Smart Home Technology in Your Rental Property

Using-Smart-Home-TechnologySmart home technology has advanced to a degree that makes it functional, reliable, and affordable. Many homeowners now expect homes to be ready for smart home tech integration. When it comes to rental properties however, many homeowners are missing out on an incredible opportunity to increase the visibility and value of their rental property.

Rental home technology immediately gives your home an advantage in rental listings since many rental properties do not feature smart home technology. Even a mediocre looking property can look sophisticated and modern with smart home technology featured prominently in the listing. For vacation property rentals, every feature and perk can bump your rental property up in value and visibility.

Rental home technology also provides property owners greater control, ease of access, and management tools. With rental home technology your tenants can download an app and you give them access to everything from lights, locks and a/c to television and stereo controls. For example, your tenants left the heat on in your winter cottage? What would normally require a visit can now be easily remedied directly from your smart phone. Tenants locked themselves out? You can open the door for them remotely from your phone. Smart home technology also allows your tenants to have greater control and comfort in the property itself. Many tenants spend lots of time looking for light switches, remotes, or calling you to solve small problems like turning on the TV or watching a DVD. Smart home technology can supplant all of these problems easily and quickly, making your property much more valuable and a place to which your tenants will return over and over. In a highly competitive rental property market, a small perk can make the difference between a tenant choosing your rental property or someone else’s.

Smart home technology can increase the ease of management, make your property more appealing, and increase the value of your property. With so many options of smart home technology integration at an extremely reasonable cost, it makes all the sense in the world to invest in smart home technology.

 

The Importance of Tenant Screening

The Importance of Tenant Screening

The Importance of Tenant Screening

Tenant screening is a vital step that all landlords should take before renting a property out. In a perfect world, a landlord could trust all people who wish to rent from them. However, the world is not perfect and not all tenants are created equal. Screening potential tenants will lower the risk of losing money on a rental property.

There are three main reasons to screen tenants. These reasons for screening tenants are easy to recall if you can remember the Three P’s.

Profit: When a landlord is renting out a property the main goal is to make a profit on the rental. This means that the tenants need to be responsible, dependable and will pay the full amount of the rent punctually. Not only is it important to find a tenant that will pay the rent on time every month, but obtaining tenants who will fulfill the term of the lease is also imperative.

It can be difficult to predict what tenants will be financially responsible. One way to do so is to run a credit check on potential tenants. A credit check will give the tenants’ financial history and it will show whether they have a tendency to miss or make payments late.

Property: A landlord needs to make sure that they protect their property. This can be done by renting to people who have a history of taking care of past rentals. It’s impossible to tell by a person’s appearance whether or not they take care of their possessions or will take care of a property that doesn’t belong to them. The tenant screening process will help the landlord get a picture of whether or not the tenants will protect the rental. Contact former landlords to get an idea of how they took care their past rentals. Be cautious when renting to a first time renter. Contacting references is a way to obtain information on the tenants.

People: It is not just the landlord’s job to protect their profit and property, but it is also important to protect the other people living near the property. This may be other tenants or residents of the apartment complex or neighborhood surrounding the rental. References can help paint a picture of the type of people the potential tenants are. Some jurisdictions allow a background screening to be done in order to make sure that the tenants do not have criminal proceedings against them.

Landlords should set standards for desired tenants prior to starting the tenant screening process. It is important to have clear standards of what is acceptable for in order to avoid discrimination or other violations of the Fair Housing Act. Don’t rush through the process to just rent the property. Instead, take your time in order to protect your three P’s: profit, property, and people.

Termite Management

Termite Management in your Rental Property

Termite Management in your Rental Property

Termites are serious pests that can have a major impact on the quality of life of tenants, and represent a costly risk to landlords and property managers. The control of termites is a job that is best left to be handled by professionals, but there are some steps you can take to prevent infestations altogether and there are also some useful bits of knowledge that will help you identify infestations early.

Knowing how to identify termite infestations is critical. If a tenant suspects that termites are present on the property, do not waste any time in confirming an infestation and subsequently having it removed. Termites are often confused with ants, which can be a costly mistake in itself, especially since both tend to swarm during spring weather and wet conditions. Termites have straight antennae, thick waists, and wings of equal size, where ants have crooked antennae, slim waists, and wings of several sizes. The presence of termites indoors is almost always a sign that an infestation has happened, and warrants immediate action. Termites are drawn to the light, so doors and windows are places to check. The presence of termites at foundation walls, porches, and patios is a cause for serious concern. Termites leave behind mud tubes about a half-inch in diameter, commonly on foundation walls. Termite infections can remain hidden for years, as they will often leave no visible damage, so periodic inspection may be prudent in areas where infestations are common.

There are several practices for preventing termite infestations. Termites are attracted to moist environments. To keep humidity down, it is a good idea to repair all leaking water sources both in and out of doors, such as sprinklers, faucets, water lines, etc. Leaky roofs and gutters should also be attended to as soon as possible. Ventilate crawl spaces and attics to reduce their humidity, as well as any other cavernous but uninhabited rooms and structures. Eliminate clutter and structural conditions that are attractive to termites. Trim all plant life away from the foundations of buildings, and make sure that no mulch or leaves are left to accumulate at the foundations. If possible, give the soil a grade so that all water drains away from the buildings. Wood sidings, stucco, and foam board should start at least half a foot from the ground, and the foundations should be regularly inspected for cracks and holes that need to be filled. If any of the plant life on the grounds becomes infested, remove them, including tree stumps and trees. The general rules all aim to minimize moisture, remove wood to soil contact, and minimize clutter at the foundations.

If you have or suspect a termite infestation, there is no method for safely treating it on your own. You must have the infestation removed by professionals, both for the health and safety of your tenants and the value of the property. Choosing the appropriate termite control company can be difficult. Make sure they are properly licensed, and check their references and reviews as compared to two or three other companies. Getting inspections and estimations from multiple companies will give you a good idea of the extent of the infestation and the current market for services. Termites damage wood slowly, so you have weeks or a month to deal with it, so take your time, but do not ignore the problem; it will become serious.

Termite infestations are serious business. They can be avoided with proper planning and management practices, but sometimes fate throws curveballs that can’t be prevented. Knowing how to identify possible infestations and contract the appropriate professionals will prevent complete financial disasters

Why Landlord Insurance is a Good Idea

Insurance for Landlords is a Good Idea

Insurance for Landlords is a Good Idea

Insurance for landlords provides protection against property damage and liability claims. It also can pay repair or replacement costs and income loss for property owners who rent out one or more homes, apartments or condominiums more than a few weeks per year. It is not required by law but does cover things homeowner insurance policies does not.

What Types of Insurances are Available
Insurance for landlords usually is divided into three types: DP-1, DP-2 and DP-3. D-1 is a basic policy that covers things such as vandalism and fire. DP-2 covers a broader range of perils, such as hail and windstorms, and some even include a vehicle running into your rental unit. DP-3 is known as a “special form policy” or “open peril policy.” Unless something is explicitly excluded, it is covered. DP-3 also covers replacement cost, what something costs to replace now, versus cash value, what you paid for it when you bought it. “Landlord protective polices” cover things such as equipment breakdown.

What Should Be Covered by Most Policies
Rental property insurance typically covers damage to buildings and personal property caused by theft, vandalism, fire and storm damage. Some policies also cover tenant damage. It also covers liability claims and lawsuits if a tenant, visitor or even a trespasser, is injured on your property. Such costs can include judgment or settlement costs, legal fees, medical expenses and funeral costs.
You can buy additional landlord insurance for protecting your rental property. These policies include landlord contents insurance, employer liability insurance, natural disaster insurance (earthquakes and floods typically aren’t included in standard severe weather coverage) and rent guarantee insurance, if the building must be vacant for repairs due to a covered loss.

What Can Happen If You Don’t Purchase Insurance
Protecting your rental property is essential. If you don’t purchase rental property insurance you could suffer financial loss from a fire, break-in or severe weather. You also could get sued by a tenant or visitor who gets injured on your property. You also could lose income if your rental unit becomes unusable because of circumstances that are beyond your control.