Tenant Screening

Durable Flooring for Rental Property

flooringAside from painting, flooring is probably the next biggest expense in managing a rental property. Wear and tear from tenant to tenant can be very hard on flooring so it’s important to choose the best option to get the most bang for your buck upfront. Spending a little more on a good floor may save you money down the road on cleaning and replacement costs not to mention give you the ability to attract desirable tenants.

Below are some flooring options to consider for your rental space and the pros and cons of each:

Carpet

This is an attractive choice because it’s relatively inexpensive and easy to replace, but it also wears down quickly. Carpet attracts dust and dirt and can be a hassle to clean. And if you are allowing pets in your rental property, the carpet is going to take double wear and damage. The upside to carpet is it can be replaced often with minimal expense and if you want to protect an expensive floor underneath, it’s perfect. If you do go with carpet, consider a darker color and a tight weave instead of a plush. This will help you keep the carpet through a few tenants before having to replace.

Tile

Tile is expensive but it looks great and it’s moisture resistant. Tile is also very simple to clean. Tile can last for years through several tenants and still look great. It’s also good if you are allowing pets since it does not absorb odors and dirt. Tenants can put down their own area rugs if they want a warmer feel. Area rugs have an added benefit of protecting you floors. And if a tile cracks, you can replace just the damaged tile instead of replacing an entire floor.

Hardwood Floors

Hardwood is among the priciest of flooring options but they can also raise your property/rental value. Hardwood flooring is very durable but it does take substantial care. Moving furniture on floors can create scratches that will need to be polished or refinished when needed. Pets can also be tough on hardwood floors but again that can be reversed. Hardwood is not moisture resistant so you will have to install tile or linoleum in wet areas such as the kitchen and baths.

Laminate Flooring

Laminate flooring is a great low cost alternative that can look very attractive. Many new laminates mimic the look of wood or very effectively. It easy to install and it can tolerate a lot of abuse. But with heavy traffic or pets it can still scratch and appear worn so it may have to be replaced during the life of your rental.

Sample Rental Application

Rental ApplicationThere are many things to think about as a landlord or a property manager when you are getting ready to rent out your property. But one of the most important items on your checklist should be making sure you have a good Tenant Application Form.  Having the right tenant application form handy for you applicants to fill out will save you time and money and in some cases, costly and stressful legal headaches.

Your Tenant Application Form should ALWAYS collect the following:

  • First, Middle and Last name of your applicant. The more info you have, the better for tenant screening purposes.
  • Current address of the applicant.
  • Current landlord name and phone number information for reference checking purposes.
  • Current employer and employer phone number for employment verification.
  • Social Security Number of the applicant. This is a must have for doing a tenant credit check.
  • The date of birth of the applicant. This is a must have for the tenant credit check and the tenant criminal background check.
  • Detailed list of other potential occupants
  • Disclosure and details of any pets
  • The applicant’s signed authorization and acknowledgement for a tenant credit check, a criminal background check and other tenant screening. It is the law under the Fair Credit Reporting Act that you have to have the applicant’s signed authorization before you can attain credit history or background information on the applicant.

Your Tenant Application Form should NEVER collect the following:

  • Race
  • Religion
  • Sexual Orientation

Getting the right information the first time and side stepping legal pitfalls will help you expedite the application process and allow you to get a qualified applicant into your property faster. Many sites offer a Tenant Application Form Template to help you get started. Be sure to check with your state laws to see if additional modifications need to be made to any template you find.  Attached is a Tenant Application Form Template you can use. Best of luck and happy renting!

 

Review Your Tenant Screening Files

locking-File-CabinetsAre you a property manager or landlord? Do you have a ton of rental applications and paperwork from previous tenants? It may be time to spring clean your files and revise your documents for future tenants before the busy rental season begins.

Tenant Screening Items to Review

  • Review Rental Applications – Make sure your rental application are asking for the applicant’s signed authorization to complete a screening. If you don’t have the tenant’s authorization and release you’re not following the law. Download a free copy of our signed Rental Agreement Form or Authorization to Release Tenant Information Form
  • Review your specific State’s Landlord and Tenant laws. Landlord-tenant disputes are a common occurrence and many can be avoided by being aware of your rights and responsibilities.
  • Review your computer’s security. Make sure you have a password protected computer and you change your password frequently.
  • Review your Income and Expenses – Tax season is over and now may be the best time to review all your rental income and expenses and get organized for next year! Review the IRS example rental income and expenses yearly.

Tenant Screening items Shred and Throw Out

  • Do you have past rental applications, credit reports, verifications and other screening reports? Most states only require you to keep these documents for 5 years. Check your State’s Laws and then first shred, then trash any old applications and screening documents.

4 Ways to Reward Good Tenants

winebasketIf you’re lucky, you’ve finally got the right tenants in your rental property. They take care of your property, they’re considerate and they always pay their rent on time. Keeping tenants like this should be a top priority on your list especially when you consider the expense of having an empty property and the time and energy it takes to find new qualified tenants. Making a few small gestures may help incentivize these dream tenants to renew their lease when it’s time, making your life as a property manager a lot easier.

  1. Discounts or Signing Bonus

 

Think about offering your tenants a discount or a signing bonus for renewing their lease. This could be $100 dollars off the first month of the renewed lease or some other perk. The cost of the bonus will be far outweighed by another peaceful year filled with rent money that’s paid on time.

 

  1. Paint

Nothing gives a property a face lift like fresh paint. It’s an inexpensive way to spruce up your property and make your tenants feel like it’s brand new. Think about repainting a few rooms or the whole property to incentivize your tenants to renew their lease. Even better, let the tenants select the colors from a palette you’ve approved. Choosing the colors will make the tenants feel even more like the property is their long term home plus they will appreciate that you cared about their personal preferences.

 

  1. Anniversary Gifts

We all know in life that small unexpected gestures go a long way in making a lasting impression. So when it’s time for your tenant’s renewal, present them with an anniversary gift of a nice bottle of wine or a small gift basket to thank them for a great year. Make sure you let them know you’ve appreciated the kind of tenants they are and provide them with a renewal lease. They will be grateful for the gesture and will be reminded that you’re a landlord that cares.

 

  1. Upgrades

Is there an appliance at your property that you know has seen better days? There is no time like lease renewal time to swap out a tired appliance. Your tenants will be excited to get a new dishwasher, stove or refrigerator and you will save money on potential repair bills, time and frustration. The upgrade doesn’t have to break your bank if you look for sales and find a good deal on an appliance. Even if you don’t spend a lot, the tenants will feel like you made a big investment in their comfort and that will pay off at renewal signing.

 

These are just a few examples of ways to keep a good tenant. Get creative and use these tips to find meaningful ways to express your appreciation. A little energy and investment will go a long way in keeping your rental property in the right hands!

What information do I need from my applicant to screen them?

checklistTenant Screening reports include vital information to help you make an educated decision on your applicant. Before you check your applicant’s background & credit you will need to have your tenant fill out a rental application with some required data to return complete and accurate reports. It is a good idea to ask for a photo ID along with the tenant application to verify the applicant’s identity. Often times an applicant uses a nickname or has illegible handwriting which can result in blank or inaccurate reports.

The tenant application needs to include these required fields when ordering a credit check:

  • Full legal name
  • Date of Birth
  • Current Address
  • Social Security Number

Credit reports will not be returned if the Name doesn’t match the Social Security Number on file with the credit bureaus.

The tenant application needs to include these required fields for ordering a background check:

  • Full legal name
  • Date of Birth
  • Current Address

Background checks will not be accurate if you don’t use the applicant’s full legal name or submit a date of birth.

The tenant application needs to include these required fields for ordering an eviction search:

  • Full legal name
  • Date of Birth
  • Current Address
  • Social Security Number

Big Changes Made to FICO’s Credit Score

FICOWhile you know the data that creates the credit score comes from the creditors who you’ve done business with, did you know that your score is actually generated by a mathematical formula owned by just one company? FICO is the analytics software company that is responsible for generating 90 percent of all the U.S. consumer lending decisions through its FICO Scoring model.

The FICO credit score is what allows banks, property managers, landlords, and other creditors to make business decisions every day. The credit score is generated when a consumer’s credit history is fed into FICO’s analytical software that uses the credit data to calculate the credit score. The three credit repositories, Trans Union, Experian and Equifax, each license the use of the FICO scoring model to generate credit scores for use on their reports.

It’s important to understand how credit scores are determined because slight changes in the FICO scoring model can make big changes to a consumer’s credit score, making it higher or lower. A more stringent FICO model will result in more landlord, lender and creditor denials. While a more forgiving FICO model will yield in higher scores and more credit approvals.

FICO has recently announced some big changes to how the credit score is calculated by recently releasing the FICO Score 9. Due to changes in the risk analytics, more consumers are expected to score higher enabling more creditors to approve consumers for loans, leases and purchases.

So what’s different about the FICO 9 Score model compared to the older versions?

  • The new FICO Score does not penalize or calculate any negative score effect for paid collection accounts. In past FICO models, even though a collection account was paid off, the fact that it was a collection account would reflect negatively on your credit score.

 

  • The other difference is that new the FICO Score model is sophisticated enough to differentiate between medical collection accounts and general collection accounts. This now ensures that medical collections will have a lower impact on the consumer’s credit score and the level of consumer risk they represent.

 

Consumers should benefit from the new model. FICO’s efforts to remove paid collection accounts and decreasing the negative effect medical collections on the score is aimed at making the credit score even more predictive of a consumer’s likelihood to repay debt than previous version. The hope is that the new scoring model will also help banks, property managers, landlords, and other creditors to make better decisions as well, diminishing risk and increasing profits by allowing them to approve a wider pool of qualified applicants.

Rental Property Taxes 2014

tax timeIt’s that dreaded time of year again when we all have to buckle down and work on our taxes. This process can be a little more complicated for those that own renal property. Here are answers to some general questions that most landlords have when it comes to rental property taxes:

 

Is the income from rental property taxable?

Yes, the income is taxable but the whole amount you collect is not necessarily taxable. You may subtract the cost of getting your rental ready to rent and the amount of money to maintain the rental property.  Report rental income and expenses on Schedule E and file it with you Form 1040.

If I receive rent in January of 2015 for December of 2014, in what year do I report it?

You would report the rental income on your 2014 tax return because you received it in 2014. You always report the rent for the year you received it.

 Are Security Deposits Taxed?

No, security deposits that are intended to be returned to the tenants at the end of the lease are not taxable.  If you incur damages from tenant and have to keep part of the security deposit then you must report that money as income. It would however be offset by the deduction on you Schedule E for the cost of repair for the damages

Note that a deposit for a last month’s rent is taxable when you receive it because that is simply rent paid in advance.

What can I deduct on my rental property income?

All the expenses you pay for in maintaining and managing your rental property are typically deductible. Note that even if the property is vacant but you’re maintaining it, you can add up those expenses to set against your rental income when you get it.

Deductions include:

  • Supplies
  • Yard maintenance
  • Depreciation
  • Advertising
  • Homeowner association dues and condo fees
  • Insurance premiums
  • Interest expense
  • Local property taxes
  • Management fees
  • Pest control
  • Professional fees
  • Rental of equipment
  • Utilities
  • Repairs

Keep good records even though it can be a hassle. You must be able to back up any deductions you take!

 

 

 

 

 

 

 

What Kind of Information Appears in the Public Records Section of a Tenant Credit Report?

A tenant credit report is a crucial document for a prospective landlord and a prospective tenant. The property owner can use the information in the report to determine the applicant’s ability to maintain the financial obligations of a lease. A credit report contains information such as employment information, tradeline summaries, previous addresses, current credit information, and public records such as bankruptcies, liens and judgments.

Public records play an important part in the background check process, as well. Public records contain negative information that silently speaks about the person’s creditworthiness. The following are types of information that a prospective landlord or property owner may find in the public records section of an applicant’s tenant credit report:

Bankruptcies

Bankruptcies are an additional piece of information that a prospective landlord would find in the public records section of a tenant credit report. Bankruptcies are legal declarations that a consumer is unable to pay his or her debt. Such declarations can remain on a person’s credit report for as long as seven years. A prospective landlord may see a bankruptcy as an indication that a debtor has money management problems and issues with other lenders. Alternatively, a property owner could see a recent bankruptcy as a clean slate for a prospective tenant.

Civil Judgments

Civil judgments appear in the public records section of a tenant credit report. Civil judgments can consist of a wide variety of negative information. A civil judgment occurs whenever a party or person sues a debtor to collect a sum of money. The suing party may be a bill collector, a person who was involved in an accident, or some other injured party. If the courts rule against the debtor, then the civil judgment will show up on the report. The report will show the date the court made the judgment, the amount of the debt, and the status of the debt.

Tax Liens

Tax liens appear on a tenant credit report. Tax liens occur because of unpaid taxes. A debtor should pay all tax debts to increase his or her chances of being accepted for a lease agreement.

Property owners should make their decisions based on all the information in the credit report rather than just the negative information.

How Student Loans Affect Your Credit Report

With the average student loan amount at the end of 2013, being $29,400, many college graduates are now wondering how their loans will affect their credit report. While the high costs of education may have forced them to take a student loan, many college students ignore their loans until the first payment is due. Unfortunately, by that time, many of them find themselves in in a bad situation, especially with the rise of post-graduation unemployment.

The best time to consider how your student loan will affect your credit is before you even apply for one. Knowing how your loan will affect you could have a large impact on how much you choose to borrow and, in turn, on how much you will have to repay. Consider that the average fixed interest rate for a Stafford loan right now is 6.21 percent, and private loan rates are even higher. Private loans’ rates are based on your credit score, and they tend to be variable rates, which means that the rates can fluctuate throughout the life of the loan.

Speaking of the life of the loan, the standard length of a student loan is 10 years. There are other repayment options, one of which, the extended repayment option, will allow you to lengthen your term by up to an additional 15 years. Extend with extreme caution, though; lengthening your loan term also greatly increases the amount of interest you will pay over the life of the loan. If you are financially able, it is best to pay your loan off sooner rather than later.

There are consequences to mismanaging your student loan repayments. If you are in danger of being late, it’s better to contact your loan provider and ask to defer your payments. A deferred payment does not affect your FICO score, unlike a late payment, which will incur a late fee and create affect your credit report after a certain time period. Also, deferring payments on certain loans stops the accrual of interest until the deferment period is over, while making late payments allows interest to accrue on top of the unpaid interest and the principal! Even worse, if your payment is more than a few months late, your loan will go into default status. A defaulted loan severely damages your credit and dramatically decreases your FICO score, making it difficult to qualify for other types of credit, including renting a home or apartment.

There is a silver lining, though. A well-managed student loan can help a new graduate establish a great credit history. Since your FICO score is based on different factors, including payment history, length of credit history, and debt to credit ratio, paying your loan responsibly over the length of the loan will increase your FICO score a little more each year. If you choose to take a student loan, take no more than you need, and pay on time every single month. You will be doing yourself a huge favor.