A Landlord Refresher: Screening Tenants

I just came across a story about someone who has rented three places in the last three years with fake references and credit reports. The Equifax report that the tenant supplied was doctored and the references were all friends of the scammer.

Landlords, please pay for a credit report when screening tenants.  If you are renting your place out with the help of a licensed sales representative or broker, ask them to pay for a new report.  The report that tenants pull up doesn’t have payment factors and you can’t verify that the report has not been doctored. If you order your own, you’ll see all kinds of information like aliases, former addresses and employers.  These are all things that can be used to verify that the rental application was filled out correctly. If an applicant doesn’t want you to run a credit report, don’t rent to them.

If the credit score is in the 800s, you have yourself a star applicant and someone who is likely to pay rent on time every month.  Someone in the 700s is likely also great.  Someone in the 600s may have had some trouble paying bills in the past or may just have thin credit, or not a lot of credit history, which is more common with young people.  A lot of tenant applicants score in this zone, so you’ll have to satisfy yourself with each particular applicant using all of the other information.

If someone applies to rent your place and they are selling their home because they are in trouble, their score may be low and you must decide if you are willing to take this risk.  What does their current home look like?  And, just because that home is well maintained, doesn’t mean they won’t damage yours.  And just because they will have a large infusion of cash at the closing of their home, doesn’t mean they will pay rent on time every month.  Sticking to an over 650 rule will likely help weed out any applicants who don’t pay their bills on time, but it’s not a guarantee.

If an applicant lies on an application, don’t rent to them. Verify that you have the correct Landlord for their previous or current home.  If the wrong name is listed for a reference, this is not someone that you want to rent to.  It’s easy for sales representatives and brokers to verify this information, so it’s probably best to involve a professional who has had lots of experience with rentals.

A google search will pull up all kinds of information including verification of the applicant’s place of employment. You can also google the name on the employment letter and make sure that the person who signed the letter actually works for the company. I also call the company using a number that I’ve looked up myself instead of the number provided by the applicant.

One last tip is when you are handing over keys, ask for identification.  Is the person who is getting the keys the same person who you are renting to?  Is the last name different?  If so, I would ask why.  Check the identification from everyone on the lease. People who use aliases don’t make good tenants.

When you move in a good tenant, you’ll get your rent paid on time every month.  But keep records, just in case things change. If a tenant suddenly asks to change the date when rent is due, say “No”.  It’s usually fine to let one month come in later, but changing the date from now until the end of the lease is usually a sign of trouble to come.  Keep all NSF cheque records. And if you are missing one whole month of rent, please follow up with the correct paperwork so that if you end up in a Tribunal, all of your ducks are in a row.  That paperwork is the topic of another blog, but you can find everything you need on the Social Justice Tribunals webpage.  http://www.sjto.gov.on.ca/ltb/

 

 

 

 

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Landlord or Detective

You’ve really got to be a bit of both to make sure you get a great tenant.  A great tenant is easy to approve.

  • DetectiveCredit score is over 720
  • No aliases.
  • Employment letter with a name that’s easy to  confirm on LinkedIn.
  • Better yet, the tenant is on LinkedIn and actually works at the company shown on the employment letter.
  • Current Landlord actually owns the building where the tenant says she lives.

The easiest check for me to do is to verify that the Landlord name as listed on the rental application actually owns the building that the tenant says they are renting.  This isn’t as easy to verify when the tenant is currently renting through a large corporation, but it is easy enough to verify over the phone.  Rather than phone the number on the application, I look up the person who signed the letter on-line and phone the number that’s listed for the company.  But if the tenant is renting a house from a private owner, I look up the owner’s name. It’s easy for me to do this because my membership with several real estate boards gives me access to the Land Registry system.  I can easily find out who owns the house.

Last week, while checking a tenant’s application, I found that the name on the application did not match the owner of the home.  I found the owner’s number and left a message.  I also phoned the “landlord” that was listed on the application. She phoned me back the next day.  I asked her if she owned the house.  She said yes.  I told her that her name wasn’t on land registry.  Her story changed then. She said that she was sub-leasing to the applicant that I was phoning about.  We didn’t rent to this couple.

In our 25 years experience in renting out homes, we’ve made some mistakes.  The one that has cost the most was renting to people who would eventually stop paying rent or who would pay later and later each month. Each situation can be traced back to when I was reviewing an application and found red flags.  An inaccuracy on an application is one of the best reasons for turning away a prospective tenant.  So now, rather than call and ask the tenant about the false information, I do my own detective work and then sometimes I just say no.  An extra month vacant is less expensive than missing a few months rent and then having to go to the tribunal for an eviction order.  I like to start with great tenants.  Some may run into difficulties at some point, but they all start out as great tenants!

 

So you want to be a Landlord?

If you’ve got some money that you want to invest, real estate may be a great option for you.  Someone else pays your mortgage and once the mortgage is paid off, you have extra income.

Get help with this early on.  What type of property is the best investment?  Where should you buy?  Who will screen tenants for you?  How much should you put down?   You need a real estate Broker with rental property experience and knowledge.  Pat and I own some rental property.  We also manage several properties and we help our clients buy and then rent their investment properties.  You need a mortgage professional who understands investment property.  You’ll need an accountant when it’s time to sell to help you understand any Capital Gains or HST implications. And you need a real estate lawyer.

I’ve found that a 35% down payment will result in positive cash flow in most cases and lots of lenders prefer a 35% down payment when it’s not your principal residence.

If you’d like to chat with us about this possibility, give me a call or text message at 905-466-7992 and we’ll show you how you can become a Landlord!

Heather Belsito, Broker, Stonemill Realty Inc., Brokerage

http://www.teambelsito.com