When screening applicants, do you use calculate the Debt To Income ratio?
If you don’t, then you should!
I just had someone apply for a rental home. He currently owns a home and will be closing on it in a couple of weeks. He told me told he tried to buy a house but had been turned down due to an old bankruptcy. That didn’t make sense to me but I told him to fill out the request to see my vacant property and to answer the pre-screening questions that would be emailed to him. Once he did that, I told him I would get him in to see the home.
This happened Friday late in the day. I checked for his responses over the weekend but he didn’t request to see the property. I assumed he had moved on. Monday morning, I received a notice that I had received an application for my vacant property. When I looked at it, the application was from the person I spoke to on Friday.
Keep in mind, he did not follow directions and fill out the request to see the property and he didn’t answer the pre-screening questions. He also has not seen the property.
I reviewed his application and ran his credit. It is interesting to note that the credit screening report listed him as APPROVED. There were only two items in collections, one item past due and the rest of his debt was paid on time. His credit wasn’t terrible and his credit score was 601.
Calculate The Debt To Income Ratio
When I reviewed his application, I noticed right away that he had four bills listed that he owed. I ask every applicant to list what they owe monthly for bills.
Car payment: $400
Car Insurance: $133
Cell Phones: $120
Child Support: $425
Monthly rent: $1,200
Total Monthly Debts, including the rent, are$2,278. This does not include gas, electric, water, fuel for his vehicle, food and entertainment.
His monthly gross income was listed as $3,900 and his net was $2,859.40
When you subtract the debts from the net income, you are left with $581.40 to pay all other bills for the month.
When I ran the numbers, his debt to income ratio was too high. This applicant could not afford this rental home and was denied.
I run across too many landlords who don’t follow all of the steps when screening applications. This guy seems very nice but he is desperate to move and isn’t using his own good judgement. If I let him move into this home, the chances are high that he would not be able to pay the rent.
If you want to find great tenants, follow a system and don’t make exceptions. Follow a process and follow every single step.
When you calculate the debt to income ratio, you get a better picture of what the applicant can afford.
RENTAL TIP: Rental listing scammers are on the rise. Keep a close eye on your vacant properties.
Many of you know that there are people out there who will copy your listing and put it on other sites at a reduced rate. These thieves can be located anywhere in the world and with internet access, they can easily locate listed properties.
Once favorable listings are identified, these people copy your listing, paste it into their account, change the rental amount and then hit “Post” on their site.
Then, renters looking for a new place to live run across these ads and contact the scammer to see the property. The scammer will tell interested parties to drive by and look at the house. Then, if the potential tenants like it, they are instructed to send the money for rent and the deposit through an app. Once the scammer receives the money, a locksmith is hired to go out to YOUR property and change the locks. The locksmith meets the new tenant at the property and then gives the keys to them.
The new tenant has moved into your property. You have no knowledge that any of this has happened. You also don’t have a lease or any money from them.
COVID 19
These scammers are using COVID 19 as a reason to not allow access to the house and to not meet anyone in person. This seems to make more sense to potential tenants right now and they may be more willing to take a chance.
Tips To Protect Yourself:
Type up a note, preferably with your letterhead on it, and tape it in the window by the front door as well as at any other doors in the property. The note needs to state who manages the property, along with your contact information. This will prevent a locksmith from changing the locks. A note identifying the real owner also lets anyone who has been told to go look at the house who they should call because your contact information will be on the note.
Leave your business cards inside the house just in case. You might consider adding a flier holder to the property as well.
At least once a day, search for the address of your home in the Google search bar to see if it comes up anywhere else. Make sure the listing is yours and that nothing has been changed.
Physically visit your vacant property at least once a week to make sure no one has moved in and to check all windows and doors to make sure they are locked.
Make friends with your neighbors and let them know the house is for rent. Ask them to contact you if they notice any unusual activity. Also let them know when the property has been rented.
If you use a lock box to grant access, aggressively change your lock box codes. I am changing mine every 48 hours.
The Victims
There are two victims here: The Tenant and The Landlord. I know of more than one case where a landlord showed up to check on a vacant home only to find that someone had moved in. These people who moved into the home fell victim to the scammer and paid someone else the reduced first month’s rent and the deposit.
This left the real owner of the home with a lot of issues. This owner didn’t get any of the money. The people who moved into the home hadn’t been screened and were probably paying less than what the owner wanted. The new tenant didn’t have the money to pay the real owner any more money.
This is a bad situation all around. Take the necessary precautions now so that you don’t become a victim as well.
How Do You Deal With This?
If you are faced with this situation, you will have to make some decisions.
Your options are:
Try to make this new tenant work.
Give them notice to vacate and see if they will voluntarily move out.
File and eviction and have them removed from the property.
Sometimes you can work with the new tenant. This will require a new leas and in most cases, a rent increase. I would strongly recommend running a credit report on this tenant and following your normal process for approving a new tenant. If this tenant meets your guidelines, then work with them. If not, then the tenant will have to move. It is then a question of whether the tenant moves voluntarily or is set out.
Watch Your Properties
It is your job to keep a close eye on your properties but it is impossible to watch it at all times. A security system would be ideal but is expensive. Again, your neighbors can be your allies so be sure and enlist their help. They almost always know what is going on and are usually happy to spy for you. Have them contact you if they notice anything suspicious. Be sure and let them know when the house has been rented.
Do you have air conditioning trouble shooting check list?
During hot summer months, you can hear the buzz of air conditioning units running continuously. They are an essential part of many homes. All of my rentals that I manage have central air conditioning units and some have an additional window unit for second floor areas that are difficult to cool.
Question: As a landlord, do you provide mini blinds in your rental homes or do you make the tenant install them?
I love mini blinds in my own home but loath them in rental homes. I have never understood how they can be damaged so badly by tenants! There is no denying that mini blinds make a home look more finished and make tenants happy. Installing cheap blinds makes sense given that they typically have to be replaced every time a new tenant moves in. However, the older they get, the more impossible they get to clean.
Screening applicants is a stressful and challenging endeavor. You typically only have to screen tenants when you have a vacant home or a home that is about to be vacant.
A vacant home does not put money in your pocket. Your goal is to find the best possible tenant that you can find as quickly as you can. To do so, you have to cast your net far and wide.
There are days as a property manager when I just roll my eyes as my fingers furiously type an email response. Today was one of those days. Remember, having procedures in place will save you a lot of headaches! One such procedure is the move in inspection.
I moved college students into a rental home and two weeks later I logged into the system and saw a new work order. This work order had been put in by the mother of one of the student’s.
In the work order, she stated the following: “The burners on the stove are dangerously dirty. It looks as if they have never been cleaned. The oven needs to be cleaned too. The cupboards have grease and dirt on them that were also not cleaned before the boys moved in.”
As a property manager, I make sure that my rental homes are clean before any tenants move in. If the previous tenant does not leave the home move in ready clean, then I hire someone to do make sure it is. My cleaning crews typically take pictures when they are finished. These photos are added to the property folder in Drop Box.
Luckily, my move in process is solid. I have a written move in inspection and pictures of the entire house. Part of the move in process is to make sure to get pictures of all appliances, all cabinets, all mini blinds, etc. I make sure and get a close up of the interior of all appliances and cabinets as well as the range cooktop and door.
I put together an email to this parent and explained that the appliance and the cabinets were clean at the time of the move in inspection. Her son did not attend the move in inspection but another student did. The stove was operated and inspected. All of the cabinet doors are opened and closed to check for proper operation. The stove or the cabinets were clean at the move in inspection. I went to my Drop Box account, pulled up pictures of the stove and cabinets and sent them to the mother. The picture of the stove top was enlarged to show that it was clean!
She did respond later in the day with:
“Thank you. Honestly, when I was there this weekend they were disgusting. I will talk to my son.”
Mad Parent
In all fairness, I don’t blame her for being upset that the stove was so dirty. She did not attend the move in inspection and did not see the home prior to them moving in. I strongly recommend that everyone attend the move in inspections. The reality is that these students are in college and this is not the first house they have rented from us. Students tend to be independent and while I try to insist that the parents attend a move in, they don’t always make the time to do so. They skipped the move in this time because the students moved from a large house to a smaller house. In the previous house, there were no issues with the appliances so apparently the tenant that didn’t move with them was the cleaner!
This is a perfect example of why you need to have a move in process that is very detailed. Remember to follow it every single time! I respond to emails and texts like this all the time! It gets very frustrating but is much easier to make go away if you have pictures.
Do you have move out letters to send to your tenants who have given notice? If not, you need them! Grab two letters and a price list below.
Screening applicants is a stressful and challenging endeavor. You typically only have to screen tenants when you have a vacant home or a home that is about to be vacant.
