Finding Great Tenants – Qualifying and Signing a Lease

Finding Great Tenants – Qualifying and Signing a Lease

If you followed our earlier articles in this series  ”The Craig’s List Ad“, “7 Questions You Are Allowed to Ask“, ”The Showing Appointment” and read our articles on Overcrowding, Renters Insurance and “My Tenants’ Dog Ate My Hardwood” you should have a good idea of what lies ahead as a landlord and be prepared for the final step – qualifying and selecting your tenants!

So, lets say you met some nice tenants at your property and one you particularly liked fit one or more of the following:

  • They were as polite can be – they came on-time (actually it looked like they had already been there for a while checking it out) and spoke about how great tenants they are and how much they care about the homes they rent.
  • They had all the paperwork pre-filled and ready. Even had a printouts of their own credit reports and a pre-filled lease ready for you the landlord to sign.
  • They said they were handy and not to worry about the last few repair items you were still working on. They also offered to paint the “bland and boring” walls and to do any other repairs necessary.
  • They offered to pay two or even three months rent upfront – they offered to write a check right there to prove they were serious.
  • They could move in right away – you don’t have to worry about the house being empty anymore.
  • The current landlord gave glowing reviews (landlord may have called even before you showed the home to say how great tenants they are.)
  • They really needed a response soon though – they knew it was Friday afternoon and all but really have to get an answer before the weekend is over.

Some may snicker and know where we are going with the above (and probably won’t need to read this article.) For those think the above would make great tenants, please please please read on.

So, it is great that you managed to find a tenant. We would suggest calling the person a prospect for the time being though. There are lots of different people renting from Craig’s list, so it is imperative that you check out the prospective tenant thoroughly. If you are renting out your place yourself, you are really putting yourself up as a target. Problem tenants need homes too and will seek out first time landlords that are lax in their tenant verification and qualification.

We get calls from prospective tenants all the time that ask if we are a real estate company or an owner. When they realize are a real estate agency they will excuse themselves from the call very quickly (some will actually ask for the owner information demanding to speak to the owner instead of us about some special circumstances.)

The basis for any proper tenant qualification should be the rental application. Make sure *all* prospective tenants fill out an application form and that they submit a copy of their drivers license or other valid id as well as paystubs etc.

Some sample rental applications:

For Qualification and Verification Purposes, we suggest landlords make sure they do at least the following:

  1. Run credit on the tenants (have them order it online themselves on a reputed site and email you the login and password – i.e. on creditreport.com ) Print it out for your records and compare names and addresses with the copy of the drivers licenses. Make sure they don’t have outstanding judgments, late payments, bankruptcies etc.
  2. Be clear on who and how many will be staying in the apartment, pets etc. All adults should apply and have their references and rental history checked.
  3. Be sure to get at least 1 month’s rent and one month security deposit up front (in certified funds if you don’t have at least 2 weeks before you hand them the keys). I would not recommend accepting tenants that cannot afford to pay you the whole amount up front.
  4. Verify their employment (call supervisor/HR) + get copies of recent W-2′s.
  5. Make sure they understand they have to pay utilities. move-in fees, trash fees, maintain lawns and landscaping and whatever else is required.
  6. If they have dogs/cats, make sure they understand the lease or condo association rules and that they pay you a pet deposit or pet fee (a $500 pet deposit or a $250 pet fee is not uncommon.)
  7. Call the last 2 landlords. If they are problem tenants, the current landlord will probably lie just to get rid of them.
  8. Verify all information – income, employment, name on credit report/social security number etc. Look for red flags and inconsistencies. Are there additional addresses listed on the credit report? Are they listed as prior addresses on the rental application?

Don’t make friends with your tenants. You should be honest, fair, courteous and friendly. If you are looking to keep your rentals an investment, don’t mix business and pleasure.

Don’t let your tenants paint or make improvements. They may not finish or may feel you are indebted to them and ask for slack when they are late with their payments etc. Or may just do a bad job or have horrible taste.

Tenants are people too and are looking for a clean and safe home for themselves and/or their family.

Life can be hard and bad things happen to good people. People struggling need to live somewhere and sometimes it is possible to really help someone that are going through a rough spot.

Most people are worthy of respect and kindness (whether you are willing to rent to them or not.) 

Regarding leases – there are plenty of sample leases online you can look at:

Regardless of what is available online – if you are doing this on your own you should always have an attorney review your lease and paperwork.

Also, make sure you provide the renter with the various disclosure/disclaimer forms as well as the led based paint pamphlet (info and download from http://mrlandlord.com/lead/.) Their may be other forms necessary from your homeowner association, local jurisdiction and state.

The above may seem like overkill to some, but it takes only one bad tenant to give you unlimited hours of wasted time, destruction and lost income.

So, what was wrong with the prospect at the beginning of the story?

Well, tenants that pre-fill in a lease and bring to the showing are either a) awesome prepared tenants, or b) brying to run the show and are hoping to the owner will skip some of their due-diligence.

Never take personal checks when giving the keys – they may bounce and after you have given the keys your legal standing is diminished.

The glowing reference from the current landlord? If you had a nightmare tenant that wasn’t paying – and a new landlord called you for a reference – how far would you go to get rid of that tenant? (not saying you should lie – just saying that some/many would)

Then, the fixing up part – yet again sometimes a ploy to make the landlord enthusiastic about a less than ideal tenant (wow, he/she will fix up my place for free – managing this home will be sooo easy!)

Finally, getting an application on a Friday afternoon and demanding an answer and signed lease by Sunday could be a way for the prospect to limit your ability to check their references and verify information.

We hope the above will help you get started. We do a lot of rentals and will be happy to help you find a great tenant if the above seems overwhelming to you. We also run an affiliated property management company and can also help you manage your rental if you like.

This article was written by Are Andresen of Soldsense Realty LLC. Soldsense is a real estate firm licensed in Virginia and has an office in Vienna, VA. Finding and qualifying tenants could get you in trouble if you don’t follow the rules and regulations that are out there. If you would rather have professional help please contact Soldsense.

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