Good screening process identifies good tenants
When John Nuzzolese found a tenant for a high-end home on Long Island, N.Y., during a slow winter season — a tenant with an excellent credit report in hand who was willing to not only accept full asking price but also to pay six months upfront — the experienced real estate broker figured he had a landlord’s dream come true.
It didn’t take long for his nightmares to begin. Looking back, Nuzzolese can recognize the mistakes he made and says they should serve as a lesson to other landlords:
- Mistake 1: He didn’t check the tenant’s driver’s license to verify he was the person on the credit report.
- Mistake 2: He skipped the reference check because an employer and past landlord were unreachable.
- Mistake 3: He got fooled by the offer to pay extra month’s rent upfront, a ruse to make the prospective tenant sound qualified.
- Mistake 4: Handing over the keys before the checks had cleared because the tenant, from California, “needed to move right now.”
Almost immediately, Nuzzolese says, “Mr. Hyde emerged and started making all kinds of threats and demands. Only one of his checks cleared. He began working me over like a pro.”
While Nuzzolese consulted with an attorney, his luck improved. “By a miracle, I was saved when the FBI arrested him while he was on a business trip in California. Taking back the property at that point was very easy.”
The experience was partly what led to his launching The Landlord Protection Agency, which aims to help make managing rental property profitable, enjoyable and safe for owners, in the late 1990s.
As a landlord and property manager for some 250 tenants over the years, Nuzzolese has certainly had his share of successful tenants who pay on time and take good care of the property. He especially likes to see tenants take pride in their rental as a home. For those renting out a part of their own home, that factor is all the more important.
“Selecting the right tenant makes the difference between loving real estate and hating it,” says Timothy Spangler, the CEO of a real estate investment company.
Finding good tenants is not just happenstance. It can take time and it usually takes considerable effort, both in learning the ropes of being a landlord and in selecting the right renters.
“Just because a landlord can get a tenant to pay high rent doesn’t mean he should take it. All too often, landlords are willing to forego the screening process to take an unqualified tenant who agrees to a higher price,” Nuzzolese says.
The best way to avoid mistakes like that is to learn the ins and outs of choosing renters.
Here’s a crash course.
Search for a Star
- Taking out an ad — and wording it well — can be the first step to finding a good tenant, but screening out bad ones. “It’s not the quantity of potential tenants that apply, but the quality of tenants that counts,” says Spangler. In his ads he states the basic details about a rental unit, and stresses that a credit check will be done. “Most people with bad credit won’t even call.” Even the hint that you report on tenants to a credit bureau often will send a deadbeat looking elsewhere.
- Holding an open house can also save the landlord time and give you an early opportunity to look over your prospects.
- Only one out of five people who make an appointment to see a rental unit will show up,” says Spangler. And meeting someone face to face is always the best way to start the screening process.
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