SMARTERLANDLORDING

ADVICE FROM EXPERIENCE

Kevin

Making Offers Sight Unseen With Contract Contingencies

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Can you make an offer to buy a property sight unseen?  Yes, you can and sometimes you should.  Can you can do it with confidence?  Yes, you can do that too.  All you need are a few contract contingencies placed in your offer.  These contract contingencies will protect you and your hard earned money if the property turns out to be a dud.  What are these contract contingencies?  Read on to find out.

Buying Sight Unseen?

You might be wondering who would be bold enough to make an offer on a property sight unseen.  Well, a lot of people are and would do so. In today’s hot real estate market, many properties will have multiple offers just hours after they hit the realtor’s listing system if the are priced right.  With competition like that, there is just no way you can see and inspect these properties before they are snapped up by another buyer.

The key these days to acquiring properties is making offers, often sight unseen.  But, that does not mean you should leave your or your money hanging out there unprotected.  There are ways to protect yourself with contingency clauses in your offer to purchase contract.

Inspection

The first of these clauses is what is known as an inspection clause.  Such a clause allows you, or someone you designate, to inspect the property before you close.  There are many ways to word this clause.  The most common is simply “This offer is subject to and approval of an inspection of the property.”  With such a contingency clause in place, if upon inspection, the property is not quite what you thought, or needs significantly more repairs than you anticipated, you can get out of or renegotiate the contract.

Financing

The second contingency clause to protect yourself refers to financing.  Again, something simple such as “This offer is subject to adequate financing” will often suffice.  What is adequate?  That is up to you to decide.  Such a clause is key because you can never be 100% sure of financing, even if it is your own money.  What if you or your private lender get in an auto accident?  Funds may be needed elsewhere if such an event occurs.  You just never know so protect yourself with such a clause.

The Weasel

Finally, you should include what is often referred to as a “weasel clause.”  A clause such as this gives you the ultimate out if you need it.  What is it?  Something along the lines of “This contract is subject to review and approval of my business partner.”  Who is your business partner? Whomever you want.  All you have to do is tell the seller your business partner did not approve and you are out.

These clauses are to be used to protect you.  You should never make an offer on a property that you do not intend to close on.  Doing so is bad business, underhanded and it wastes everyone’s time.  Today’s hot real estate market however demands that we investors take some risk and perhaps make offers before we even see the property.  But, this exuberance does not mean that you have to make offers where you are not protected and have no way to get out of if something major pops up later on

Now go and make offers with confidence.  These contract clauses will allow you to know what you are getting into.  They will also allow you a way out if you need it.

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here.  Contact Kevin here.

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No Fault Evictions Rise Ahead Of Rent Controls

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The new law, championed by Democratic Gov. Gavin Newsom as the strongest statewide renter protection in the country, caps annual rent increases at 5% plus inflation, while also forcing landlords to specify a legitimate reason for evicting tenants and to offer relocation assistance for no-fault evictions.

But in the interim months until the law kicks in, tenant rights groups are scrambling to combat what they say is a wave of landlords exploiting a temporary loophole that allows them to get rid of tenants now. That way they can raise rents beyond the rent cap, avoid having to pay any relocation help to displaced tenants, and simply remove tenants they view as problems without going through additional legal hurdles introduced by the new law. 

Read the rest here.

The Self Defeating Effects Of Rent Control

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When New York State’s legislature passed a bill strengthening rent controls on apartments in June, New York City mayor Bill de Blasio crowed that the legislation “will halt displacement . . . and keep working families in the homes they love.” Yet one of the biggest eras of displacement in Gotham’s history happened decades ago because of rent control. Enacted during World War II, controls squeezed landlords unable to increase rents for maintenance, repairs, and fuel prices until owners began abandoning buildings by the thousands during the late 1960s, driving out middle-class residents, stranding the poor in deteriorating apartments, and creating immense tracts of poverty in formerly stable blue-collar neighborhoods.

Billed as tenant-protection legislation, New York’s latest rent regulations, which make it more difficult for landlords to raise prices on apartments that they upgrade or that become vacant, mark a return to the disastrous policies of the displacement era. But because New York’s progressive legislators can’t repeal the laws of the marketplace, the effects have already begun to show.

Read the rest here.

When Can A Landlord Disturb Tenants?

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Tenants have the right to quiet enjoyment.  That grand legal term means that your tenants must be left alone in their home.  It means that you as the landlord cannot just barge into their home anytime you please.  You cannot disturb tenants quiet enjoyment without good reason. What is a good reason?  Read on to find out.

Quiet Enjoyment

Some landlords hold the notion that they truly are the lords of their properties.  And to some extent they are.  But once a lease with a tenant is in place, landlords give up some of their property rights.  One is the right to freely enter the property.  Landlords are not allowed to go in their tenant’s home anytime they want even though they own the property.  Imagine if the bank that holds the mortgage to your home was allowed to come and go anytime they wanted to.  You would not like it.  Under the law, a person’s home (even a leased one) is their castle.

There are times however when landlords can, and should disturb a tenant’s quiet enjoyment.  Landlords just have to know when these times are and how to properly go about it.

When And How To Disturb Your Tenants

Three scenarios come to mind.  The first is repairs and maintenance, the second is routine inspections and the third is showings for prospective tenants.  Each of these scenarios is a legitimate reason to disturb your tenants.  But, each also requires a bit of planning on the part of the landlord.

First, landlords must insert clauses into their lease which allows them entry into a tenant’s home for the reasons stated above.  It has to be spelled out for example, that the landlord will enter the property and conduct an inspection every year.  It has to be stated that the tenant will allow showings to prospective tenants when they give notice to move.  And it has to be stated that you will at times need to do routine maintenance nd upkeep.

Of course, even with these clauses in your lease, a landlord has to give their tenant advance notice of the disturbance.  How much notice?  A week or two for routine maintenance and property inspections is usually enough.  Notice for showings and unexpected maintenance could be a little as twenty-four hours however.  In any case, be sure to provide as much notice as you can.  Doing so will cut down on a lot of tenant animosity.

Disturbing Tenants Without Notice

Are there times when you can barge in to your tenant’s home?  Times when you will just have to disturb your tenant no matter what?  Yes there are.  These are times of emergency.  If water is gushing, sparks are cracking or gas is leaking, you are just going to have to go in and disturb them.  They may not like it and may protest, but it has to be done to save your property and perhaps even a life.

For example, I once had a tenant bump the knob of his gas stove and accidentally turn it on before he went to sleep.  Gas leaked for hours before it was smelled by another tenant.  Since I could not get an answer on the sleeping tenant’s door, I went in, turned off the gas and likely saved the building.  Another time a tenant got drunk, passed out and left her kitchen sink running.  The sink overflowed and started to pour through the ceiling downstairs.  Thinking a pipe had burst and unable to rouse the tenant, I went in.  She was mad I woke her and I was even angrier at her stupidity, but that is another story.  Both times I was completely justified in disturbing my tenants (and yes, she had to pay to repair the ceiling.).

Do Not Disturb Your Tenants

Your tenant has the right to be left alone in their home.  You cannot go in and disturb them just because you own the place.  Even failure to pay rent does not give you the right to barge into their home anytime you want.  In fact, doing do may just get you in trouble.  But, with proper lease clauses, reasonable and expected notice or in the case of an emergency, you can go in and disturb your tenant.

Have a good “disturbing your tenant” story?  Please share it with us.

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here.  Contact Kevin here.

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Being The Bank

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Have you ever used or considered using private lenders for your real estate business?  That is, borrowing funds from private individuals to purchase your real estate investments.  If not, why not?  You should.  Such a strategy can be very powerful for the real estate investor.

Now take those thoughts one step further.  Have you ever considered being the bank?  Have you ever thought about being the person that lends the funds for others to invest in real estate?  If not, why not?  It too can be a very powerful investing strategy and it is something that you, as an investor should learn about.

I recently read Be The Bank by Ben Lyons and I found this book to be a great introduction to the world of private lending.  Mr. Lyons has over 30 years of private lending experience and his book takes you through all the basics and more.

He begins his book with a very good question.

Almost every bank in the United States makes a large portion of their money from lending money secured by real estate. So why doesn’t the individual invest in mortgages as part of his or her investment strategy?

He answers that it is because most simply do not understand how private lending works.  This is why he wrote the book.

Beginning with the history of the mortgage, Mr. Lyons, using his own real world experience, explains:

  • The various types of mortgages available today.
  • Which types of mortgages private investors like you and I should consider investing in.
  • Who would be interested in borrowing private money and why.
  • How a private lender should qualify or underwrite potential borrowers.
  • The returns a private lender can expect.
  • Loan structures, property types and risk.

All in all, I consider Mr. Lyons book to be a very good read for the real estate investor.  Not only will it perhaps get you thinking about different ways of investing, but it will also teach you how private lender view risk and what they are looking for in a borrower.  Either way, this book is a win for the smarter landlord.  Order your copy here.

By ordering this book through Smarterlandlording.com, I will receive a small commission to help with the upkeep of this site.  This commission in no way changes the price of the book for you.  I have no relationship with Mr. Lyons, I simply find his advice and knowledge to be potentially valuable to my readers. Please help support Smarterlandlording.com by ordering a copy of Mr. Lyons book through this link.  Thank you!

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here.  Contact Kevin here.

Subscribe to Smarterlandlording and receive a Free Report: 21 Tenant Screening Red Flags

Clauses Every Lease Should Have

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Your lease is the contract between you and your tenant.  For any contract to work and be legal, certain clauses are necessary.  If these clauses are left out or are poorly written, the the landlord runs the risk of serious problems in the future.  This post describes several clauses every lease should contain.

Before I get to clauses, let me start off by saying that there is no universal, standard lease.  Situations between landlords and tenants differ. Properties differ.  State and local laws differ.  Thus the lease found at Office Max or even my lease will not work for you.  A lease needs to be tailored to your unique conditions.  Plus, it should be reviewed by a competent real estate attorney from your area.

That said, here are some clauses every lease should have.

Duration

While tenant turnover may be a cash flow killer, I would strongly advise against open ended leases.  Instead, every lease should contain a duration or a length of time the lease runs.  You want a definite end date, so that either you or the tenant can get out of the contract (with a no-fault eviction if necessary).  Traditionally, with residential leases, the duration is a year, but that amount can be adjusted to fit your particular situation.  Six month or two year leases are not unheard of.

Term

Most residential landlords set the term lengths of their leases at one month.  In other words, while the duration for the lease may last for a year, the term is monthly.  This term is why rent is due to most of us every month.  Some leases have weekly terms.  Hotels have daily terms. Terms can therefore vary, but are important clauses as they set out when we get paid.

Cost

Don’t forget the most important part, which is how much the rent is.  Rental amounts need to be clearly spelled out.  I think most of us know that, but it deserves a mention as it is so important.

Extension

What happens when your lease duration is up?  Does the tenant have to move?  Do they need to sign an entire new lease?  Does the existing lease continue on in some fashion?

I have seen landlords do all of the above.  But the most common way to extend a lease at the end of its duration is to go by the term.  Most of us landlords use monthly terms so the lease becomes monthly, or month to month, in duration.  Of course this can also be weekly or even daily.  Whatever it is, it has to be spelled out in the clauses of the lease what happens when the duration is up.

Late Fees

How much will be charged if the tenant is late with their rental payment?  How much can you charge?  When is a rental payment considered late? All of these items should be spelled out in your lease so there is no confusion.  Plus, you need to provide incentives to get the rent in on time.  State laws often dictate when and how much landlords can charge with late fess.  So know and understand what those laws say.

Notice of Termination

Both side to any contract, like a lease, need advance knowledge that one party to the contract is terminating the relationship.  In the landlord world, this notice of termination means the notice given by a tenant that they are planning to move.  How long should this notice be?  Most landlords require at least the term of the lease, which is most commonly a month.  But why not require a little more?  Would not 60 or 90 days of advance notice give you more time to market and re-rent the property and reduce the interruption of your cash flow?  We have found in our business that it does.

Allow Showings

Once a notice of termination has been provided by your tenant, you need to get the property re-rented.  How do you do that if you cannot show the property?  In our leases we insert a clause that allows us to market and show the property once a notice of termination has been submitted.  Sometimes tenants complain about the intrusion, but we just point out the clause in the lease they singed and that usually ends the discussion.

Overstay

What happens if a tenant gives you notice of termination, whereupon you re-rent the property but the existing tenant does not move when they saw they will?  Where does your new tenant go?  Who pays for the expenses incurred?  Could get pretty sticky if you do not have the proper clauses for tenants that overstay their lease.  In our business, we charge $100 per day of overstay.  That clause tends to keep things moving.

Local Needs

Some states require special stipulations in leases.  You may need to tell folks where their security deposits are held for example.  In Tennessee where I work and live, leases need to have special provision related to notices of non-payment of rent.  Not having such a clause can lead to lost time, income and much frustration for the landlord.

Leases are legally binding contracts.  What they say and how they say it is important.  Carefully consider the words and clauses in your lease. Do not use a “boiler plate” lease and have a competent real estate attorney in your area review it.  What you say, or not say, can make all the difference towards helping or hindering your life as a landlord.

What is in your lease?  Do you have any special clauses that are required in your area or help your landlord business?  Please share with your comments.

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here.  Contact Kevin here.

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Can You Call The Cops On Your Tenant?

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Can you call the cops on your tenant?  Yes you can.  But the real question is whether or not the cops will do anything when you call.  It is likely they will not.  Not because they do not want to or do not sympathize with you, but because the landlord-tenant relationship is treated differently under the law.  Here is how.

Criminal vs. Civil

Cops get called to all sorts of situations.  From the murderous to the mundane, they see the darker, stranger side of life and will often take action if a criminal offense has occurred.  The occurrence of a criminal offense is the key.

So what is a criminal offense?

Shoplifting bread from Wal-Mart constitutes theft, passing a counterfeit $20 bill is fraud, breaking a window is destruction of property and someone sitting on your front porch that refuses to leave is trespassing.  All of these scenarios are types of criminal acts that the cops can and often will take someone to jail for.

But what about the tenant that does not pay their rent?  Is that not theft?  Does punching holes in your walls equal destruction of property? When the boyfriend who is not on the lease moves in is that trespassing?  Is it not fraud to knowingly write a rent check that will bounce?

Many would answer yes to the above questions.  Theft is theft and trespassing is trespassing.  However, the powers that be do not quite see it this way.  In most states (Arkansas being an example of the opposite) these issues have been deemed civil matters as opposed to criminal.

In effect, legislating most landlord-tenant issues as civil matters means calling the cops will do the landlord no good. The cops will not likely be able to do anything because the various state legislatures have prohibited them from doing so.  The cops may respond to your call, but unless there has been violence the responding officer is likely to tell you there is nothing they can do.

Your Remedy Is With The Courts, Not The Cops

Instead, the police will tell you that the matter is a civil one.   They will tell you that your remedy is to be found in the courts, not with them.  To reverse a wrong and reclaim your rights as a landlord you have to file a lawsuit.  These lawsuits can range from the eviction we are all familiar with, to a request to garner wages due to damages above and beyond a security deposit.  Even that boyfriend who has moved in and is trespassing will likely not result in any action.

As I said, only in the most extreme cases will calling the cops result in any action.  In all my years as a landlord, and in taking to hundreds of landlords, I can count the number of times the police have taken action against a tenant on one hand.

Screening Is The Key

So yes, you can call the police on your tenants but it is likely that nothing will come of it.  In most cases, the police are legally barred from taking action.  A better idea is to screen tenants thoroughly so that you will not need the services of the police in the first place.  Of course, people can and will do things that no screening method will uncover, so if you need to, call 911.  Most of the time however, screening is the best protection.

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here.  Contact Kevin here.

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Landlords, Understand No Fault Evictions

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No fault evictions are making headlines .  Laws are being considered or enacted recently that either ban or restrict the practice in California, Oregon and New York.  Therefore now would be a good time for landlords to understand no fault evictions, why they might be used and offer some suggestions before doing so.

Understanding No Fault Evictions

A no fault eviction is a legal proceeding during which the landlord attempts to regain legal possession of a property from a tenant.  The tenant is being asked to move, due to no fault of their own.  Most tenants facing no fault eviction are often current on their rent and may otherwise be a good steward of the property where they reside.  In lay terms one party to the lease contract, the landlord, is deciding to end the relationship.  The legal process for a nor fault eviction is however generally the same as if the tenant had not paid the rent.  There are legal notices, court dates, judges and judgments.

Why Use A No Fault Eviction?

A landlord might use a no fault eviction for many reasons.  First, upon purchasing a property, a landlord may want to have a clean slate. Inherited tenants will not have been through the new landlord’s screening process and that may cause some unease on their part.

Second, a landlord may want to rehab and upgrade a property.  I can tell you from experience that a major rehab is impossible to do with a tenant living in the property.  Having a vacant property allows for the gutting of kitchens, bathrooms and the replacement of walls, windows, etc.

Third, a property owner may want to move into the property.  I myself moved into one of the first properties I purchased.

Why The Backlash?

In short, there is a backlash because people are being kicked out of their homes even if they have diligently paid the rent and otherwise done nothing wrong.  Some simply do not like that.  They may have lived in the same place for years and developed an attachment to the neighborhood.  Their rent may be under market and they worry about finding a new place of similar quality to live for the same price.  They may not have the money to move.  They may be older or even sick and moving will be difficult.

Taken together, these reasons have produced a backlash resulting in various w or proposed new laws across the country.

What Know About No Fault Evictions

I myself have purchased buildings with existing tenants which I intend to gut, fully rehab and bring back on the market.  Believe me, they needed it and unfortunately the tenants had to go.  Understanding that this can upset the inherited tenants, I strove to ensure that I was in compliance with existing laws, understood existing leases and was as accommodating as I could be.  A bit of tactfulness can go a long way in these situations.

The first thing that any landlord, and tenant for that matter, must understand is that a lease is a contract.  That contract specifies who is a part of the contract, what property the contract applies to, the consideration between the two contract parties aka rent, and the duration of the contract.  Either party can end the contract by providing appropriate notice.  Tenants can move of their own volition and landlords can ask tenants to move.  When tenants refuse, then the landlord is forced to evict.

Secondly, landlords cannot just cannot arbitrarily kick people out of their homes.  Even if they are a new owner and have recently purchased the property proper steps must be taken.  Tenants have rights to the property they live in and their lease runs with the property, not the owner.  Not having a written lease does not matter, tenant rights will still apply.  You as a party to that lease contract have to uphold those rights.  If a year long lease was signed two months before your property purchase, it means you will have to wait another ten months before you can file to regain possession of the property.

People Need Time

Most folks cannot just up and move tomorrow.  They need time to find a new place to live and get their stuff together.  If you intend to empty a property of its existing tenants, you can soften the blow with time.  Give as much time as you can give.  At a minimum, there will likely be contractual time obligations contained in the lease, or there may be legal time requirements.

When purchasing a property, be sure you understand the time constraints you will be under.  Carefully review existing leases.  Use an estoppel agreement to further clarify your new landlord/tenant relationship.

Cash For Keys

Another possibility to soften the blow is to offer some type of incentive for tenants to move.  A little cash or help with a move might go a long way towards getting you the keys.  It sure can be easier and less confrontational than eviction court.

If They Will Not Go

If tenants refuse to go, or drag their feet too long, you have no other option than an eviction.  Evictions can be ugly in the first place, but add an angry tenant who feels that they have been wronged and it can get nasty.  So nasty that it leads to calls for bans on no fault evictions.  And while I can understand and sympathize with tenants, it is wrong to force one side to stay in a contract they no longer wish to be a part of. Landlords can hopefully minimize the issue by understanding what they are getting into and using some of the advice outlined above.

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here.  Contact Kevin here.

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5 Questions To Always Ask Your Tenants

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One of the first presentations I heard when I started going to MIG over 15 years ago was by Don Beck.  In it, he had a set of laws for landlords.  One of those laws was “no matter what the question, your tenant will have an answer.”  Some of these answers are true, some are not.  Many are attempts to deflect or redirect.

Some questions always seem to bring out the bring out interesting answers from tenants, especially prospective tenants.  These are questions however that you must always ask.  What are these questions?  Here are 5 questions to always ask your tenants.

What about this gap in your residential living arrangements?

When a prospective tenant does not show a continuous line of residency, you must ask this question.  When here is a gap, often of a year or more, that is unexplained you need to find out why.  Where was the applicant living during this time?  Why have the chosen not to tell you about that gap?

This residential gap could be completely innocent and explainable.  The applicant may have had to move back home to care for a sick relative or they could have moved in with someone and the relationship turned sour.  These are items your applicant might not think matters or they are embarrassed to admit.

On the other hand, they may have been evicted.  Or, they may not be able to get a good reference from that landlord and hoped you would not notice the gap.  Either way you need to explore the reasons for the gap.

What about this gap in your work history?

This is another common question that has to be asked.  Again, the answer could be something completely innocent.  It include such things as simply taking time off, going back to school or caring for that sick relative.  Or they could be trying to hide the fact that they were fired for theft.  You will never know until you ask.

What about this account in collections?

Finding tenants who will pay, stay and respect our properties is the name of the game.  That is why you have to ask these questions.  Yes, the account may be old and they may have been embarrassed to put such things on your application.  Few of us are ever perfect.  But, as landlords we simply have to dig deeper to find out what is really going on.  Was this a past mistake or is there a pattern that continues to the present?

Who will be living with you?

This is a question that needs to be asked so you can document the answer.  Make sure you make a note when your prospective tenant answers “no one.” or “just my daughter.”  On more than one occasion we have found evidence that someone other than what we were told by the tenant has moved in with them.

Do you have any pets?

Some folks will be honest with this question, others will not.  We love pets and allow cats and smaller dogs, but many will try to get around the pet fees.  Thing is, we always tend to find out because we will be going in the property at some point (often for maintenance) and the evidence will be there.  Again, it is best to have things documented from the very beginning.

Not everyone that you meet and applies to live in one of your properties is going to lie, but enough do that we have to ask these questions. Landlords often have to do some detective work to flush out the lies and the potentially bad tenants before they move in.  And while tenants may always have an answer, sometimes it will be pretty easy to see through them.

Have a question you always ask your tenants?  Ever get an interesting answer?  Please share with a comment below.

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Subscribe to Smarterlandlording here.  Contact Kevin here.

Subscribe to Smarterlandlording and receive a Free Report: 21 Tenant Screening Red Flags

Uncover Lies By Using Rental Standards

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My book, Advice From Experience To New Real Estate Investors, has a chapter on what newbies should know before they become a landlord. In that chapter I note that lying is a widespread and uncovering lies is part of the landlording business.  One way to uncover lies is by using rental standards.

Be warned, no matter how good someone appears on the surface, you just cannot trust them.  People lie and try to cover up their past deeds all the time.  Some, are simply embarrassed.  Some, such as professional tenants, are purposefully trying to deceive you.  Others, tell little white lies and hope you will not notice.  No matter who is doing the lying or why, it is your job to uncover the lies before you let an applicant move in to your property.  The best way to do this is with consistently applied rental standards.

Two Key Rental Standards

Rental standards are comprised of many parts.  But two key parts to any set of rental standards are a rental application and credit history. Requiring every applicant to fully complete a well structured rental application provides the landlord with a basis to uncover dishonest answers.  On your application, always ask questions about an applicant’s rental and credit history.  These questions should include:

  • Where did the applicant live?
  • How long did they live there?
  • What was the amount of their rent?
  • How often did they pay the rent late?
  • Have they ever been evicted?
  • Have they ever filed bankruptcy or had a judgement against them?

Not everyone is going to lie on their application when answering these questions, but some will.

Pulling a credit report is the second key part of this process.  Reviewing a credit report on every adult who wants to live in one of your properties is an absolute must.  Credit reports show many items, including:

  • Late payments
  • Bankruptcies
  • Charge offs (when a creditor has given up trying to collect debt)
  • Closed accounts
  • Judgments
  • Accounts in collection.

Compare The Two Keys

By comparing the application against the credit report, any inconsistencies should appear.  If you find that an applicant has outright lied, best to let them find somewhere else to live.

On the other hand, give an applicant some consideration if they tell you the truth about past issues.  After all, none of us are perfect and it is hard to tell the truth when you know it might hurt you.  Look for signs that the applicant really is trying to improve or get back on their feet.

You Set Your Standards

Remember, as the landlord you can set your own rental standards and you do not have to reject applicants who are honest yet have a bit of a checkered past.  You can instead adopt rental standards that reward improving behavior.  These standards could include:

  • No bankruptcies within the past X years.
  • No judgments within the past X years.
  • Less than X late payments within the past X years.
  • No accounts in collection.

As the landlord, the standards you use are up to you and the market you serve.  There is often a lot of flexibility (other than legally protected classes) on what your rental standards can be.  I would even say that your standards should evolve as you learn and grow your business.  Just be sure to apply whatever standards you use consistently.

Uncovered any big lies as a landlord?  Please share with a comment.

Kevin Perk is the founder and publisher of Smarterlandlording.com.  He is the author of Advice From Experience To New Real Estate Investors.  Contact Kevin here.

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