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.
Thanks, Kevin for another great article! I can only agree with you. I had an applicant about a year ago who had lots of red flags (please don’t call my boss, his wife just died). But I was patient, waited a few days and found out the wife really did die, but in the meantime I pulled her credit/background report through Rent Perfect. Come to find out she was of an age to have been living on her own for about 30 years. The report contained 46 different addresses for her. Either she had lied on her credit applications or she had moved on average every 9 months. I ask for a 2-year lease and I knew before I talked to her boss (about her new job that she hadn’t even gotten the first paycheck) that this was a HUGE RED FLAG. I said thanks but no thanks and moved on.
They aren’t all so blatant but I think I was dealing with a Pro Tenant.
JanneZ