From Ozzy to Awesome: A Modern Landlord’s Guide to Vetting Tenants

Mike Kalis

From Ozzy to Awesome: A Modern Landlord’s Guide to Vetting Tenants (biggerpockets.com)



PREVIOUS POST

How to Reap Big Benefits From Build-to-Rent Investments

You can’t look at two pieces of a puzzle and accurately predict the entire picture.

For that same reason, landlords need to dive deeper than the “two C’s” — credit and cash — when screening potential tenants. Using those factors alone, it’s hard to know whether you’re on the verge of renting to Ozzy Osbourne or Donny Osmond.

In his heyday, Ozzy Osbourne was making tons of money and likely had a healthy line of credit — but he was also known for being a total party animal who engaged in bizarre and destructive behavior. Donny Osmond, on the other hand, was wealthy and had a squeaky-clean lifestyle.

Unfortunately, back in the 1970s, landlords had a tough time telling the difference between the Ozzys and the Donnys. As a result, they ended up renting their properties to a lot of crazy trains. What a nightmare!

Today’s landlords, however, are operating in an era of data-driven decision-making. It has never been easier to dig deeper than the “two C’s” and unearth hidden gems of evidence that illuminate whether a person will be a great tenant.

Here are three vetting techniques every landlord should use in 2017:

1. Follow the Digital Footprint

Begin your investigation into tenants with a wide net: the internet.

The web never forgets. Every photo, tweet, and comment made in a public forum is still viewable. You may also find articles — both positive and negative — about candidates that shed light on their professional accomplishments and personal habits.

One big caveat, though: You need to be extra sure these pictures, articles, and reviews pertain to the same “Steven Tyler” who’s applying to live on your property. Look for hints — such as the location of a restaurant he’s reviewed — to confirm whether this is the person you’re looking for.

Further, if you find Steven Tyler’s Yelp account and see that every review says something along the lines of “Your establishment is the opposite of amazing. You deserve ZERO STARS!” — he’s a tenant to avoid. Someone who gleefully shreds every business he interacts with will not be fun to work with. If Mr. Tyler can’t handle his soup needing more salt, he likely won’t take minor home repairs in stride.

Finally, don’t be afraid to stalk prospective tenants’ social media accounts for clues about what they’re really like. For instance, if Steven Tyler is holding a lit cigarette in multiple Facebook photos, he was clearly lying when he checked the “non-smoker” box on his application. If he devoted an entire photo album to showcasing his gigantic surround sound home theater setup, prepare yourself for noise complaints if you rent to him.

2. Grill Their Exes (Landlords, Not Lovers)

Talking to a candidate’s previous landlords should be a no-brainer, but privacy concerns often make it difficult to gain the useful insights you’re after.

That’s why you shouldn’t take other landlords’ words at face value. Read between the lines, and listen to how they talk about their former tenants. You don’t have to be a trained psychologist to know whether someone is genuinely sad to see a tenant leave.

If the landlord only gives vague one-word answers, you can probably conclude that Steven Tyler wasn’t a dream tenant. On the contrary, if the landlord sounds very familiar with Mr. Tyler, it could be because he was an annoying tenant who was always causing issues, crying, or going crazy. Proceed with caution, and search for context clues.

To guide conversations with past landlords, try asking questions like:

• “Were you sorry to see him or her go?”
• “Tell me about how the lease ended. (Did it end in eviction?)”
• “Were there any complaints, or was there any damage?”

3. Think Deeply About Professions

In many American cities and counties, landlords are legally allowed to turn down candidates based on their primary source of income. This is a superpower I urge you to use often.

Some professionals generally make great tenants. Some do not. Let’s start by looking at the obvious ones.

Carpenters, plumbers, and electricians are the types of people who will unclog their own toilets and fix their own appliances — and might send you a receipt for The Home Depot afterward. Everyone wins in this arrangement; the tenant knows the job was done up to his or her standards, and you received at-cost maintenance work.

Accountants and engineers tend to be tidy and neat because their careers depend on their ability to arrange and organize infinite numbers into rows and columns. Sure, they will keep to themselves and probably won’t send you a fruit basket during the holidays, but you’re looking for a tenant, not a best friend.

Obviously, you want to avoid someone who looks like a professional troublemaker. But what about some under-the-radar professions to avoid?

Salespeople (or other commission-based professionals) can have volatile incomes that result in unhealthy spending habits — and this can impair their ability to pay rent on time.

Lawyers are highly educated and make plenty of money, but you can be sure they’ll put their expertise to work and argue every clause of the lease. Further, they litigate at will. It doesn’t cost them a cent to sue you.

Speaking of legal action, there’s no guarantee you’ll be able to collect overdue rent payments if you sue a self-employed tenant. Their assets are tied up in their business — and if the business implodes, so does your ability to win a judgment against them.

The “two C’s” are still necessary, but these days, they’re not nearly enough.

Dig deeper, make the internet your ally, and put together the entire puzzle when vetting prospective tenants. Today, it’s easy to be a rock-star landlord who avoids destructive tenants and protects investments.