Real Readers Ask: Traveling & Tenant Screening

personal finance

Want to know more about world travel and tenants? Welcome to the latest installment of Real Readers Ask. Today I want to share two questions that AA readers posed last week.

What Did You Do With Your Stuff When You Traveled?

Noelle wrote to say:

“Hi! You’ve inspired me so much with your drive to be “location independent.” I was just curious about one thing: Did you sell your home in order to travel? Or did you have your own place to come home to?”

(Note to New Readers: Noelle is referring to the time I traveled around the world for more than two years, venturing across the Middle East, Asia, Europe and Australia.)

For the sake of saving money, I didn’t have a home … or anything else.

I sold almost everything I owned, including my car and furniture. I sold some stuff for hundreds of dollars, and other things in $20 increments. All the money went towards my travel fund.

Anything I couldn’t sell, I donated to Goodwill or the Humane Society thrift store. The few possessions that remained, like my snowboard, I stored with friends.

I had been renting, so I timed my departure to coincide with the end of my lease. In the span of one week, I quit my job, moved out of my apartment, and flew to Spain with a one-way ticket.

Of course, I knew I’d be traveling for 2+ years. If I had only been going away for 6 months, I would have acted differently.

If I had owned a home, I would have placed a tenant in it and hired a property manager to oversee the building. In fact, I know a woman who has a handful of rentals in Atlanta, but lives in Paris. Her property manager sends her a check every month, which she spends on bicycles and clothes and croissants and whatever else people buy in France. ☺

If you’re a homeowner, and you lived by The One Percent Rule when you bought your house, you’re in a much stronger position to travel than renters are. Renting out your home is the fastest and most surefire way to retire young, travel anywhere, and live free.

How Do You Lead Tenants from “Showing” to “Move-In”?

Trevor, age 31, wrote to say:

“I have two rentals, and my own home. I love reading about real estate investing, but the thing I have the most problem with … (is) getting people from a showing, to tenancy. Could you write about your process? What info do you give them at the showing? What questions do you ask them? What credit/background check service you use?”

I have the same problem. I’ll do a showing for prospective tenants. The potential tenant “oohs” and “ahhhs” about the high ceilings and big backyard. They start mentally placing their furniture throughout the house – “My couch would look great here! I can put my table there!” – which is a fantastic sign.

Then I never hear from them again. They never fill out an application. So what do I do?

Nothing. If they’re not on-the-ball enough to fill out an application, I don’t want them as a tenant.

Besides, if they really wanted to live there, they’d apply.

As for the second part of your question, regarding tenant screening: I use TransUnion MySmartMove as a tenant screening service. It allows you to view their credit score and their criminal history.

(By the way, that is NOT an affiliate link or any kind of paid promotion. That’s just what I genuinely use.)

I also call their current/previous landlord and get a copy of their pay stub. If they live in an apartment building, look up the phone number of the building yourself rather than dialing the number they gave you. Plenty of tenants have their friends pose as a fake “ex-landlord” reference.

Should bad credit nix the applicant? Sometimes.

One of my best tenants had perfect credit except for a foreclosure. The foreclosure tanked his credit score, but I noticed that he paid all his other bills – credit cards, car loans, etc. – on time. His income was almost four times the monthly rent. So despite his low credit score, I let him move in, and he’s been a perfect tenant ever since.

Of course, your results may vary. This is a judgment call. You have to make your own decisions.

Three More Essential Tenant Tips

UPDATE 2/13/2013: One of my readers, Karen, emailed me the following tenant screening tips. I liked these so much that I asked her if I could share them with AA readers:

#1: Peep Their Ride.

The MOST important other thing to do is look inside their car when they come to see the rental. You will see their attitude towards their surroundings. The way they keep the inside of the car is the way they will keep your premises.

If the car is old, but clean as a whistle, they take care of their possessions and will most likely keep your rental the same way. If the car floor is knee-deep in fast food wrappers, soiled baby diapers, garbage, empty beverage cans, discarded clothes, this is how they will keep your home. Their attitude towards their surroundings is poor. They will also most likely refuse to pay for – or even acknowledge – their damages.

#2: Visit Their Home.

If they live in town, visit their home. The way their home is is the way they will keep YOUR place.

How can you see their home? You can drop by to give them information. You can arrange to sign the lease there. (You’ll still have time to back out if you see that they’ve trashed it!)

By visiting their home, you will also find out if they have pets. This will be especially important if your lease specifies “no pets.” (Incidentally I never allow pets, especially dogs. When the tenant’s dog bites someone, YOU will be sued. The tenant will get off scot-free, as they have no assets which can be taken in the judgement.)

Pets also leave fleas, tear up carpets, damage woodwork, bark constantly, and defecate in and out of the house (which irresponsible pet owners don’t clean.) Your insurance company will love you if you don’t take pets, especially large dogs.

#3: Use Google Voice (or an Answering Machine).

I use an answering machine for calls. If the prospective tenant is speaking over the sound of shrieks and howls and commotion — if they sound like they’re calling from the raptor house at the zoo — you most likely will not find them to be good tenants.

One day I heard two calls on the answering machine. One was from a man who said: “Hello, this is Dennis. I’m a heavy equipment operator for XYZ Construction Company and I’ve worked there for 3 years. I work 6 days a week, and I’m gone from 6 AM until 6 PM every day. I have my pay stubs to prove how much I earn. My boss will give me a reference.”

The second call said, “Yo. I needs the place. Welfare gives me some money and I live with my Daddy. He won’t let my homies hang at his place. Welfare says they give me mo money if I has my own place. Then my homies can hang at my pad.”

When you use answering machine, you can pre-screen. You don’t have to bother calling back the tenants that don’t sound like good candidates. (And if they imply that they’ll be using your place as a party pad, paid on the taxpayer dime, they might not be the tenants you want.)

The reader who contributed these comments, Karen, has been a landlord for more than 20 years. Karen says: “At one time I had 54 tenants simultaneously in addition to my regular business, and I have always been a successful owner of rental property.”

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12 Responses to “Real Readers Ask: Traveling & Tenant Screening”

  1. AverageJoe
    12. Feb, 2013 at 9:14 am #

    Great call on the foreclosure tenant. It’s so difficult to pick the right tenant that you really have to look for clues like the one you mentioned. I’ve met many people who make the mistake of looking at salary closely. That’s a huge miss…just because someone makes a lot of money doesn’t mean they pocket any of it.

  2. krantcents
    12. Feb, 2013 at 1:21 pm #

    When you are showing a property, you are trying to make a sale. You have to ask for the order. I always asked them if they would like to leave an application and/or a deposit. No deposit, they were not serious.

  3. Military Money Manual
    14. Feb, 2013 at 5:00 am #

    Some great tips here. I’m starting the process of researching rental investment properties and your tips for screening potential tenants are great food for thought. Have you had any experience with renting properties through AirBnB? It’s more legwork with people constantly coming and going but could provide more profit per day. Any thoughts on that? Thanks!

    • Afford Anything
      15. Feb, 2013 at 9:51 am #

      @Military Money — I know a few people who have vacation rentals … It becomes a full-time job, in part because you’re expected to provide fresh towels, full rolls of toilet paper and other detailed amenities. It’s akin to running a small hotel. If you are renting a room in your own home, or in a cottage house behind your home, the management would be a little easier. Vacancy would still be a risk, unless you live in a year-round, high-demand area like Manhattan. Generally speaking, the rule of thumb is that you need 2-3 times more revenue per day in order to compensate for the additional vacancy and management. (Vacancy is the real killer.)

      That said, I’d love to hear the perspective from any Afford Anything readers who own vacation rentals or use AirBnB….

  4. Luis
    14. Feb, 2013 at 8:13 am #

    “Yo. I needs the place. Welfare gives me some money and I live with my Daddy. He won’t let my homies hang at his place. Welfare says they give me mo money if I has my own place. Then my homies can hang at my pad.”

    That is a pretty good imitation of local slang :-)

    Glad to see we have some of the same landlording standards. I agree with the tenant that sounds interested but never fills out the application. I am currently renting a house and have gone through several of these over the last week. I do follow up with some but only once. If you have to prod them too much (sometimes a little bit is needed) to fill out an application then they are just “tire kickers” and you really don’t want them.

    I would love to hear a lot more about the lady that lives in Paris and rents houses here…

    I think landlording can be done long distance but only to a certain degree and for a certain time unless you are ok dealing with the losses that will inevitable comes as a result. Remember that a property manager is not always the solutions. There are plenty of property managers that suck, that will put anyone with a pulse on your property and that downright will steal from you.

  5. Brick By Brick Investing | Marvin
    14. Feb, 2013 at 9:23 am #

    I have to admit we have a toddler and although we love her to death she is a little terror. My wife and I consider ourselves clean and healthy people but if you were to look in my wife’s backseat at the moment you would see tons of goldfish and cracker bits. I always thought it was the most disgusting thing ever and I would be the last person to own such a vehicle. But in all honesty it is the last thing on my mind to clean, between my full time job, husband, father, and blog I just don’t have time to pick up crackers & goldfish on a daily basis.

    All good points in your article though. When I had a rental property I left it up to the property management firm to find me tenants.

  6. Julie @ Freedom 48
    14. Feb, 2013 at 10:18 pm #

    I love the tip about peeking inside a tenants car! I’d never thought of that. We do always make a point of visiting their current home. When they decide they’d like to rent the place we say “I’ll drop by your place and we can fill out the application and go over the paperwork”. We make it seem like we’re trying to make it convenient for them – but the reality is… we want to see what kind of conditions they’re currently living in. So sneaky! =)

  7. JT
    18. Feb, 2013 at 10:59 am #

    Looking at the car and its condition, both inside and out, is my main criteria because that is almost a guaranteed look into the personality and responsibility of the prospective tenant. I also refuse to rent to anyone who tries to negotiate the rent down. I price at the low end anyway, so I have lots of prospects. If they are negotiating down, they can’t afford it and will be late inevitably.

  8. tmr
    18. Feb, 2013 at 11:53 am #

    I own my condo now, but when I was renting, I TWICE had landlords call me back to increase the rent after I’d turned over my paystub and credit info. I was a young, single woman who had two jobs, one of which was a big firm lawyer job. I was rarely home, and lived in modest rentals because of that. I absolutely, 100% had the impression that they saw how much I was making, and decided to raise the rent. I walked away from both rentals. I thought that was absolutely shady.

    • Afford Anything
      18. Feb, 2013 at 11:59 am #

      @tmr — That’s totally shady. Rent is supposed to be based on the location and the condition of the property … the general fair-market value. It’s not sliding-scale based on the tenant’s financial means. Good for you for walking away from the deal.

  9. Krishanu
    22. May, 2013 at 2:13 pm #

    Question: How do you go about declining an applicant? I mean, what do you tell them, the basis for your decision? Are you required to? Or just a “sorry, but I can’t rent out my property to you” suffice? Could the prospective tenant claim discrimination, under the Equal Housing Opportunity law?

    I’m new to renting (out) and hence this maybe a redundant question for many.

    • Afford Anything
      24. May, 2013 at 8:23 pm #

      @Krishnau — First of all, I use a tenant screening service (Transunion’s My Smart Move), which allows me (legally) to see the applicant’s credit history. The service has an automated form that you can send to tenants that don’t pass muster, which simply says that their application has been declined. I’m most comfortable using that form, since it’s just a standard form (i.e. I can’t say anything that could be wrongfully interpreted).

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