So help me understand how this happens.
You have a house. You want to buy a bigger one. You do. But then you can’t sell your first house.
So you decide to rent out your first house.
Lots of people are doing it.
So far, so good, right?
And actually it is.
Right up to the point where you decide NOT to do a proper background check on the tenant prospects.
And you end up being called an “accidental landlord” and a – sniff sniff – victim, by a moronic AOL real estate writer (link below).
Really?
Are people really that foolish?
You have a house worth a couple of hundred thousand dollars. It’s nice enough that you once lived in it yourself.
But you don’t have enough common sense to do a little research on how to be a landlord? Or LEAST how to do a proper background check?
Apparently these “landlords” didn’t. And they got caught holding the bag. A bag they couldn’t afford.
Listen. Owning rental properties is NOT rocket science. It really isn’t. But there ARE things that you need to learn and do if you want to be successful at it. Some very basic principles that, IF you pay attention to them, can significantly increase your chances of success. And they work whether you’re an accidental or on purpose landlord.
Here are the top 5 things you should do:
1. Don’t buy crappy houses!
The scene gets played out regularly just like a scratchy movie reel from the old days: A newbie real estate investor approaches me and breathlessly tells me about the GREAT deal he got on a crappy property that he plans to hold forever as a rental. Cut to three months later: newbie real estate investor is hanging his head and moaning about how bad the real estate market is because he didn’t do any work on his crappy house and he’s wondering why it’s still not rented.
I’m not saying that you should only buy houses that you and your family would live in. But you know when a house is a crappy house. So stay away from them. (If you already have one and you’re having trouble with it, give me a call. There may be some things you can do to improve the situation)
2. Don’t buy in crappy areas!
Once again this is not rocket science. Use your common sense. Nobody wants to live in crappy areas. Renters are people too!
3. Screen Tenants
I always thought that this was a no-brainer. Apparently it isn’t. Get copy of each person’s driver’s license. Get a copy of each person’t social security card. Match the copies with the originals. Then do a real background check. Yes it will cost between $25 and $50 per person, but you can have the tenants cover it as part of the application fee. Or pull it out of your own pocket. It’s worth it. (These are the folks that I have used for 9 years: E-Renter USA)
4. Judgements Matter. Credit score not so much.
The AOL writer in the linked article admonishes you potential landlords to “CHECK CREDIT SCORES”. I can almost see her giving you the finger wag like a 1st grade teacher does.
But guess what? She’s full of crap. The fact is, if the folks that are applying for your rental had good credit, they’d be BUYING, not renting. So credit scores don’t matter very much. And it’s a good thing too. Because these days you have to jump through a lot of hoops to get someone’s credit score.
No. What you want to look for are judgements on the credit report. Felony convictions on the background check report. And whether they show up on a sex offender registry anywhere. These three things will tell you a great deal of what you need to know about a tenant prospect.
5. Get the security deposit and first month’s rent in cash
You should read that again. GET THE SECURITY DEPOSIT AND FIRST MONTH’S RENT IN CASH.
For one simple reason. Cash doesn’t bounce. Plus, having someone put together that much cash at one time is an extremely effective screening device.
Now keep in mind this in not a comprehensive list regarding tenant screening. But it’s a start. And if you just focus on these five things you’ll be well on your way to weeding out the bad eggs.
Take it from me. I didn’t do all of these things when I was getting started. And I got left holding the bag a couple of times myself.
Here’s the link to the AOL article: http://realestate.aol.com/blog/on/accidental-landlords-non-paying-tenants/
