Rental property can be a solid investment if you treat it exactly like a business. That means due diligence when it comes to understanding the numbers for your asset to cash-flow, and as a landlord, it means finding the largest component that helps your cash flow stay positive, which is excellent tenants. Here are some of the things to look for to find good tenants.
The Internet is both a blessing and a curse. As a blessing, we have a constant flow of news, entertainment, connectivity with others, and a ton of cute cat memes. As a curse, we have spammers, scammers, and identity theft at every click of the mouse or swipe of the phone. As a landlord and a property owner you need to be especially cautious because of the latter. Using common sense and good business sense as a property owner should be your first priority when screening for appropriate applicants. Here is some information on how scammers work in the rental industry and how you can still find good tenants in the age of scams.
The fastest growing form of fraud is called synthetic fraud – this means an applicant fabricates all or some of their information in order to create a new identity in an effort to rent a property. They may use real social security numbers (usually from children, the elderly, or deceased people) and combine them with fake names and birth dates in order to pass a simple background check. Synthetic fraud accounts for at least 85 percent of all identity fraud in the United States according to the National Apartment Association. The applicants simply create or buy fake identification that combines real data with phony names. These fake forms of ID are often available for purchase on sites such as Craigslist or other similar websites that have no regulation or rules. Sometimes this scam is run on landlords because someone’s true identity is not rent-worthy, but the scammer still needs a roof over their head. However, even if you pay your rent on time under a false ID, it still doesn’t make you a good candidate for long retention, which is what most landlords want for their investment.
This 2019 article explains how landlords are now getting duped by renters who use fake identities. Anyone with a false ID can rent an apartment or house so it’s crucial to do thorough background checks for each and every applicant. You can almost count on the fact that some applicants will lie on their application form in an attempt to rent a home. This is why reputable tenant screenings are such an important step when trying to find good tenants. Tenant screening services are usually provided by a third party that specializes in checking potential applicants’ backgrounds. A thorough tenant screening should include a credit check, a criminal record check, any bankruptcy or foreclosure reports, employment records, eviction records, past address history, and reference checks. Screenings such as these will give you some peace of mind that you are renting to a good, honest tenant – which is really crucial for the bottom line.
A lot of potential tenants will have pretty thin credit and background records anyway, so as identity theft increases, it’s more likely that you will see an increase in these kinds of fraudulent ID applications. The problems are compounded if you are a long-distance absentee owner as well. Another way to combat the scammers is to hire a qualified property manager and make sure they are doing a thorough job of screening and managing your property. One caveat to using a property manager is to make sure that they are knowledgeable about the ADA requirements and Fair Housing laws so that there is no whiff of discrimination at any point. You or the property manager should know not to ask any questions regarding an applicant’s race, color, religion, sex, national origin, disability, familial status, or gender orientation. And don’t forget that each of the 50 states also have their own particular state laws that you need to be aware of, so you or the property manager need to investigate those landlord-tenant rights as well. Choosing good tenants should be a careful and equitable process for both sides involved.
The good news is that once you find a good tenant, then you can concentrate your time and efforts on retaining that tenant for as long as possible, which saves you money overall. Being aware of the latest scamming crazes and always being on the lookout for less than stellar applicants will help you achieve your goal of renting out your properties to good people. If you do your research, then you can find tenants who pay rent on time, maintain financial stability, and can take care of the property itself – without having to worry about being caught up in a big scam.