How to Effectively Screen & Qualify Tenants In 5 Easy Steps
by John Nuzzolese
I always say that “95% of your tenant problems can be eliminated in the screening process.” If you’re like me, you probably find it difficult to relax when you have vacancies. So getting it rented is the main idea, right? Well, from now on, lets say “getting it rented to a properly qualified tenant is the main idea.”
Below is what I call The 5 Steps of Screening Tenants.
STEP 1: First Contact
From the very first contact with the tenant, the screening process has begun. Whether you are the landlord, real estate agent or property manager, the same still holds true.
First Contact is usually by telephone, so you need to ask the right qualifying questions in order to decide if you should proceed to step 2. Advise customers of your up front rent and security deposit requirements and other important facts regarding the rental that may help disqualify the prospect.
I suggest you make a list or prospect card of questions to ask and have it handy while you conduct your first contact interview. For example:
Name: Phone:
Reason for Moving: # of People:
# of children & Ages: Occupancy Date:
Pets: Smoking:
Credit: Landlord Reference?
Please note that anyone who has a problem answering your questions (as long as you ask them politely), probably will not qualify for your rental. Serious customers want to make a good impression on you and should be happy to answer your questions. This process can save you and customers a lot of time and trouble.
STEP 2: Showing the Property
From landlords to real estate agents, we all have our own style in showing the rental. I think we all need to be aware of certain telltale signs to watch for while evaluating your prospective new tenants.
1. Appearance. Is the prospect neat and clean? Did he or she make an attempt to make a good impression? In most cases, an unkempt person keeps an unkempt lifestyle and home.
2. Car. Does the prospect have a nice car? Is it clean? Although we can’t judge people by their car, we should take note of it along with other details.
3. Attitude & Manners. Does this prospect behave respectfully? Does he or she show indications of being difficult to deal with in the future? Did the prospect wipe his or her feet when stepping into the house? Did the prospect walk into the rental while smoking? You can learn a lot about people even before speaking to them. Sometimes it helps to pay attention to details.
4. Criticizing the property. Are the prospects pointing out legitimate concerns, or are they trying to come up with items to negotiate price?
5. Yes or No? Can the prospect make the decision now or will they have to think about it? If they know now that they want your rental, did the prospect come ready to give you a deposit and fill out an application?
STEP 3: The Application Process
The first thing you need is a quality rental application. Let the applicant know that his or her application will be considered along with others, and you will notify the applicant once a decision is made. Advise the applicant(s) that it is very important to fill out the application as completely as possible. If you (and I recommend you do) run a credit report on the applicant, I suggest you be sure to collect a screening fee. This is a provision in the The LPA Rental Application.
Inform your prospective tenant that the application must be returned as soon as possible to avoid the risk of losing the rental to a competing prospect.
Review and verify the application thoroughly and look for inconsistencies and red flags. When you are satisfied, you will proceed to approving your new tenant in step 4.
STEP 4: The Approval Process
This is usually a fun part, but keep in mind that you are still screening the applicant while preparing him or her for the next step. I like to congratulate the applicant on being approved and let them know they came in 1st place. Also, let them know if you made any special concessions just for them, such as overlooking minor credit infractions, etc.
This process is also an opportunity for you to make sure the applicant can and will deliver. Set the time, date and place for your lease signing. Instruct the applicant(s) to bring the proper amounts of monies, identification (if you don’t already have it), and how you prefer to be paid. (Check*, money order or cash)
* Be sure to tell your new tenants that possession or keys will be given only after checks have cleared.
STEP 5: The Lease Signing
It is very important that you have a quality residential lease. You’d be surprised at how many people would just sign a lease without reading it! And I don’t just mean tenants! I believe it is crucial to read the entire lease with the tenants at a lease signing. It is your agreement with them. Shouldn’t you both know what is really being agreed to? As you read the terms of the lease with the tenants, you will be able to conduct your 5th and final step of screening. Does the tenant argue on every item? Is the late charge an issue? And so on.
Of course, if you are unhappy with how your prospect responds to you and/or your lease, you must not rent to this person. I believe: It is better to have NO tenant than it is to have the wrong tenant.
One of the most important elements of modern residential leases today is the Late Fee clause. In order to encourage timely rent and discourage late payments, I highly recommend you have a solid late charge clause. Having the clause in your lease is only part of protecting yourself against late rent.
The first step is to explain and warn the tenant about the late fee when going over the lease before signing it. I’ll even ask the tenant not to sign the lease if they think that late payments are in their future. I also inform the tenants that I belong to a national tenant reporting bureau and have the power to adversely affect the tenant’s credit, so.. “Don’t mess up with your rent. It’s not worth it.” If the tenant values his credit and plans on buying a home someday, I remind them that it is very important to prioritize the rent payment and keep their credit clean.
How much should the late fee be? I feel late charges should hurt. I don’t want to make it so high that a struggling good tenant will fall even further behind, but it should be a painful enough fee that the tenant will not want to pay again. Ever.
Many tenants who incur a late fee don’t really mind paying it in their own good time. That’s why it is important to also charge a Daily Late Charge in addition to the initial late fee. It gives the tenant an incentive to hurry up and pay the initial late fee before it grows into an even more painful hit.
Another item we include in our Late Charge clause is a Bounced Check Penalty. I usually make the bounced check charge the same as the inital late fee. I also prepare the tenant that if the rent check bounces, it will cause the rent to be late and they will be responsible for a late charge too.
I want to stress to you that the landlord protection clauses in our lease or any other lease are there to protect you, but sometimes you will have to enforce the lease. Many landlords are afraid to lose their friendly relationship with the tenants when it comes to enforcing the lease. Remember that this is your money we are talking about. This is your property they are occupying and you deserve to have a tenant who lives up to his or her agreement with you. Send the late fee notices and make the tenants pay the penalties. You have your own bills and you want your rent to be on time. That’s why you rented to them. – John Nuzzolese
About the author
As a Real Estate broker / investor in New York, John Nuzzolese has been
involved with rentals and investment property since 1979. Besides owning and operating two real estate businesses, he is president and founder of
The Landlord Protection Agency, Inc., an organization specializing in helping landlords and property managers avoid the hurdles and pitfalls and expensiveblunders common when dealing with tenants.
More information on the Landlord Protection Agency is available at www.theLPA.com
