Part of being a landlord is not only trying to maximize rents collected but also playing defense to protect what you have. Hopefully overall risk management, while maybe sacrificing some of the top line revenue, will result in optimized bottom line profits long term. These can be strategies such as consistent maintenance (I definitely need work in this department), insurance, and tenant screening, which is the topic of this blog post. Not particularly sexy but necessary.
I am back from Austria and now have an open room. It’s time to put my business pants on and rent out some square footage. I am foregoing placing an ad on Roomster (Tinder for roommates) this go around to see if I can avoid the advertising costs. I have put ads on Facebook and Craigslist. I posted FREE ads last night and am already getting responses. I showed it to one gentleman, with his lovely mother, this morning. This room has rented between $650 – $750 the last three years, depending on length of lease and I am going to try and get $725/month plus utilities on a year long lease. Here’s my Craigslist ad:
If anyone has thoughts about the ad please let me know. I’m always trying to get the picture sequence correct, as well as the best pictures in general. While many people say they don’t judge a book by its cover that is really just BS unfortunately; everyone is programmed to react to images.
That guy from this morning though now says he’s sold on the space and wants to lock it down. So what’s our next move? We need to do some due diligence, in the form of background and credit checks. We want to make sure he’s not a murderer, drug dealer, or other type of bad person that could cause some rifraf to the house or the other roommates. I’ve found some people, who’ve made unbelievably good first impressions, who have dark pasts which is kind of scary to think about. This process may have saved me some real future pain.
We also want to make sure that he’s been diligent towards paying his bills. When someone asks if a prospective tenant is a credit risk really what they’re asking is whether there is a significantly (subjectively defined) high probability of the tenant not being able to pay. Hopefully he doesn’t have too much debt and if he does we need to ask ourselves does that debt inhibit his chances of paying us.
I have gotten used to using mysmartmove.com for tenant screenings and I would recommend it for a couple of reasons.
- Can pass the cost of the screening to the tenant or even make a profit off of its administering. For example you could charge the potential renter $50, you pay the $40, and pocket the rest. I don’t do this but you could. I do however have the tenant pay.
- You can see above there are different options for the information that you get on the prospective tenant. I always do the premium, since they’ll be paying. The “Income Insights” tell you if the person makes 3x the rent and if what they entered seems suspicious.
- All you need is the prospective tenant’s email. You put the email into mysmartmove when you start an application and mysmartmove sends the renter a link to fill out. This keeps their information secure if they’re worried about providing vital information to you, the landlord.
If anyone has additional questions or comments on this process please reach out. And remember, “Protect thy house.”