Rule Number 7
June 1, 2012
How do landlords screen tenants? The US Census Bureau’s Property Owners and Managers Survey shed some interesting light on screening methods. Many do it by breaking Rule Number 7.
The Survey reported that most private landlords (64 percent) use personal interviews as their main source of tenant screening as do multifamily units (75 percent). It makes you wonder, though, what happens to the rest of the applicants? Do the landlords even speak to them or do they just take the money, hand them the keys and let them move in? More than a third of the landlords of single-family properties, and a quarter of multifamily landlords don’t use personal interviews as a tenant selection source. But is that all bad?
Rule Number 7, from my speech, “The Rule” is “Never decide to rent to an applicant while you are listening to him.”
There are only two times a landlord gets into trouble, when he’s in a hurry and when he feels sorry for somebody, and bad tenants are pros at making landlords do both. You never knew there was so much misery and hard luck in the world until you listen to a bad tenant try to worm his way into your property. A black cloud follows them around wherever they go, in every aspect of their lives.
These folks are so pitiful, and have such hard luck stories, that it is enough to make the most stony-hearted property manager’s heart bleed. They have a knack for going to work for the most unreasonable, rotten, cruel, mean, obnoxious bosses on earth, and for companies that are about to lay people off.
They have a knack for getting into accidents and getting sick, which, of course, runs up huge doctor bills that they have to pay, so they can’t pay the rent. And because they seem to always rent from the most unreasonable, uncaring, rotten, cruel, mean obnoxious landlord, they always get evicted. “You’re not like that, are you?” they ask.
Once you’ve been sucked into their universe of bad luck, it tends to rub off on you. They don’t pay you any rent, either. And do they have some unique excuses! Their advantage is that they have a new set of stories to take to the next landlord after you boot them out. At that point, some landlords feel such pity that they hand the keys to their new “tenant” and even say they’ll wait for the security deposit and the rent until the tenant gets paid on the first.
And that was all because of breaking Rule Number 7? Could be.
Where the survey gets even more interesting is the remainder of the selection methods. Some 61 percent of single-family landlords don’t even consider the responses on the application form, and similarly half of landlords for two-to-four plexes don’t either. As a matter of fact, the majority of landlords don’t even consider other criteria, income, rental history, and such Seventy-five percent of single-family landlords and 71 percent of plex landlords don’t even check to see if an applicant makes enough money to pay the rent. That means that almost two-thirds of landlords decide to rent to an applicant solely, with no other consideration, on the basis of the interview.
One telling statistic is how often landlords call the previous landlord for a reference and verification. While 84 percent of large apartment complex managers check landlord references, only 43 percent of single-family and 51 percent of plex landlords do. They don’t even call to find out if the tenant actually lived there, much less to find out when and how good a tenant he was. Then they can’t understand why they have problems with misbehaving renters.
Look at how the people who manage large complexes do it. They check credit and references, they check employment, they check previous landlords, and they make sure the applicant earns enough to pay the rent. One of the reasons for this thoroughness is that most large apartment complexes have written procedures for dealing with tenant selection. They have those procedures because they realize that tenant selection is the most important thing that landlords do, and they want to make sure to do it right.
Good management and tenant selection means having procedures and following them. It means verifying everything. It means making sure the person we are talking to is worthy of renting from us. Doing it “right” includes personal interviews, certainly, but doing it “right” also means abiding by Rule Number 7, never decide to rent to an applicant while you are listening to him.