Property Management Advice for Investors: Lessons in Tenant Screening

in Advice, Property management, Uncategorized

As an investor myself, I think it is important to provide real property management advice for investors. Particularly important are some valuable in lessons in tenant screening. Oh, where to begin. But first…

How I Became My Own Property Manager

I never intended to manage my own investment properties–I sort of fell into that role as a bootstrapping investor and learned the hard way. Unlike the mature markets in Fairfax and Arlington Counties, the market I invested in (in Virginia’s Shenandoah Valley) doesn’t yet offer cost-effective residential property management for small investors like me. So, I had to plunge in and learn by trial and error. From becoming a social media tenant sleuth to learning how to sniff out good contractors, every bit of wisdom I gleaned cost me time and money. And along the way, I learned some pretty expensive lessons. I think a few of those lessons are worth sharing with other investors and would-be landlords.

Like a lot of people new to real estate investing, I got my foot in the door by using a combination of home equity loan and savings to purchase several tiny income properties at a time when prices seemed to be rebounding after the lows of 2009 and 2010. My goal was to net some income each month and (hopefully) to see some appreciation in a burgeoning market, over five or six years of ownership.

I joined a real estate investors’ networking group and sought out the best advice I could get. “Don’t lose money each month” was what it boiled down to. And what was the surest way to lose money? Bad (as in nonpaying and/or destructive) tenants.

The Tenant Problems Begin

I had a little problem, however. The houses I had purchased came with tenants (and leases that had more than six months left on them). While I felt a bit nervous about my rough-around-the-edges tenants, I figured I could manage them if I just stayed on top of things. And maybe I’d even end up with a good tenant or two. It could happen, right?

Wrong. From the beginning, I had problems with all my tenants. Problems collecting rent and problems with maintenance. Problems with town ordinance violations and problems with neighbors who didn’t care for my tenants’ habits. The best of the lot were the elderly couple who moved out in the middle of the night the week after I bought the house. They took a couple of major appliances with them and disappeared without a trace. But they did vacuum before leaving, at least. Which was very thoughtful of them.

Screening Tenants

So, I set out to find me some new tenants. I wrote an ad for Craigslist, uploaded some pictures of the cute little Cape Cod house, and clicked Publish. I figured before I even took an application I’d do whatever initial screening I could. I’m a journalist, after all–and I know my way around digital research.

About five minutes went by before the first eager inquiries started rolling in. I cracked my knuckles and started right in on the Facebook sleuthing–which my teenaged daughter informed me was more appropriately named Facebook-stalking. But hey, after the great midnight appliance heist, one couldn’t be too careful, I told her. I was only performing my due diligence as a responsible landlord and investor.

First up: Delilah Shuttleworth (not her real name). She was a hardworking young mom, she informed me–just making it on her own due to her positive outlook while looking out for her darling toddler, who was the joy and light of her life. She had included a couple of photos with her inquiry, which backed up that persona. The head shot looked like it might have come straight out of the annual church directory. Awwwww. And another one pushing her chubby little two-year-old on a swing. Sweet. Oh, and she wished me a “blessed day” in her closing.

Using Social Media for Initial Tenant Screening

On to Facebook. There was Delilah in the profile pic–but with a ferocious animal print ensemble rather than the Peter Pan collar I’d seen in her email. Plenty of photo albums available for public viewing. And, lo and behold, nearly all of them show her downing shots (or unconscious). And right at the top of her profile is a request for money for the incarcerated boyfriend. (It even came associated with an app called JPay. The smarter way to pay inmates.) One friend commented that she’d maybe make a donation to the cause if Delilah would pay her back from last Friday night. Delightful Delilah had snarled back at her with a string of four-letter words that’d make a sailor blush.

Three hours later, I’d completed Facebook research on all Craigslist responders whose emails provided last names. And I’d determined that they were quite a fun-loving, free-spirited, photo-sharing bunch–but alas, not exactly tenant material.

The Tenant Problems I Never Anticipated

I’d subsequently learn a number of tricks in ad copywriting to keep me from even having to do that up-front Facebook detective work. Asking for a work email, mentioning online payment policies, requiring a preliminary application to be considered for a showing, indicating that a broker would be in touch to take application fees, etc. Those measures helped me at least to filter applicants for minimally stable jobs, up-to-date financial practices (such as having a checking account), and incomes. And subsequent credit checks (using the application fees) helped further refine the list, of course.

What were the debacles and time-sucking inconveniences my screens didn’t help me uncover? A history, in one case, of creating “lawsuit traps” and suing people. A drug addiction. A hoarding problem. An employer who went out of business the week after the lease was signed.

What a Professional Property Manager Offers

Would a professional property manager have been able to spot and avoid these problems? Maybe not all of them. But in placing tenants on my own I’ve come to realize one important thing: As a landlord, even when I tell myself I’m keeping emotional distance, I am still too close to the situation to maintain objectivity. I am proud to be providing renters with affordable housing, and I truly want to place tenants who seem to satisfy my criteria.

But it’s more than pride in placing tenants. There’s plenty of fear in this landlord job too. I fear seeing one of my houses sit empty, because of the drain to my bank account (and thus my ability to do things like meet all my own bills, plan vacations with my kids, or grow my primary business). Finally, I have little time for the extra care an empty house requires of me.

No, I’m not objective about my properties–or the tenants who want to live in them. How could I possibly be?

I am emotionally involved in my own properties–no matter how many screening techniques I learn or how much wisdom (and healthy skepticism) I gain. If my market had offered me an experienced property manager specializing in single family homes, I have no doubt that I’d have been better off hiring someone to bear that responsibility (and maintain that unblinking eye to the bottom line).

A property manager with years of insight into tenant issues, applicant red flags, and local employers could have avoided many of the traps I fell into in my push to keep my houses from sitting vacant.

Not to mention saving me hours of time being horrified yet strangely fascinated by applicants’ lives on Facebook.

If you would like to learn more about WJD Management, please review our comprehensive Management Program guide. If you are ready to rent your home, feel free to take advantage of our exclusive FREE Rental Market Analysis. Finally, don’t forget to connect with us on social media! Follow us on Facebook, Twitter, LinkedIn, Instagram, and Pinterest for tips, ideas and updates.

Property Management in Old Town Alexandria Virginia

in Advice, Property management, Rental Market Insights

Are you looking for real advice about property management in Old Town Alexandria Virginia? We’ve got the advice you need for property management in Old Town Alexandria, Virginia.

How much does it really cost?

You live in Alexandria, Virginia, and you recently learned you’re being transferred overseas for the next couple of years. You’re excited about the big new transition. There’s one problem, though: To keep your house, you know you’ll have to become a landlord. Which means somehow dealing with rent collection each month, the intrusion of 2 a.m. phone calls into your sound sleep when something breaks, the paperwork at tax time, the hassle of finding good contractors to fix stuff, etc., etc.

5 Questions Every New Renter Should Ask

in Tenants

So you are not ready yet to buy a home and have decided to rent a place, here are 5 questions every new renter should ask.

(Editor’s note: For answers to these typical new renter questions, we turned to local expert and career Realtor, Harry Yazbek, Broker and Branch Vice President for Coldwell Banker Residential Brokerage in Vienna.)

Number 1 – Do I Have to Have a Realtor®?

The short answer is no, but why wouldn’t you want one? A Realtor® can become your best friend and help negotiate terms and conditions you may not even think about. The way it usually works is you sign an Agency agreement with a Realtor® and you become their client. By law and Article one of the Realtor® Code of Ethics, they must represent your best interest and protect your rights. They will negotiate with the landlord or property manager and assist with lease review and other paperwork required.

Key point: Although a Renter’s Agent is generally compensated by the landlord and not the renter, they owe the renter all the loyalty.

Number 2 – What if My Credit History Isn’t Perfect?

Your credit history is, increasingly, a key factor in all areas of your life as a consumer and as a candidate for housing. Some may protest this trend but we must accept reality in that our credit “worthiness” is a major consideration to future employers, credit cards, auto loans, licensing bureaus such as real estate and mortgage loan officers–and, of course, landlords.
There is no set credit score for renters, most landlords select their tenants based on many variables, and credit is just one of them. For example, let’s say someone had great credit then lost his/her job in a layoff. After the job loss, many payments were missed and credit suffered a great deal but a new job was secured a few months later and credit payments have been perfect ever since. To some land lords, this scenario is not as risky as someone who has consistently had bad credit over the years. The two applicants may potentially have the same score but the one who was laid off will likely present a smaller risk to the landlord

Key point: If two candidates are equal in all but their credit ratings, most landlords will take the applicant with the better credit.

Number 3 – How Much is The Rent?

Rent is usually established by current market conditions, comparable rents in the neighborhood, property condition, amenities and term of lease. Generally speaking, the longer the lease term you offer, the more likely you may be able to bargain for a reduced monthly rent. Of course this ties up the property on both ends and if market conditions change, one party will usually get the short end of the stick.

Although rent amount is technically negotiable, one needs to keep in mind what type of market we have at the moment. When homeowners were losing their properties due to foreclosure during the financial meltdown, the rental market was very hot, in favor of landlords. Basic supply and demand kicked in, the majority of those former homeowners entered the rental market and demand exceeded supply, hence rents went up drastically.

Key point: Know the market and negotiate terms accordingly.

Number 4 – Who Pays for Normal Wear and Tear and Damage?

Answer is very simple, read your lease and negotiate it. Generally speaking, normal wear and tear is not the tenant’s responsibility but the cost to repair tenant damage is and will be deducted from the security deposit. When you first move into the property, conduct a “walk-thru” inspection where you can detail and take photos of any existing damage to the place, same as you would with a rental car.

Key point: Careful inspections–with photos–mean you will not have any existing damage to a property counted against your deposit.

Number 5 – What happens if I break the lease?

A lot of bad things can happen if you break the lease, depending on how nice you were to your landlord and how pragmatic he or she happens to be. First thing the landlord can do is keep the deposit and sue for the remaining balance of the lease. Or, the landlord can find another renter to take over and sue for the amount of time the property was vacant during the transition. This will most likely have a negative impact on the renter’s credit history. I would recommend you seek counsel before attempting to break a lease. In many cases landlords are very understanding, and a transition can be done amicably (but with the cost of process being paid for by the tenant). This will probably include rental payments while the home is vacant, utility costs and yard maintenance during that period of time, as well as any Realtor® leasing fees incurred by the homeowner.

Key point: Communicate with your landlord if you must break your lease–and be prepared to bear the costs of vacancy.

To learn more answers to common new tenant questions visit our Tenant FAQ page.

How to Interview and Hire a Property Manager in Northern Virginia

in Foreign Service, Property management

Wondering how to interview and hire a property manager in Northern Virginia? Here are questions absentee and Foreign Service homeowners should ask.

Curious about how to interview and hire a property manager in Northern Virginia? Local Realtor Carolyn Connell knows a little something about the professional property management needs of Absentee and Foreign Service homeowners. She not only specializes in Foreign Service relocations–she has experienced a few herself. Here’s what Carolyn had to say about the special needs of Absentee and Foreign Service families who decide to rent out their home while living out of the area or overseas. This information is also relevant to traditional homeowners, investors, government and military personnel and families! Here is how to interview and hire a property manager in Northern Virginia.