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Landlording and Screening Tenants

So, after you've followed the criteria for purchasing a rental investment property and snapped one up, how do you screen your potential tenants?

I've been a landlord for a few years now and I've seen it all when it comes to tenants.  Good ones, bad ones, all shapes/sizes, and all financial the predicaments you can think of.

When I first started landlording, I didn't have a lot of specific criteria when accepting tenants.  I basically took anyone who was willing to pay me money.  Big mistake.  I was completely naive to the fact that not everyone is responsible with money and can/will pay their rent on time (or ever).

From my mistakes, I have come up with some rules that must be followed before I allow a potential tenant to move in. 

1. Must have a verified job

  • This may seem obvious, but I've had tenants who told me they had jobs but turned out not having any steady work.  No work, means no money to pay rent.  Simple solution, make sure they show you a recent pay stub along with employer contact info so that you can call to verify employment.  Note, I don't have any student housing, so this rule may not be valid in that situation.

2. Must have at least 2 good references (from previous landlords preferably) 

  • Get referrals from landlords prior to their current landlord.  Their current landlord may give them a good reference just to get them out of their place.  To me, landlord referrals are extremely important when screening tenants. 

3. Should have decent credit

  • You can get the tenant to show you their most recent credit report, or you can get it yourself from various sites online.  Tenants with poor payment history usually results in a higher probability of rent payment default.

4. Must have enough cash for a security deposit and first months rent (see local rental guidelines in your area).

  • If the tenant doesn't have the cash for security and first months rent on or before move in date, then I move on.  Some tenants will try to pay you a portion of each because they don't have the cash.  To me, having some cash in the bank shows money management responsibility which means lower chance of rent default. 

5. Prefer not to have a single older lady (or man) as a tenant.

  • Nothing against single older ladies (or men), but from my experience, they are very needy as tenants (am I going to hell?).  I'd prefer low maintenance tenants.
  • However with that said, I would accept them providing that they meet the other criteria.

6. Prefer no pets.

  • I don't mind if the cats are spade/neutered (spray is deadly), but not all pet owners are that responsible.  I love dogs, but tenant dog owners don't seem to clean up after the dog in the yard.  So I just keep a general rule of no pets.

7. Absolutely no smoking inside the premises.

  • This one is self explanatory.  Smoke causes a stink that lingers.  The only way to get rid of the smell is to wash/repaint the walls and/or wash/replace the carpets.  Besides, indoor smoking in Canada is slowly becoming taboo.

8. If one tenant is viewing the home, I must meet all parties before application is accepted.

  • If the potential tenants are a couple, it's usually the good one who views the apartment.  I've had experiences where I accepted a new tenant based only on meeting one of them and it turned out to be a big mistake.  The 2nd tenant turned out to be psycho.  Never again.

Can you tell that I've become a disgruntled landlord? :)   For you landlords out there, do you have any tips for screening tenants that I didn't mention?

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FrugalTrader About the author: FrugalTrader is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.

{ 15 comments… add one }

  • potential tenants from abroad April 3, 2008, 8:54 am

    What do u think of People moving from abroad?!
    I Have a Condo for rent, but many potential tenants contacting me for it from abroad! Not easy to check their credit or references! What do u think?! Is there any hint to be safe!?

  • FrugalTrader April 3, 2008, 9:11 am

    Potential, that is a really tough question that only you can decide. Personally, without any credit or references, I would have a really hard time accepting a tenant. One thing you could do is to confirm their place of employment to make sure that they have income.

    Also, you could see what their reaction is when you tell them the amount of upfront money you require. Security deposit + first months rent or whatever the maximum is in your region.

  • DAvid April 3, 2008, 12:06 pm

    Potential,
    You could also consider renting for a shorter period. If you are able to rent on a weekly basis, you may be able to take action within two weeks of a problem becoming evident, rather than two months.

    We have rented our suite by the week, and credit the last few days of the month for prompt payment of the earlier periods.

    DAvid

  • Mary April 3, 2008, 12:21 pm

    Yeah that sounds reasonable David, But the problem is that I myself am out of town and rather have a long term tenant!!

  • Barry May 28, 2008, 4:12 am

    Can you explain more about ‘HOLDING CHEQUES’?

    So you would write the same dates at the top, ie. sept 1. then at the comments section, specify in detail which month it is? so sept would be month 1/12? and oct would be 2/12? I am about to rent out three rooms to students and was hoping to find the best advice to screen my tenants. Anyone find that renting out to girls was more troublesome than guys? vice versa? I heard girls are alot messier…etc. Also, I plan on living in the same house as my potential tenants, I read on the Tenancy Act taht this completely voids the act for those tenants that live in there, can anyone confirm this? I am in Ontario btw. Thanks!

    -BT

  • wayne August 21, 2008, 6:33 pm

    barry #56 i am also in ontario. i have heard that if you rent out rooms and you have an item in the fridge that is yours then you can evict them easier as they can “injure” you or cause harm.

  • Bill May 22, 2009, 2:58 pm

    A couple of other handy tips are to try and meet the prospective tenants at their current residence and to meet the pets if you are accepting pets.

    By seeing their current residence you get an idea of how they maintain their current property and by meeting pets if they described their cuddly lap dog as a wonderful pet you can verify it in person.

    Although many of Frugal’s tips seem like a bunch of extra work, they pale in significance when you have to go through an eviction process. This can eat up a considerable amount of time and drain you emotionally. At least in Alberta we have the Residential Tenancy Dispute Resolution Service now which streamlines the process, but it still drags out and invariably costs you lost rent.

    Here is a walkthrough of one my recent evictions which shows how long it can take and how much the costs can be, http://www.investors.housez.ca/?p=83

  • FutureLandlord August 6, 2009, 11:44 pm

    This article is helpful because I am going to become a landlord in the near future. Can someone tell me which company you are using to screen your potential tenants? BTW, I am in Ontario and I think there are not many of them in Canada and are you satisfied with their screening service? How much approximately do you pay for tenant screening service?

  • Dave September 29, 2009, 12:18 am

    I have been learning all I can about stocks, until recently. I have come to realize that I won’t be able to outrun my rent and taxes fast enough to achieve my goals. This is why I have switched to researching real estate. It solves these problems.

    The rent I currently pay could go to cover the mortgage and the renter could help me build my equity quicker. The smith manever will make it tax deductable. These strategies together help with your 2 biggest expenses. Housing and Taxes. Stocks aren’t going to do that.

  • not for me anymore November 16, 2011, 7:53 pm

    I thought that I’d stretch my investment portfolio and trying purchasing real estate to rent out. I bought a new condo, thinking that it would require less maintenance, and attract a higher class of tenant. I was wrong on the second point.

    I rented to a family, where the woman was super friendly but turned out to be particularly deceptive. For those of you that think that they can rely on a ‘vibe’, think again. I did the reference checks: called her previous landlord and employer. A couple months later, I found out that she had given me false references. Her ‘real’ ex-landlord had tracked me down, and was looking to verify her address because of the extensive damage they had left. The Residential Tenancy Act gives you very few grounds on which to evict a tenant – and providing false references is not one of them. As long as she kept paying rent, my only option was to endure her games. I received numerous complaints from the strata citing violations, all which she had excuses for. I eventually sold the place, and had to take a small loss because it didn’t show well. Note that intent to sell a property isn’t grounds for evicting a tenant either, so I didn’t have the opportunity to clean it up. After a lengthy procedure with the Residential Tenancy Board to re-coup costs for damages done to the property, which found in my favour, she refuses to pay – I’ve got a credit collection agency involved and even they are having problems.

    Long story short, I’ve decided to stay out of the real estate game. Stocks are more risky, but they have far smaller a PITA (pain-in-the-a**) factor

  • Bill May 30, 2012, 1:58 pm

    Great list, but one extra point to add, many landlords seem to get the references, but they don’t actually follow up and call of them.

    Or if they do, they don’t know how to make sure they aren’t given misleading information. I’ve talked to landlords that have called references and been given glowing recommendations from previous landlords and employers only to find out the people they talked to weren’t actual employers or landlords, just acquaintances of the tenant.

    Someone above suggested using Google to research tenants, well you can do the same thing with the phone numbers they give you for references. Do a quick search on them to see if they actually do belong to the people or companies they are supposed to and if it is supposed to be a former landlord you should find some links to old ads for that property. If you don’t…..

  • Stupid & Sorry November 28, 2012, 11:30 pm

    Hi I have a tenant from hell. Has falsely acused my husband & son of several attacks on her, the police come they don’t believe her but they are here all the time. She is in our little cottage not 50′ from our house. Landlord & tenant Board said we are not covered by the act because we are a seasonal cottage rental, told us to call the police the police wont remove her, Municipal Housing & Affairs called said we are supposed to be governed by the Act and their representative wouldn’t talk with my husband & I on the phone hung up on us & wouldn’t give us her supervisors name. She has 2 dogs that have destroyed the lawn & most likely the cottage. The Board told us & the cops the same thing we are not covered by the act, but who the hell knows, I sure don’t. Right now I am afraid for our lives & livelyhood, and even the police are scared for us. They stayed out at the end of our laneway for two hours the other night. We have to go everywhere in pairs so we have a witness & I video our outside time so she can’t make up stories. I am at my wits end. If ever someone asks you whether or not its worth the money to take this chance think about what your freedom, & sanity is worth to you before you answer that question.

  • Kevin November 29, 2012, 10:18 am

    Easiest solution is to sell. Does not matter what the loss is, it is not worth your safety. When you sell it then it is no longer your issue

  • Stupid & Sorry November 29, 2012, 9:07 pm

    Kevin with all due respect this property has been my family for generations, and I will not allow human excrement(our trespasser) to drive me from my home. I believe in human rights but I believe you have the right to protect yourself & your family on your own property. Wars have been fought over such. This piece of dung who masquerades as a woman will not prevail, and if she does she will not live peacefully. We all need to start to fight back I am going to do everything I can from now on to fight against the Landlord Tenant Act and get it to where it is fair for everyone not just the abusers.

  • Nightrider February 25, 2015, 11:33 am

    You can tell whether a tenant is going to work out as a “good” tenant or not by doing some basic things.
    1. Previous landlord may give a good ref just to get rid of them. So, take that with a pinch of salt.
    2. ALL questions in your assessment questionnaire must be answered without reservation. Such as, credit rating, credit card balances, bank balances.
    3. Offer to visit them where they live. Just glance through their living to see how they live.
    4. Of course, no smoking. No pets is a preference but it is not always easy to find an otherwise good tenant.
    5. First and last month’s rents must go through the bank without difficulty.
    6. Always include utilities in your rental fee. To be fair, you can install another hydro meter and do reading of that meter. Your lease should say if they consume more than xxx amount, then they pay.
    7. Parking should be done with thoughtfulness. Lay this rule strictly.
    8. Clear snow and debris to their access. It is your responsibility. They will appreciate and they will be good to you. Same goes for grass cutting.
    9. Once in a while, in summer, you include them in your barbecue. This is just to get them on your side. Make them feel welcome.
    10. Enforce rules about noise but not to the degree that it intrudes on their personal life style. It is, after all, their home.

    Don’t forget: Tenants are paying you for living there.

    Understand the human touch but be firm. Give and take is a good policy.

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