Ronald Regan has a great quote which I love and live by with my business, and that is, “ Trust, but verify.” It’s so true. When you are investing in property and renting to people who you may not know or otherwise you may think you know. Always verify the information they are providing you with cold hard facts from more than one source if possible. Here are some things to look for:
Where is the income coming from?
When they drive a fancy car or seem to have lots of money on the surface, keep in mind they may be spending all of their money on that car and won’t be able to pay the rent. Remember, if the pricing of the rental is in the median price for our area, people who can afford a fancy car and a media rent are probably not applying. We aren’t generally dealing with doctors and lawyers.
For instance, I had a potential tenant once who dropped off her application and money. In reviewing the application, I found that she noted her income as settlement monies that she received that ended up being several thousand dollars a month. First, I thought, as a real estate agent and looking for potential business, if she’s just received a large settlement, why is she looking to rent rather than purchase a home?
After asking for the proof of the settlement she showed up at my office later that afternoon, and she was driving a brand new, shiny Jaguar. My office assistant was impressed and stated she must be a good tenant and makes a lot of money and drives a fancy car. Something felt off. Her settlement was 19 pages long and it stated that she received a large lump sum up front with additional monthly installments being paid to her over a period of 20 years. This was more than enough for her to rent from me, but there were no dates on any of the documents or signatures from a judge or someone approving this arrangement.
After asking for this missing information, she said she “forgot” the last page,”Oops!” This page was dated 1989! Her settlement, if fact, had been long spent (on that fancy car) and the payments ran out nearly a year prior.
She was trying to manipulate the process by being dishonest and conceal information. Not my ideal tenant; she was not approved. Make sure to listen to your gut when you see those red flags, don’t ignore them — “Trust, but verify.”
Sob Stories are Dangerous Territory
As a general rule of thumb, there are certain criminal activities you never want to allow in your property due to the liability and possibly even city or local regulations. One of those activities are perpetrated by sexual offenders or sexual predators. You don’t want either of these in your property and those who have been convicted of sexual offenses are not protected by the fair housing laws. You may want to consult your local laws and guidelines on the rental rights for sexual offenders in your area.
No excuse is a good excuse when it comes to finding your ideal tenant and inevitably when you receive applications, some people may look great at first look, but after digging deeper you might find out information that doesn’t feel right or that just makes you think, “This person is a no-go!” This is when the sob stories and excuses start flowing.
As a nice person, you might have soft spot for people, but just know that this can be dangerous territory. When we are looking at running a business, you have to be very careful of who you are going to take on to a rental property because you can be held liable for possible criminal activity.
For instance, I had a potential tenant submit an application and attached to his application was a very long, detailed story of how he was labeled a sexual offender. In his words, the act was a consensual act with a minor, who was his step-daughter. In this case he was found guilty by a court of law, why would I accept his page-long written story over what was filed officially against him? The answer was still NO.
Trust, but verify. Verify, verify, verify.