Selecting a resident can be one of the scariest parts of being an investor sometimes. Screening and leasing our rental properties is not something we do all the time. If you’re a self-managing landlord who is looking for a resident to occupy your vacant property, you might not be up to date on all the current laws and requirements. You may keep your residents for a long time, so you only go through the screening process every few years.Filling your Reno rental property is certainly stressful. It’s a process that’s hard to control while you’re making money. When you buy an investment property or renovate a rental home, you’re controlling the whole process. But, when you’re picking someone from the general public to live in your asset, it can be difficult to do.There are a lot of things you should consider when you’re choosing a resident, and in this blog, we’re focusing on the top three things to look at.
Financial stability is absolutely the most important thing to look for when you’re screening applications. You need to be sure the resident moving into your home has the means to afford your property. Make sure the resident has been employed by a stable company or has a traded that’s stable and in demand. You can use employment references to talk to employers and make sure the company won’t be shutting down or moving in a year.Private landlords who manage their own rental homes don’t always take the time to investigate a potential resident’s finances. This is a mistake. Financial stability is important and can be a huge indicator of whether you’re going to have your rent paid on time every month. You don’t want to place a resident who you assumed was financially stable because they were able to come up with the security deposit and the first month’s rent, and then find that resident is coming up short three or four months later. Spend some time looking at credit and debt and income.
References are important. Just like when you call for employment references, you want to call for landlord references as well. On each application, we ask for prior rental references and maybe personal references as well. Almost every rental application asks for them, and it will only take you five minutes to make the phone call and ask for some information.When you’re talking to a landlord about a current or former resident, consider asking that person for a second tier reference as well. Perhaps a neighbor or a vendor can speak to whether a particular resident was easy or difficult to work with. You really want to spend some time exploring who a prospective resident is.
Identify the person’s short term and long term goals before you begin the screening process. You want to know how long they plan to stay. If they’re here for work, they might want to rent for only a few months while they work on a project. That’s not going to be a good fit for you if you’re seeking a long term tenant. Maybe a resident is looking to buy a home in a few years and wants to save some money and rent while they get to know the Reno area.Knowing short term and long term plans will help you fill your vacancy with the right resident. Some investors prefer the stability of a long term tenant. Others like having the higher rents that come with short term tenants. Look for what you want and identify the types of residents who fit with your investment goals.
Make sure you’re screening each application consistently and fairly. You need written policies, procedures, and standards that explain your screening process and qualifying criteria. Otherwise, you can get into some fair housing trouble.Here’s an example. Perhaps you have a rental property that you expect will rent quickly, so you set very high screening standards and deny a tenant who applies because his income doesn’t match your requirements. After three weeks, you have not found a resident, and you’re starting to panic as your vacancy grows more expensive. So, when another applicant wants to rent your property and their income is too low, you approve them for your property anyway because you’re desperate to get the place rented.Not only is it a bad idea to lower your standards; it’s also illegal from the perspective of the first applicant who had the same qualifications and was denied.You don’t want to loosen your standards or become desperate. When you’re selecting a resident, make sure you have your qualifications in writing, and follow them consistently.Putting the right or wrong resident into your property is the difference between a successful investment experience and a horrible one.Standards protect you against litigation and they hold you accountable. If you have strict and reasonable criteria that you follow, it won’t be hard to find a well-qualified resident.We want you to be smart about managing your Reno rental property. Please contact us at Mynd Property Management. We’re always happy to talk about real estate and answer any questions. Even if we’re not managing your home, this is something we’re passionate about, and we love talking to other investors.You can also visit our Facebook group of investors, which is called Master Mynd. It’s a real estate investors’ club, where you can exchange ideas with other owners. Check out our weekly podcast as well, called The Myndful Investor. We invite leaders in real estate and property management to talk about their success and, more importantly, their failures. There’s a lot to learn from this relatable content.
Are you leaving money on the table by not filling vacancies fast enough at your rental property? If you’re leasing your own rental units, you could be missing out on valuable monthly income. In fact, you could be losing substantial rental revenue depending on where your rental property is located.
To stop pouring money down the drain, minimize the time between your current tenant moving out, and a new one moving in. Reducing vacancies requires more than just advertising on Craigslist. It requires a strategy designed to maximize rental income.This article will cover five strategies to reduce vacancies at your property. They include:
1. Set Accurate Market-Rate Rents
2. Get Your Unit Rent-Ready, with Great Photos
3. Use a Multi-Site Marketing Platform
4. Enable Self-Showings with Smart Locks
5. Identify High-Quality Renters with Technology
Here are more in-depth details on the five strategies to reduce vacancies at your rental property.
A data-driven property manager analyzes rental rates down to the neighborhood or property level. It’s not advisable to rely on free websites like Craigslist or Zillow since they may publish outdated or inaccurate information. Zillow rents are simply estimates based on publicly available data and information about similar properties listed for rent in the area. On the other hand, Mynd uses actual achieved rents to provide a much better idea of how much your property can command per month. Using incorrect data to set rents puts you at risk of prolonging vacancies.After providing you with a proforma of your investment’s performance, a property manager should work to lease your unit. Mynd uses AI and predictive analytics to review each owner’s rent rolls to ensure their property is commanding market rates, which includes analyzing comps from a variety of different sources. As a result, Mynd fills vacancies quickly () and achieves higher rents for their property owners.
Next, move fast to “turn” your property, or get it ready to rent. The longer you wait, the more monthly cash flow you put at risk. In most states, your current resident is required to give a 30-day notice of their move-out. As soon as you receive notice from your current tenant, start searching for a new one immediately. This is an ideal situation for most owners because it means they are operating an occupied, cash-flowing unit for an entire month while they begin their marketing efforts to find a new tenant. One critical part of getting your unit ready to rent is taking great photos and shoot a virtual, 3D tour of the interiors.
Take clear photos of each room. Ensure that the rooms are well-lit and that you use the auto-focus setting on your camera. Higher-resolution photos will display well on any platform: mobile, laptop or tablet. If you operate a multifamily property with aesthetically appealing common spaces, professional landscaping or other attractive features, take photos of them as well. Alternatively, you could hire a professional photographer. As for a 3D tour, you can hire a third-party company to shoot one, which is ideal if you operate several multifamily buildings with lots of units or have a large portfolio of single-family rentals.
With rents set, start marketing your unit to prospective tenants. One of the best ways to market your rental is by exposing it to as many eyes possible. Arguably, Craigslist has become the most popular way to advertise rentals. But is Craigslist reaching enough people?A tech-forward property management company like Mynd leverages automation that scours the Internet for the best places to advertise your vacant units, meaning that more than 40 different syndicates and websites display your property. It would take an owner incredible amounts of time, money and effort to complete this task. By putting your listing on all these sites, Mynd maximizes the number of prospects who view the unit, thus minimizing vacancy time and lost rental income.
Make sure to abide by state laws when showing your property to prospective tenants. California and Washington State landlords are required to deliver a 24- or 48-hour written notice, respectively, to the current tenant before showing their unit. If you’re not well-versed in state laws, consult with a property management firm with deep local expertise to show your unit for you. One secret to increasing your prospect pool and reducing vacancies is self-showings, which are enabled by smart locks. Self-showings are much more convenient for the prospect. Mynd has found that tech-savvy millennials and younger renters react more favorably to self-showings because they can be booked completely online, without interacting with what they view as a salesperson. They can also fit easily into their schedule and view the property with ease and without any pressure.
A tech-forward property manager makes self-showing appointments easy. At Mynd, the prospect simply signs up, goes through a security check and provides a copy of their ID and credit card, and then selects when they’d like to view the unit. Before the showing, the prospect receives a unique access code to tour the property during a specific window of time. The code remains valid only during the allotted time frame. Prospects don’t have to worry about a property manager showing up late to the appointment or hovering over their shoulder while they tour the unit.If there are any follow-up questions, a prospective tenant can call the property manager or send an SMS. When a prospective tenant has the ability to instantly communicate with the team showing the unit, that rental tends to get leased faster. Smart locks help enable self-showings since they give access to prospects and track the exact time the prospect tours the property. Ultimately, self-showings and smart locks give residents more control, translating into a better user experience and resulting in more signed leases.
After completing the first four steps, continue to move your prospects along swiftly. A tech-centric property manager makes it easy to fill out a leasing application and pay a deposit online. Mynd, for instance, kickstarts the process by making digital applications available.Mynd uses a state-of-the-art lead management system to ensure that high-quality tenants lease your properties. As a matter of fact, according to credit bureau TransUnion, the Mynd ResidentScore, which measures the likelihood of a resident to be evicted based on their income level, outperform the geographical average in the Bay Area and San Diego. Here’s a snapshot of the average ResidentScore in each of Mynd’s markets vs. the industry average score, also known as the average VantageScore:
Technology provides owners with full visibility into the leasing process–from tracking who they are, how many prospects expressed interest in their unit, to how many prospects actually visited their property, when they visited, how many applications were filled out, and more.If you’re a busy professional who doesn’t have time to formulate a comprehensive leasing strategy to reduce vacancies, you’re in luck: Mynd can help. Contact us today if you own rental properties in California or Washington State with vacancy issues, so we can assist in reducing them.
The tenant you put into your property will have a direct impact on the type of rental experience you have as a landlord. That’s why tenant screening is so important. If you don’t screen thoroughly, you could end up with a resident who doesn’t pay rent or who damages your property. You could find yourself with a bad tenant who refuses to follow the terms of the lease or engages in illegal or disruptive activity in your property.The best tenants are responsible, consistent, and reliable. They pay rent when it’s due, they communicate when maintenance or repairs are needed, and they meet all of the expectations that are set forth in your lease agreement. They stay in place for a long time and they treat your property as if it is their own.How do you find these tenants?You establish a great tenant screening process. We’re talking about screening today.
As a landlord, you should be familiar with the federal fair housing laws. The Fair Housing Act mandates that we don’t discriminate against any tenants or applicants. As you may know, the law establishes seven protected classes. You cannot deny housing to anyone based on:
State and local laws are sometimes even stronger than the federal fair housing laws, so make sure you get to know any additional requirements in your specific market. Violating fair housing laws is extremely costly. If a tenant or a prospective tenant files a fair housing claim against you, there will be a lengthy investigation process and if you’re found to have violated the law, you could be fined several thousands of dollars. It’s hard to recover from that type of a mistake. So make sure your tenant screening process is compliant. We recommend that you document it in writing and follow it consistently every time.
At Mynd Property Management, we take fair housing seriously, and we’ve implemented some processes that make it impossible to discriminate unintentionally. Our screening process is entirely digital. This is helpful and safe because it removes the human element and any biases that humans may have.When tenants want to rent one of our properties, we ask for a current government-issued form of identification and two verifiable documents that prove income. We also ask for social security numbers so we can run our background and credit checks.In many parts of the country, we get tenants who are foreign nationals. They often don’t have the necessary documentation but they do have employment letters or verifiable income that’s quite high. American companies often hire these individuals to work for them, and they’re paid very well. Thus, they meet the screening standards we have in place.When we have the completed application and all the supporting documentation, we screen the applications and notify tenants of the results. This process completely avoids any bias and keeps our landlords safe from fair housing claims. When an application is submitted and screened, there is not a human interaction, so it’s difficult to discriminate. Your own bias, whatever that may be, cannot slip in and impact your decision-making process when it comes to choosing a tenant.You’re really looking for someone who qualifies, and this process accomplishes that.
Our system runs a credit and a criminal check through Transunion. It also does a nationwide eviction check. The results will prove whether the applicant meets our criteria, and we can let the applicant know that they are approved for the property they want or whether we have to decline them.Sometimes, it’s very simple. But sometimes, there are varying degrees of results. An applicant’s results may fall somewhere between a tenant we’d accept and a tenant we’d decline. So, we have the option of making an offer that’s conditional. If there’s something on the applicant’s credit history that makes us nervous, we will ask for higher security deposit. They get a chance to live in the property they want, and our property owners are covered in case the tenant does not perform the way we expect.There are often cases where a person simply does not fit into the cookie cutter situation where they can just hand over the required documents and the sign the application with a photo ID. Not every application is clear and easy to screen.That’s where the human element has to come into play. At Mynd Property Management, we have a lot of people working in the leasing department, and we do a really great job of combining the digital element with the human element.With our well-staffed and talented screening department, we can connect with prospects and work with them on anything that might be different in their situation. No matter what type of situation the prospective tenant is facing, we can help make things a little bit easier for us and for them. With our team, there are a lot of eyes who can look at information and analyze data to decide if someone will be a good resident.Sometimes, we have to be creative about collecting the required information and documentation. It might require more paperwork and it may mean we have to make a few extra phone calls. But, it puts us in a position of being customer service oriented. We can provide a lot of value to both our tenants and our rental property owners. We don’t shy away from putting extra effort into the screening process. We know it’s critical and we won’t cut corners.
Fraud and scams are growing more and more common when it comes to rental properties. We always hear about dishonest people advertising properties that aren’t theirs and then collecting money from unsuspecting potential tenants who will never get access to the property. We also hear about tenants deceiving landlords and moving into a home under false pretenses and then staying until the sheriff has to escort them out months later.The automated process we use can also easily spot fraud because there are more eyes looking at the application. When you don’t have a person trying to charm you on the other end, fraud is actually really easy to spot. It’s a digital interaction, and there are no emotions or attachments involved. The process isn’t going to feel bad for someone with a story. There can be no long explanations about why the ID looks weird or why there’s a number scratched out on the social security card. Either something is accepted or it isn’t. A tenant who wants to get away with something will have a much harder time doing that with our digital presence.If something doesn’t look right on the application or a blatant lie is uncovered, we move on. We don’t give potential tenants the opportunity to sweet-talk us into allowing incomplete or incorrect information to be considered. We focus on the data and we trust it.
One thing that will really help you spend less time and effort on screening is limiting your tenant pool to only those who are likely to qualify. Always include the rental amount in your listing, for example, because you want to make sure you’re only hearing from people who can afford the rent. State whether pets are allowed, what type of income and credit standards you have, when tenants will be able to move in, and the length of the lease term you’re looking for. When you include as much information as possible in your listing, you know that only the right tenants will apply.Usually, the tenants who are interested in renting one of our properties won’t call us on the phone. They’ll text us or email us or send us some kind of message. Then, we allow them to go through the process of our checks and balances to ensure that we only place tenants who are well-qualified. This reduces our eviction rate dramatically and cuts down the amount of time we have to spend managing bad tenants.Transunion is an extremely good resource for background checks and credit history, and self-managing landlords can easily get some help in evaluating the applications that come in during the leasing process. Once we have successfully screened a tenant, we’re happy to notify the tenant that the property is theirs. We welcome them into the Mynd family of tenants, and we begin to develop a respectful and positive professional relationship.This is an overview of what we know about the application process and good tenant screening. Remember that legal compliance is absolutely critical, so no matter how you screen your tenants, be sure you’re following all applicable fair housing laws for your state and city.If you need some help screening tenants or you’d like some assistance with other areas of property management, please contact us at Mynd Property Management. We look forward to working with you.
It takes money to make money, and this is certainly true for real estate investing. But Vallejo’s real estate market presents to investors its own set of challenges that could wind up costing them in the long run. Our guest today is Doug Brien, CEO of Mynd Property Management, who will discuss with us the top three things that could cost you money when investing in Vallejo.Alex Osenenko: Boys and girls, I'm Alex Osenenko with Mynd Property Management. Today, we're talking about investing in Vallejo real estate. It's a very important subject for those of you that are interested or considering investing or already have investments.I have a guest today that will help me unpack some of the specifics within the market and give all of us the advice we need to make the decision one way or the other. My guest today is Doug Brien. Doug, how are you?Doug Brien: I'm doing well, Alex. How are you?Alex Osenenko: Great, great. So Doug is the current CEO of Mynd Property Management, but I think even more important for this particular topic—as we're speaking of the specific city of Vallejo—is his previous life. He was a founder and CEO of a company called Waypoint which purchased over 750 homes in Vallejo. So that gives him just a tiny bit of experience within the area. And so we're going to just try to extract some of that and throw some nuggets of wisdom your way. They'll help you not to make mistakes that they have made in the area. So the topic today is: the top three things you see, in your experience, that will cost Vallejo real estate investors money.Doug Brien: Well, this is a good one because I don't know anybody who invests in real estate who isn't focused on making money. So you have got to know what is going to cost you money. I know that's how I think about real estate investing. Look, I think with Vallejo there are some specific things you have got to be careful of.One is: this is a part of the Bay Area that was built up in the early 1900s. There's a lot of older inventory. And so, I think getting professional inspections, thoroughly evaluating your electrical system and the plumbing. In particular, watching out for galvanized plumbing, which can get corroded and cause problems and can be quite expensive to replace with copper plumbing.Alex Osenenko: As somebody who is not as avid of an investor as potentially you are or some people watching, how would you go about discovering whether this particular house has galvanized plumbing or not?Doug Brien: Well, I would recommend hiring a professional inspector, like using a contractor or some resources from a property management company to get a professional. But, if you just want to know on your own, the easiest way to find out is to go under the house.You can typically see what kind of plumbing is running and you're going to typically see one of two things—silver galvanized or bronze-ish copper. You want to see copper. That means that you're not going to have that corrosion problem. So, really understanding the asset and all the costs that are going to need to go into that property to make it a sound investment property—that's one place where we have lost money.The other is evictions. You know, there's a very diverse group of people from all different socio-economic levels that want to live in Vallejo. And so it's really important to know who you're letting into your house and having very strict standardized criteria that you want your renter to meet. And this is, I think, a good reason to look into professional third-party property management because they're professionals and have the standards that are best for the market. And what that does is it enhances your chances of bringing someone on as a resident that can pay the rent and take care of your house.If you find yourself in a situation where someone is in your home and they can't pay and sometimes you are following up with them to collect the rent and they get unhappy and they start damaging your property and, all of a sudden, you are trying to evict—evictions in California can take 3, 4, 6 months or longer, and a lot of legal costs involved (). So, having unqualified people in your house is the second way that I see people lose money.And related to that is just delinquency. Again, this is a blue collar area. If you don't have someone in your investment property that can pay, you end up with situations where they get behind and they want to make partial payments. You really have to navigate that carefully. Some residents are very good at playing this game of telling really compelling, sad stories. And look, there are real things that happen, for sure, but, as as an investor, you have got to be really careful because you're in this investment to make money and collect rent. Be fair to people, of course, but delinquency and bad debt—lost rent collection—can be a challenge in Vallejo if you let the wrong people in. So, those are the three things to watch out for.Alex Osenenko: Gotcha. So to recap: renovations, understanding the makeup of the house, the asset, itself, being smart about what you're buying and then estimating what it is going to cost you to bring it to a condition where you can rent it out to a quality tenant. Speaking of quality tenants, evictions and delinquencies will cost you money, heartache and ruin your potential for this investment property.Doug Brien: And Alex, one point to the eviction thing that I would recommend—and I'm just remembering this as you said it—avoid evictions at all costs. I think a lot of investors get caught up in the principle of something like, “hey, so I'm going to evict them.” At waypoint, we got to the point, after experiencing time-consuming, drawn-out, expensive evictions—you hate to do it, but sometimes it makes sense to go to someone who owes you a couple thousand bucks and say “I will pay you $1,000” and eliminate this bad debt so it's not on their credit history. Pay them and eliminate their debt to get them to agree to move out. You hate to do it, it seems like the wrong thing to do, but sometimes it's actually a smart thing to do because you get your property back and it ends up costing way less. We call it CASH FOR KEYS. We hate to do it in this scenario, but I would always keep it in mind because, as an investor, you have got to look at what it's going to cost you to evict someone. It is expensive.Alex Osenenko: So just get the right tenant. Don't fall in the trap of Fair Housing issues. The recommendation here is to hire somebody who can place a quality resident. That will mean everything to you and your investment and eventually your return.So Doug, thanks a lot for helping us cover this important subject. Those of you who are still watching, go to Mynd.co, M-Y-N-D dot CO. Doug and I have done a number of these interviews. If you are serious about potentially investing in or putting your money into Vallejo—it’s a great place, but you need to know the underwater stuff and the above stuff and the good and the bad. And so, we cover a lot of that at mynd.co. Thanks a lot for watching and Doug, thank you for your time.Doug Brien: Thanks, Alex.Every real estate investor will inevitably incur certain costs when renting a property. But a block-to-block, house-to-house market like Vallejo had its own particular set of challenges that can end up costing investors even more.As many homes in Vallejo are from the turn of the twentieth century, it is best to have an up-front understanding of what repairs and renovations will be needed for the property to be move-in ready. Likewise, with a diverse socio-economic pool of potential tenants, and as evictions can quickly become quite expensive, having some strict criteria for potential tenants, or simply hiring a property manager to mitigate such scenarios can absolutely save you in the long run.
Selecting the right property is a necessity when looking to invest in the real estate market. But equally important is selecting the right tenants. Dan Hines, Regional Director with Mynd in the Sacramento area, is here to give us his top three most important things to know or remember when selecting the right resident for one’s property.Steve Rozenberg: Hey everyone, this is Steve with Mynd Property Management and I am here with Dan Hines. He's the Regional Director for Sacramento. Dan, thanks for joining me today. I appreciate it.Dan Hines: Thanks for having me on. Appreciate it.Steve Rozenberg: Yeah. So what I want to talk about today is—this is kind of, to me, the start of the evolution of being a landlord—of either having a great experience, or having a not so great experience, and I say that from my own personal experience when I started, and that's picking a resident. So in Sacramento, and obviously every place geographically is different, right? With different jobs and statuses and income and everything that's going on specifically with the location. If you were to maybe nail it down to let's say three things, three things that you think would be the most important when you are selecting a resident to live in your rental property, what advice would you give the average investor that's looking for that?Dan Hines: Yeah. So it's like the old saying, "A good offense is a great defense." Right? A lot of investors are apprehensive to get into becoming a landlord and it's, "Well what if the resident messes up the property? What if the resident doesn't pay? What if..." Right? All those things that can go wrong. The best way to get in front of that is to just have a very strong, stringent screening practice. And you need to have that stuff figured out before you have an applicant who's ready to move in in a week.Plan your stuff, make sure you know what you're going for. The top three things in my mind: income, that's huge. You need to make sure that the resident has a consistent, steady income and they can afford the place. Rental history. Are they first-time residents? How are they leaving their last place? Are they getting their security deposit back? And then just the overall application due diligence process, right? Do you understand, do they have collections from a utility company? What's their credit score? Those things will normally help you triangulate and figure out the overall quality of this resident.The major one that I just really want to stress, though, is being totally clear on the income situation. Too many times I've seen situations where a landlord wants to be nice. They're trying to help the person get in. They want to be flexible. Yeah, it's a little tight on the income, but they say they can make it work and it's okay.And then a few months down the road there's a surprise. Now the resident can't afford to pay the rent and it's a really tough situation for everybody now. And it came from someone trying to bend the rules and trying to be nice.Steve Rozenberg: Yeah, absolutely. I used to always say, you trust but verify. Right? And the numbers will tell you. Even to your point, what I have learned, when I was always selecting a tenant, we used to always say, if you look at their past, you'll see their future. Meaning, if you look and see what they've done leading up to today, if they've hopped around on jobs and they've been kicked out of other places, and they owe people money, they're not going to change for you. That's a habit pattern that's going to stay. But more importantly, what I think a lot of people don't realize is if you bend the rules, let's say you get that gut feeling where you're thinking, "Oh, this person. I've got a good feeling about them. They're getting a good job, or this is going to happen," and you bend your rules. What happens is, if you did not select one tenant and all of a sudden you selected this tenant and that tenant was qualified, that could all of a sudden slip into discrimination or a fair housing issue because you have a set of rules that now you're bending the rules.And it could be skewed and looked at in any light. And I think that the biggest thing that I've learned, and tell me what you think, is that you're running a business. And that business has policies and procedures for a reason. And it's not there for you to bend them at will. And I know a lot of people, and I, when I first started, I did this also, where I would bend the rules as the vacancy term lengthened.So all of a sudden my house was vacant a lot longer, I would accept something different. And the challenge was, is every time I did that and I did not stick to my rules, it bit me. I mean, I can't name one time in all the properties that I've owned that it actually turned out to be the better. That I actually said, “man, I'm so glad I did that. That worked out great for me.” You know?And I mean, that's just what happens. And I think that a lot of us, you said it great when you're talking about the things that you need to do, and you’ve just got to be able to verify that income and make sure, hey, you know what? I'm not going to say, it's not that you don't need to be nice to them, but I think it's a matter of you being business and you're running a business and the business dictates you need a certain amount, whatever you think it should be, that's the amount you need to have. And that's a go no-go.And if it doesn't, you don't have the option to change it. I always tell landlords, "If you were working for me, would you just change things at-will or would you do what your job description said?" Well, you're working for yourself, so that's why you think it's okay to bend the rules.And that's the challenge we have when we're a landlord and we're really not sure. And I don't know about you, but every disaster I've talked to in the landlording industry, it's normally because they did not stick to the rules. Or maybe they didn't have rules, they didn't have written disclosures of what they would and would not accept. And that's normally what seemed to bite them.Dan Hines: Right. Right. So to the point of running it like a business, you have to set your business up for success. And you do that by planning, by knowing what your lanes are, knowing when you have to make certain tough decisions. And if you start off your tenancy with someone and you haven't set clear expectations and you haven't set them up for success, meaning, are you placing someone in the property that can legitimately afford it? If you're not, you cannot be surprised. You are forfeiting your right to be surprised.In six months when they tell you, "Hey mister landlord, I have a problem. I'm late this month." And I can't tell you how many times we've taken on clients who have residents in place, thousands and thousands of dollars that they're trying to piecemeal rent checks together. And it's, something happened and they got in over their head, and it just creates a really unfortunate, unfortunate situation for everyone involved.Steve Rozenberg: Yeah, it does. And many landlords and investors in this world, they fail in this. But they fail, I think, because they fail to plan. And this, I believe, and I was someone in the initial, when I first got investing way back when, I didn't know anything about this. And this was the root of a lot of heartburn and headache and challenges because I didn't run it like a business and I did not run it to where, these are the policies, these are the procedures, and these are my qualifications. So this is great information. So just to wrap this up, give me the three again. We said income, is that right? Income was the first?Dan Hines: Income.Steve Rozenberg: And the second was ...Dan Hines: Rental history.Steve Rozenberg: Rental history. And third?Dan Hines: The third was just the overall application due diligence process. A credit check.Steve Rozenberg: Right, yeah. Are they doing what they're supposed to be doing? Are they supposed to show up at 5:00 PM to give you the deposit money and they don't show up? To me, these are indicators because it's like they're on their best behavior today. If they're not even doing what they're supposed to do today, how does it look six months, a year, or two years from now? And again, you look at their past, you'll see their future. So that's great.So Dan, if somebody wants to get a hold of you and they want to learn some more about Mynd or know more about the Sacramento area, how do they do that?Dan Hines: Yeah. We're easy to get in touch with through our website, Mynd.co. You can reach out to us through our 833-FOR-MYND phone number. We also have a lot of really cool stuff going on the Facebook page also. Website's the fastest. Looking forward to speaking with you.Steve Rozenberg: Yep, sounds good. And if you want to join, we have a Facebook group. The Mastermynd Real Estate Investment Club, and it's Master M-Y-N-D. But please join, there's a lot of investors on there and we'd love to have you. And this is Steve, and this is Dan, and I want to thank everyone for watching and we'll talk to you guys later. Bye bye.Choosing the right tenant for one’s property can prove to be a challenging process. But knowing what to look out for and how to set the right criteria for potential residents can make this process far easier. Having an understanding of a potential tenant’s income is the first step in choosing the right residents for one’s rental property. This gives the investor or manager the best understanding of whether an individual can afford to or will be able to keep up with rent payments.Likewise, an investor or manager should seek the potential tenant’s rental history. As a person’s past is a good indicator of their future, knowing a renter’s history can give a property owner the best outlook for how that individual will fare as a tenant. Furthermore, a property owner should be diligent during the application process. This means knowing a potential tenant’s credit score, for example. This can also give the owner an understanding of whether a person is right for the property and can afford to live there, overall.
One of the most common fears that property investors have is that the tenants they place will trash their property or stop paying rent. They worry about damage and eviction. High drama and horror stories can be avoided with a solid and consistent screening process.Good tenants will have a positive impact on your experience as an investor. A lot of the landlords we talk to aren’t sure about how to find the right tenant for their Phoenix rental property. Today, we’re sharing the top three things to look for when you’re selecting your next tenant.
Credit needs to be an important factor when you’re screening tenants. Some people get caught up on the score. You might run into landlords and management companies that have a minimum credit score for acceptance and qualification.The score isn’t quite as important as the content of the credit report.Instead of focusing on that one number, take a look at the debt to income ratio. If the tenant has collection activity on their credit report, what kind is it? Student loans aren’t a big deal. Medical debt isn’t either, especially if the prospective tenant is in the process of paying those things off.What you want to be careful about is renting to a tenant who has collections from utility companies or cable companies. If they still owe a lot of money to their last electric provider or internet company, you might have to worry about whether they’ll pay the bills associated with your property. If you find judgments from prior landlords or they owe money to an apartment community, you might not want to approve that application.
Rental history is another important factor in choosing a tenant. You need to look at how long the applicant has rented their previous homes. Do they have a pattern of moving every six months or every year, or do they tend to stay put? The longer you can keep a tenant in place, the more return you’ll earn on your investment.When you’re conducting rental reference checks, find out about security deposit refunds. Ask former landlords if the entire deposit was returned to the tenant or if most of it had to be kept to pay for damage and cleaning. This is important. At Mynd, we have the technology necessary to ensure we are speaking to the real landlord, and not just a friend that the applicant put down as a reference.
You’ll want to be sure your tenant can pay rent every month. So, check to make sure they earn enough to pay you on time consistently. We like to see tenants who earn at least three times the monthly rent. That tells us they’ll have enough funds to cover the rental payment and any other expenses that may pop up. A good tenant is able to manage their money well enough that they can keep up with unexpected expenses. You don’t want a tenant to call you and say they can’t pay rent this month because they needed to replace the transmission in their car. Verifying the income includes making sure they can pay rent and account for emergencies.
When you’re thinking about selecting a tenant, consider what you want in a renter. Do you want someone with no verifiable income and a spotty rental history or do you want someone who can produce a month of pay stubs and provide solid landlord references? The answer should be obvious.We believe that when you look at an applicant’s past, you can see their future. The main goal is to mitigate the chances of a tenant not paying rent. When you’re talking to applicants and screening your tenants, trust what they say and what they put on the application. Then, verify it. Get documentation. Talk to landlords and employers.If you have a tenant with great references and verifiable income but their credit isn’t great, consider whether it’s a big enough risk to approve the tenancy. Not all debt is equal, and the types of debt that is owed can do different things to a credit report. So take you time and dig into the information and the data that you collect.As landlords, we tend to get into an emotional rush. We have a vacant property and we want to get someone in there as soon as possible. It’s easy to convince yourself that the first tenant who applies is the right person. But, if you put the wrong tenant in place, you’re taking on someone else’s problem. Removing a tenant from your property is much harder than never placing them there in the first place.Slow down in order to speed up. Don’t rush the screening process just because your home is vacant. That only makes your situation worse.Written criteria and procedures that you follow consistently are also important. Don’t deviate you’re your process because it puts you at risk for fair housing and discrimination claims. When your process is in writing, you can answer why you selected one person over another.Remember that you’re running a business. Residents have rights, which you need to respect. If you think this may be too much to handle on your own, contact us at Mynd Property Management. We are experts in Phoenix property management, and we’d be happy to help.You can also visit our Facebook group of investors, which is called Master Mynd. It’s a real estate investors’ club, where you can exchange ideas with other owners. Check out our weekly podcast as well, called The Myndful Investor. We invite leaders in real estate and property management to talk about their success and, more importantly, their failures. There’s a lot to learn from this relatable content.
There are a lot of new laws in California and specifically in Oakland that affect landlords and tenants, and today we’re focused on Section 8. Steve Rosenberg, VP of Investor Education at Mynd Property Management and Giles Imrie, VP of Corporate Counsel at Mynd are talking about what rental property owners can and cannot do when they’re advertising properties and screening residents who have Section 8 housing vouchers.
Effective January 1, 2020, California implemented two bills which essentially require landlords to accept Section 8 or housing vouchers as an income source from applicants. Rental property owners cannot discriminate against an applicant or deny the application just because they have a housing voucher. This existed in certain California cities prior to January 1, but now it is a statewide requirement.
Previously, it was common for property owners to advertise that they did not participate in Section 8, and wouldn’t consider any residents who had that housing voucher. This was common because participating in the Section 8 program was an administrative burden. There’s a lot of hurdles to cross, including a home inspection, verified habitability, and an approved residency. The delay in getting approved and prepared could cost a lot of money.
Most owners weren’t unwilling to accept Section 8 residents; it’s actually a program that many landlords appreciate because it’s a guaranteed source of income. You know the rent will come in every month because it’s coming from a government agency and not an individual. But for most owners, the Section 8 process simply wasn’t worth their time.
Throughout California, landlords, property managers, and investors have to stop advertising whether or not they accept Section 8 applicants. You cannot discriminate against anyone with a housing voucher, which means you cannot express that you’d prefer Section 8 applicants didn’t apply. Your printed marketing materials and your online advertising must be reviewed to ensure you are compliant with this new law.
You have to treat all applicants equally.
Many investors may be wondering why this is now required. The technical implication is that Section 8 housing vouchers or any of these vouchers that are described must be considered protected sources of income. If you require specific kinds of income from specific sources only, you’re discriminating against potential residents. So, you can no longer opt not to consider a housing voucher as part of an applicant’s income.
As you may have expected, there are some tenants advocacy groups out there that are already doing some testing by visiting websites and checking application portals. They are making phone calls trying to get property owners to fall into the trap and say they do not accept Section 8 or housing vouchers. So, we recommend that you be vigilant with your compliance. If you haven’t already removed language like this from your marketing and application materials, you must do so immediately.
There were a number of Oakland rental property owners that were choosing to not participate in Section 8 simply because of the administrative burden and the time constraints in getting the property occupied and rent coming in. Unfortunately, this legislation does not address or fix the underlying root problem with housing voucher programs. Each one is run by a different housing association with a separate set of administrative requirements. If they would fix the problem of consistency and efficiency, they’d’ find that the issue would take care of itself.
You are now required to allow Section 8 and housing voucher applicants to participate just like everybody else, but this does not mean any of your other screening criteria has to be changed in any way. You can still have the same credit criteria and require the same income verification.
The only change with the income criteria is that you can only look at the portion of the rent that the resident will be paying, not the entire rent itself. Here’s an example. If your rental criteria says that a resident must earn three times the amount of rent every month, you’ll have to consider three times the amount of what the Section 8 resident would be paying. So if they are responsible for only $300 of their rental payment and the voucher takes care of the rest, you need to look for income that meets or exceeds $900 from that resident.
There are two sister bills in place. The second bill does designate vouchers and it also adds military personnel and veterans as protected classes when it comes to source of income. So all three of those protected classes now have a heightened level of protection under existing and new discrimination laws.
It is hard to say if this will become a national requirement over time. It started with the cities, and quite a few California cities were already doing this. It may have started in Los Angeles, and then it moved out through the state from there. Any time one large city influences something, other cities begin to pick it up. And, there are some very powerful tenant rights organizations in California, and they’ve worked hard to pass this bill as well as the rent control laws. California and Washington are sort of the front runners and then Colorado is quick to follow as the new rental trends and patterns tend to move east.As an Oakland rental property owner, what you really need to know is that you have to be careful with your advertising and your screening process. You can no longer refuse an application from a potential resident who is part of the Section 8 program or has a housing voucher.
We know this can get complicated, and it’s a great time to consider working with an Oakland property management company if you’re not already. We can help, so contact us at Mynd Property Management. Keep an eye on this blog space, because we’ll be updating you frequently on how this law takes shape and what other things it may be leading to.
We have some breaking news on the Portland real estate market. There are some new laws that went into effect just recently, on March 1, 2020. These laws are included in the Fair Access in Renting, or F.A.I.R. Ordinance. They cover resident screening and advertising, as well as security deposit management.Today, we’re elaborating on some new things you need to do as a landlord when you’re screening your potential residents.The recent F.A.I.R. Act was just passed on February 1, and is now being implemented with fewer than 20 business days for rental property owners to adjust. It’s complex, and it’s a real burden to place on owners and landlords. We aren’t attorneys at Mynd, but we are experts in Portland property management, so we want to share what we know and offer some pointers for how to avoid falling out of compliance with these new laws.
Portland rental property owners now have two options when it comes to screening applicants.There’s a low barrier option, which has requirements that aren’t very strict and are more open to residents of all financial and criminal backgrounds.There is also an option for you to set up your own screening criteria if you choose not to use the low barrier option. Even when you screen your own criteria, however, you have to comply with some regulations and barriers put into place by the City of Portland.In some cases, landlords will have to allow for a 72-hour waiting period before approving an application to identify the unit as accessible for people with disabilities. You’ll now need to allow your prospective residents to disclose whether they have a disability. In some circumstances, applicants with a disability will have an opportunity to rent your unit before others can even apply. Their applications must move to the front of the stack, and they’re entitled to be screened before other residents.That’s a huge delay for property owners, and it may drag out the leasing period, leaving you with extra days where your property is not occupied and rent is not coming in.
Another part of the F.A.I.R. Act is a restriction on what you can require for a rent to income ratio. We’ll talk about this further in another blog, but you need to know that you cannot arbitrarily impose your own requirements on how much income an applicant earns before being approved for your property.Depending on whether you’re following the low barrier requirements or your own standards for approval, you’ll only be able to look for income that’s equal to two or two-and-a-half times the monthly rent. You are no longer allowed to deny residents if they don’t meet your higher income standards. If you were previously only renting to individuals who earned three times the monthly rent, you cannot do that anymore.This is a heavy burden to put on property owners and it really increases your risk when you’re renting out your property. It may be more difficult to find a truly qualified tenant with these laws in place. You may also face a longer screening and leasing process in general.
But wait, there’s more.In addition to all of these new requirements, there is also an appeals process that’s been put into place. If you have an applicant who wants to rent your home but doesn’t meet the criteria and gets denied, that applicant can appeal your denial. This process can take 30 days. If, within that timeframe, you have rented the original property to someone else and the applicant wins the appeal, you have to allow them to rent another unit for which they will qualify. Applicants who can submit documentation that refutes your reasons for denial will ultimately be granted permission to move into one of your units.As a landlord, this creates a lot of extra work and requires a lot of extra time on the screening process. It could slow down your entire approval process for other applicants.
A lot of Portland landlords are going to be worried about making a mistake. If you’re wondering what will happen if you do make an error, your question is valid. These rules are so new that we aren’t sure what the ultimate penalty will be. But, you can probably count on having to pay two times the security deposit at least. Then, there may be additional punitive damages that result in a $250 charge for each error along the way. Potentially, you could be responsible for the applicant’s legal costs as well.So, depending on the number of errors you make and the types of mistakes they happen to be, you could be looking at penalties that reach thousands of dollars.As we’ve said, this is a new law, and the laws here are always changing. Surely there will be revisions, and we can expect court battles moving forward.If this does nothing else, it should show you the importance of hiring experts. Treat your property like a business and protect that business. If you’re self-managing, make sure you understand these laws and you’re prepared to follow them.We’ll be talking about this more in the future. Until then, contact us at Mynd Property Management if you have any questions or if you’re a Portland rental property owner who needs help coming into compliance with this law.You can also visit our Facebook group of investors, which is called Master Mynd. It’s a real estate investors’ club, where you can exchange ideas with other owners. Check out our weekly podcast as well, called The Myndful Investor. We invite leaders in real estate and property management to talk about their success and, more importantly, their failures. There’s a lot to learn from this relatable content.
Picking the right resident can be the most important part of owning rental real estate. This is your Myndful Minute, where we’ll talk about what you need to consider when you’re placing a resident in your rental property.
When you are picking a resident, the first and most important thing to do is establish qualifications and policies that direct how you will accept or deny residents. Be consistent. Stick to your rental criteria when you’re screening and always disclose who you will or will not accept before any potential residents decide to apply for your property.
When you’re selecting a resident, you have to use the data that you gather to make your decisions. Never use your emotions. Feelings are not useful when you’re running a business. This rental property you own is a business, and you have to think of it that way.If you deny one applicant and then later accept another applicant who has the same qualifications as that first applicant, you’re going to find yourself on a bad path. Your decision can be seen as discriminatory. Use the data you collect, and don’t use your emotions or your personal beliefs when you’re selecting a resident for your property.
Verify all of the information you’re presented with in the application. We like to recommend that owners trust but verify what they’re told by applicants. You have a responsibility to make sure the information provided is true and correct.You don’t want to find out later that the resident lied about key pieces of information in order to get approved for your property. If you don’t do a proper background check before placing a resident, you could find yourself trying to remove that resident because rent isn’t coming in or the lease is being violated. Double check everything on the application and make sure you’re putting the right resident in your property.Thanks for joining us for this Myndful Minute. If you have any questions about screening and placing a good resident in your rental home, contact us at Mynd Property Management.