Choosing a tenant can be a truly daunting task, especially when self-managing a rental property. Today we are speaking with Celeste Robertson, Portfolio Manager with Mynd Property Management in Las Vegas. Celeste is here to give us her top three things every investor or property manager should look for when seeking a tenant for their property.
Selecting the Right Residents for Your Property in Las Vegas
Steve Rozenberg: Hey, everyone. This is Steve Rozenberg with Mynd Property Management and I'm joined here today with Celeste Robertson from the Las Vegas division of Mynd Property Management. Celeste, thanks for joining me today. I appreciate it.
Celeste Robertson: Hi, thank you.
Steve Rozenberg: So, this is something that a lot of investors get very nervous about, and everyone is afraid of what not to do and what to do, and that's picking a resident.So, let me ask you this. What would you say are the top three things that you need to look for when selecting a resident to make sure that you pick the right one or don't pick the wrong one, basically?
Check their Rental History
Celeste Robertson: First of all, rental verification. You do want to be able to see how they handled their previous lease, if they had HOA violations, if they pay on time. Were eviction proceeding started? Did they break their lease? How was their security deposit process? Did they take care of the property? There's a lot that's done and taken care of when you do a rental verification.
Steve Rozenberg: You know, it's funny. I used to always say, “if you look at their past, you'll see their future.” So, if you look at somebody, if you look at what they've done up until now, just because you have a nice place does not mean they're going to change how they are and who they are just because you have a nice place to rent. And if you think that they will, it's kind of your fault for assuming that because they clearly have shown you their track record in their past. And, you can expect the same to hold true once they move in.
Verify Their Income
Steve Rozenberg: So, I completely agree with that. I think if you see their history, you will see how they're going to be moving forward. What's number two?
Celeste Robertson: And then, you would want to make sure you verify their income. I like to see 3x the rent. There's things that come up. People have other bills to pay, but you want to make sure that they're able to pay that rent comfortably. And you want to make sure that it's verifiable—pay stubs, not just what they’ve written on their application because anybody can write anything.
Steve Rozenberg: Now, do you verify that by calling the employer or what do you suggest if somebody wants to? What is the best way for someone to verify, these days, what they actually make?
Celeste Robertson: Generally, it's going to be pay stubs. You're going to see that it is from a verifiable company. Also, if they want to do their transcripts from irs.gov, which is free, then you're able to see what they've made for the year and it's very verifiable with the IRS that way.
Steve Rozenberg: Do you know—and I know we can't discriminate, obviously—but do you have a preference of two income families—one income family, government assistance—do you weigh them differently at all?
Celeste Robertson: No, not at all. Just, whatever that, collectively, they make that is verifiable, as long as it's verifiable as an income, then it works.
Steve Rozenberg: Now let me ask you this. And this is something that I know, depending on the city, a lot of people move to Las Vegas to start new jobs, right? So, if somebody's coming to Las Vegas to start a new career, how do you gauge that when they don't really have a job yet? How do you handle that?
Celeste Robertson: Generally, what they're going to have is an offer letter. If they've come out here, someone has offered them a position—we get Amazon medical things like that—but there is an offer letter that says you're going to be working here this many hours with this rate of pay and so forth. So then we ask for an offer letter at that point.
Steve Rozenberg: Well, that makes sense. And then, you've got that, at least—some kind of substance to, at least, back it up, not just their word, obviously, right?We used to always say, “trust but verify,” right?
Celeste Robertson: Right.
Run a Credit and Criminal Background Check
Steve Rozenberg: Okay. So, number three. What is the number three thing that you would suggest when picking a tenant?
Celeste Robertson: You're going to want to run their credit. When we run their credit reports, we're also checking for evictions and criminal background. You just need to know everything there is to know about that person and that is one way of doing it.
You can also check and see, on their credit report, a lot of companies will put on there whether or not they've been short on rent or utilities. It just kind of gives you a pattern. And then, just checking their criminal background, as well, is super important.
Steve Rozenberg: And do you have some no-goes like a felony or an eviction or something like that? Some things that you just say, “you know what, that's a definite no-go on this.”
Celeste Robertson: Usually, a definite no-go is if they have an eviction on-file. It is a definite no-go.
Steve Rozenberg: Right, because obviously they're kind of habitual at that point to do that.
Celeste Robertson: Because I have not come across any eviction that has been pretty.
Steve Rozenberg: They're normally not pretty, yeah. And, the one thing that I've always learned is, a lot of times when you have a vacant property, people get nervous because you own a property and that property sitting there empty and now you're starting to get emotional; you're starting to make emotional decisions in a business matter. And a lot of times you're starting to maybe allow some people that you wouldn't normally allow because you're getting nervous. And maybe it's been a month longer, two months longer.
The only reason I would caution, when people want to do that, is for two reasons. Number one, there is fair housing and discrimination. So, you can't just all of a sudden change the qualifications because you're nervous. Because it's a business, right? And now someone can come back to you that applied earlier and say, “wait a second. I had those qualifications on day one. You did not accept me.” And that can become a very slippery slope with a discrimination suit or fair housing, possibly. So I'd caution you on that.The other thing I would caution you on is, just because you put someone in your property, does not mean that you have a paying tenant in your property. And so, a lot of times we think, “I'll just put someone in because he's better than nothing.”
Now, you have a property with someone in there maybe doing some damage and you're not getting any money.And more importantly, I think the one thing that I would like to stress to investors out there is the mental stress that you go through when you have someone in your property and you don't know how long they're going to be in. And you, kind of, did it yourself because you didn't stick to your rules and regulations, because you made an emotional decision. So, I don't know what your thoughts are, if you agree or not, Celeste, on that. But that's, kind of, my standard. And I've learned that from lessons—my own—that I've actually done in the past, that I know you don't do. And that's just something that I stick to all the time.
Celeste Robertson: Right, it's your investment and you want to protect it 100% and keep everything straight across the board. Don't deter from what your guidelines are set for, because they're set there for a reason. And that's to protect your investment.
Steve Rozenberg: Absolutely, absolutely. So, just to wrap it up, number one, we've got rental history. Correct? Next we've got job history. And then we've got credit, criminal background check.So, if you do those three things and, again, you stick to your policies and you don't deviate, you're going to be doing much better than if you just went off your gut feeling or your emotions on that.Celeste, if somebody wants to get ahold of you in Las Vegas, how would they do so?
Celeste Robertson: That would be 833-MYND.
Steve Rozenberg: And if you want to go to our website, you can go to mynd.co. That’s M-Y-N-D.co. Or, if you want to go on Facebook, you can find we have an investment group there—the MasterMynd Real Estate Investment Club, as well as our podcast show, The Myndful Investor. It's on iTunes, Spotify, Google Play.
And again, we just want to help fellow investors just like you, just like me, just like all of us try to get a little bit better. So, this is Steve and Celeste, and we'll talk to you guys later. Bye-bye.While choosing a tenant can be a stressful task, there are many resources to help investors and property managers assess the history of potential tenants and narrow the search down to the best possible candidates.
Foremost, checking a potential tenant’s rental history is key. An individual’s rental history can give a manager or landlord an immediate indication of what sort of tenant they will be dealing with. As they say, a person’s past is often an indication of their future.Likewise, a potential tenant’s job history is also important. While anyone could lose their job or endure some other major challenge at any time, a job history gives the property manager a clear indication of whether the individual has the ability to pay their rent, or whether they can even afford to live in the property, at all.
Lastly, a credit and criminal background check are obviously important. Having an indication of your potential tenant’s credit and criminal history can not only help protect your property, but keep other tenants or neighbors happy, as well.
And while none of these resources are fool-proof and anything can happen, the combination of a potential tenant’s rental history, job history and credit and criminal background checks can give you the best indicator of which tenants meet the standards set in your lease agreement, but which tenants will be best for your property, overall.