Zeke had been waiting a long time for this day. His Aunt Millie finally had decided that he could help her manage her investment properties. She owned three apartment properties and about ten houses, a small rental empire she had built with her husband. The income from the properties had sent Zeke through college.

Zeke was 30 now, had a young family, and ran a successful carpet cleaning business, but he had always been a little envious of his aunt. Her trips three times a year to Greece and the Bahamas made him think there was a lot of gold buried under all of that real estate.

When Aunt Millie asked him to manage the Golden Meadows Apartments, a 30-unit property located close to town, Zeke was very enthused. To get started he inspected all of the units, met all of the tenants, and started collecting the rents and paying the bills. He was a tough landlord and enforced all of the rules in a rather highhanded way. Within one month, his on-site manager had quit and he had ten vacancies.

He knew he was doing something wrong, but he didn't want his aunt to know, so he borrowed the rent for the ten vacant units on his credit line and made sure his aunt got all of her money. Then he found a new on-site manager, and together they filled up the property with the next ten tenants that applied. He was never so happy as when the last tenant moved in. He thought all of his problems were solved.

Then the police called: Tenant Number Ten was wanted in another state. Tenant Number Nine could not pay her second month's rent because she was unemployed and Tenant Number Eight had a band and practiced all night -- to the dismay of the neighbors.

Tenant Number Seven was an undocumented worker and the Immigration and Naturalization Service wanted him out of the country. Tenant Number Five had a boyfriend who moved in and broke the door down twice in one week. Tenant Number Three's dog was urinating all over the flowers and killing them. Bill collectors bothered Tenant Number Two all of the time: Zeke learned that she had no furniture in her apartment and was evicted from her last place. Tenant Number One was Zeke's wife's best friend and she never had any money to pay rent.

To top it all off, the new on-site manager ran off with the rents they collected the next month. It was Friday night, and Zeke was devastated.

Then Aunt Millie called. She mentioned a moving van at the Golden Meadows Apartments and that the property looked trashed. He promised to be right over.

Fifteen minutes later, he was at her doorstep, telling the story while blubbering all over her.

She grew very angry, but told him that together they could work out these problems. He was surprised that she was even willing to let him be involved. She said, "One day you will inherit these properties, and I want to make sure you are successful."

So they went to work.

First she reminded him that it is illegal to discriminate based on a person's race, color, religion, age, gender, disability, sexual orientation, familial or marital status, and/or source of income. And some jurisdictions, she said, had additional anti-discrimination standards.

She suggested they get rid of the troublesome tenants Zeke found, keep the good ones, and start from scratch.

"First, we must screen our tenants."

She made a list for Zeke that included these items:

• The prospect must have landlord references from previous three years that are satisfactory.

• The household income must be at least three times the amount of monthly rent.

• Employment must be verified.

• The applicant must have no evictions on record.

• The applicant must have no criminal history.

• The potential tenant must possess a valid social security number and I.D. card.

• The prospect must not have has any collections within the last 12 months.

• The applicant must have a clear credit record showing that bills are paid on time and that credit accounts have no outstanding balances.

• The applicant cannot have filed bankruptcy within last seven years.

• The applicant must agree that pet policies and other standards will be followed.

"The screening will help us make sure they can pay the rent and be peaceful tenants. If they cannot meet these standards, we don't want them. Even with this screening, don't take cash for rent from any tenant, and make sure that the people who filled out the applications are the ones that really moved in. Once they have moved in, the on-site manager is responsible for making sure they don't sneak in additional people to live there," explained Aunt Millie.

After four months of getting rid of bad tenants, screening for new ones, and fixing the damages, Golden Meadows Apartments was once again showing a positive cash flow.

Zeke could live with himself, and Aunt Millie was convinced that he had learned an important lesson about tenant screening -- which is what she had planned in the first place.

Zeke decided that managing rentals was more complicated then he thought, and that it took a lot of work to find that pot of gold. He had learned a lot from his aunt during the next ten years before she gifted the properties to him. They became a good team, and when she finally retired, she knew that, if nothing else, Zeke would know how to screen for good tenants.

For more articles by Clifford Hockley, please press here.

Published: January 17, 2002

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Clifford A. Hockley is the President of Bluestone & Hockley Real Estate Services, one of the larger brokerage and property management companies in Portland, Oregon. Mr. Hockley holds an MBA Willamette University and a B.S. in Political Science from Claremont McKenna College. He is a Certified Property Manager and Bluestone & Hockley Real Estate Services is an Accredited Management Organization (AMO) by the Institute of Real Estate Management (IREM). Mr.Hockley serves as member at large on the Portland IREM board. He has twice been named Certified Property Manager of the Year (2001 and 2003) by the Institute of Real Estate Management and is a frequent contributor to industry newsletters.