When property owners become landlords, handling a single location may be do-able for the owner providing that they live close to the renter. Many landlords are able to ramp up to running a few properties at a time, and some landlords manage properties on their own or with the help of an employee, such as a resident manager. However, as locations become more plentiful or farther apart, many choose to hire property managers of property management firms to run things professionally.
According to Fortune Builders, choosing whether to use property management companies is a hard decision for many real estate investors. Some wouldn’t dream of investing in real estate without a property management firm in place before closing on a respective deal. Others, however, struggle to break free of the “do-it-yourself” mindset that prevents them from accomplishing more. Using a property management company isn’t as obvious as many would assume, but the benefits of using a property management company far outweigh the negatives. While it does cost money to hire a third-party manager, it is most-often worth the price. Additionally, their involvement could easily increase the chances of growing the investor’s bottom line.
Property Management
Property management firms are paid to handle all the fine points related to owning and renting rental properties. They are third-party maintainers of residences, whose primary function is keeping the property running smoothly while taking care of the tenants as well as the property. Traditionally, property managers are hired by rental property owners to oversee the daily operations of their real estate assets and deal with any questions or concerns the tenants may have. In the event the property is vacant, it is the property manager’s job to see to it the location is rented, oversee tenant turnover, market vacant space, sign leases, collect rent, arrange for maintenance and repairs, respond to tenant requests and when necessary, pursue evictions and file to legally receive late or unpaid rents. Perhaps most important, is the task of vetting potential renters and running background checks. The purpose of these background checks is to screen the renter in advance to help landlords know who will be renting their property. These background checks help determine if there are any red flags or detrimental behavior beneath the surface, to make sure the renter will pay on time and not cause the property owner or neighbors any harm.
Tenant Screening
Property managers tenant screening pays off ahead of the game and pays dividends down the road. A tenant’s financial situation is a detail landlords are entitled to investigate and tenant screening services can help with that and other factors before the property is rented. This part of a rental background check is an additional screening tool that allows landlords to say yes or no to a potential client.
Tenant screening services can be purchased individually or in bundles, and generally, there is no long-term commitment, so a property management firm or individual can stay with or leave their outsource whenever they choose. The property manager can choose which screening services work for them and which will fit their budget. Some of the services are paid monthly, others are paid per report or in volume bundles, and others can be paid up front by the prospective tenant as part of their deposit process. Individual eviction reports can start for as little as $7.99, and some credit and criminal background reports go as high as $55.
There are hundreds of tenant screening services available and they are defacto consumer reporting agencies that investigate such items as bankruptcies, judgments, liens, credit reports, sex offender status, criminal history, eviction history and employment verifications. The reports they provide help give a landlord a clearer picture of their tenant applicant before deciding which prospects to choose for their rentals.
The majority of the data in the reports come from the three major credit bureaus:
• TransUnion
• Equifax
• Experian
While this data helps illuminate the prospective tenant’s history of responsibility, and provides social security number verification, and an overall credit score, landlords and property managers can also see credit history, past bankruptcies and trends. However, a full background screen doesn’t stop there. Full background checks should include:
Personal details such as current and past addresses, job status, income, employment history, collections history, consumer statements, public records including court judgments and liens, eviction records, criminal records and other names (AKAs) the tenant has gone by.
Additionally, tenant screening criteria can include:
• Online Rental Application (Perhaps a free online rental application that applicants can fill out online)
• Credit Score and Credit Report (Make certain it is a full report and score)
• Criminal Background Check (Showing the renter’s past convictions, nationwide in addition to state-specific)
• Eviction History (Showing previous addresses and time frames in the tenant’s resident history as well as any court actions related to an eviction.)
The property managers should also expect the tenant screening service to provide:
• Tenant Screening Pricing (How much does the service cost? Are there bundles or a la carte options?)
• Who Pays the Screening Fee? (Does the applicant pay the screening fee, or does the landlord or property managers have the option to pay?)
• Turnaround Time (How long does it take to get reports in hand from time of order?)
• Method to Request Reports (What process does the user undergo to receive the reports?)
The bottom line is, make certain the prospective tenant is all the landlord or property management firm needs them to be … and it is a comprehensive tenant background screen before the fact that will save effort, stress, time and money down the road.
