People often ask how to screen a tenant to see if they are going to pay their bills.
I know it’s unpopular to say this but I still rely more on my ears and subconscious than any credit check or background checks.
You know a person much better by meeting them, asking them questions and listening to their reactions.
Recently, someone asked to borrow a large sum of money from my wife and I. It was just not possible as our wedding was not even paid off yet.
What stuck with me was we were almost willing to do it and even tried from the bank to borrow it but something was just not right with the conversations we had with them. Something just kept niggling at us about the story.
I won’t get into it too much but the fact we both had that subconscious observation was enough to put a stop to it all.
That is the same level you need to pick your tenants on.
Something just not right but you can’t put your finger on? Maybe they had a huge elaborate story about their last landlord but then one sentence “sort of” contradicts that.
It all comes down to “Go with your gut”, not a piece of paper or report.
Download this totally free rent receipt template in either word or pdf format to complete your own rental paperwork. Just click the image on the right of the rental receipt template.
Landlords are required by law to complete these necessary rental forms for their tenants. You can do this with a receipt book or how I do it is using a rent receipt template. But what must it include? Where can you get one?
Your rental receipt must include the following:
the address of the rental unit;
the name of the tenant(s) to whom the receipt applies;
the amount and date for each payment received for any rent, rent deposit, arrears of rent, or any other amount paid to the landlord and shall set out what the payment was for;
the name of the landlord; and
the signature of the landlord or the landlord’s agent.
Free Rent Receipt Template
As a property manager and Landlord, I used a simple rental receipt template to avoid confusion. The good thing about this free template is you can send a digital copy with your digital signature on it to your tenant. You can batch them all at tax time for your tenants and email the files to them; it only takes about 30 minutes a year to comply with the act/law.
Email Money Transfer – A Great Way For Tenants To Pay Rent
Back when I was running around collecting rent, a tenant told me they would rather pay by emailing it to me. I had no idea what it meant but it sounded intriguing.
I looked a bit into it and found out my bank had the service for only a couple bucks a month, so I activated it. It was cheaper than gas and saved a hell of a lot of time chasing tenants down for their rent and time spent in line at the bank doing deposits.
So anyway, I began to use it as much as I could.
Here is how it works:
1. A tenant goes to their online banking site and choses to send money via email money transfer.
2. They select a password they will tell you over the phone.
3. An email is sent to the Landlord with a link to log into their online banking.
4. The password is entered and the money is deposited into your account.
This is such an amazing tool that I was using it with absentee Landlords when I was in property management. I would either have the tenant email money transfer their rent directly or have them email it to me and I would redirect it to the Landlord.
The reason this is sometimes better than post-dated checks is because you know the money is there instead of being surprised with insufficient funds from the tenant.
Found this interesting article regarding tenant red flags. As many know, I never recommend splitting a deposit – you will never see it. The one Landlord that wanted me to do so, lost his shirt on it.
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Tenant Stories Often Raise Red Flags
By [http://ezinearticles.com/?expert=Brett_D_Furniss]Brett D Furniss
“If you have to ask how much it costs, you can’t afford it.” Maxim of the Wealthy
“If you have to ask for a payment plan for the home’s security deposit, you can’t afford it.” Maxim of the Intelligent
We are approached by potential renters a few times a month with something like the following:
“We love this house! We want to take it! We would call our lives “complete” if we could inhabit this home with our children! We get goose bumps just imagining the daily ingestion of pure beauty that permeates from each nook of this stunning domicile. We have the first month’s rent ready to put down now! Where do we bring it? We will treat this house like our very own with weekly carpet baths and loving dustings!
But… The only problem is that we are a little short on the security deposit. Will the owner accept breaking this payment into 3 months? Let the owners know we are good for it and I will be praying that they be blessed this Sunday at each of the church services we regularly attend.”
Thinking like a property manager, how many red flags come up in this beautiful soliloquy? A few come to my mind:
1. Lack of funds: I dare to call this the number one tenant screening technique; this is the collection of the application fee, pet fee, security deposit, and the first full month’s rent upfront and in full. This really is the number one way to find out if they have cash on hand. If they can pay it, they probably have money. If they can’t, they probably don’t and won’t apply.
2. Offer of the security deposit in a payment plan: This ties into red flag #1, but there is another issue. If they don’t pay it upfront, you are left with absolutely no leverage to get it after they move in. You can’t evict them because they are paying rent. Please don’t take payment plans! I’ve done it a few times (because it seems so easy and the tenants seem so sincere…), but they rarely keep up with them. Moving is always more expensive than they realize and cash was already short. They won’t give you the money simply because they don’t have to. They duped you on the front end and will now avoid your calls and hollow threats.
3. Effusive praise over a rental home: I like it that you like it, but let’s not go overboard. When you tell me that you’re going to take meticulous care of it, that’s great; but I’ve never had a tenant tell me that they were planning to systematically destroy their rental before moving in.
4. I like it that you’re into church: But I wonder why you’re telling me this when you’re applying for a rental home?
Red flags don’t mean you need to wave a white one. Be diligent in your screening process and the right tenant will come along!
Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. You can contact him directly at [mailto:Brett@BDFRealty.com]Brett@BDFRealty.com. For a FREE subscription to Charlotte Property Management Weekly visit [http://www.BDFRealty.com/Blog.php]http://www.BDFRealty.com/Blog.php.
Article Source: [http://EzineArticles.com/?Tenant-Stories-Often-Raise-Red-Flags&id=5909574] Tenant Stories Often Raise Red Flags
Found this recently on facebook. They are based in the Greater Toronto Area in Canada (10 million people) but their lessons apply to anyone. Good content to check out.
It is simply a business that you need to learn the rules, tricks, secrets and forms used. There is not really as much to it as other businesses either.
You don’t have to show up to work for 8 to 12 hours a day. You do not have to report to a micromanaging boss. And at the end of the month, hopefully you collect a bit of a paycheck (cashflow).
I’ve been on both sides of this equation: a homeowner and landlord.
I had the confidence to rent my own house because I had the knowledge to do it.
When I talk with people that are considering renting their house, they usually already have decided that they wanted to either make money or save their house from a foreclosure or have an extra property but cannot sell it.
These are very different reasons.
However, with any reason, you have to have the confidence needed to go through anything.
You may go through good times with your rental and you may go through bad things. Nothing in life is a guaranteed easy jump so the decision becomes, “Can I do it?”
Sure you can do it!
I’ve seen everyday people become Landlords and make passive income day after day.
Sure it was hard to begin with but eventually it was old hat to them. They had their own war stories, told me them and I learned from them helping me more gain the confidence I needed to be a Landlord.
If you are trying to make money, this is one of three ways to do it. The other two are stocks and business ownership. For me it was a simple decision because I knew business and it helped my confidence as well. And I was able to see the light at the end of the tunnel — a passive income.
Now if you are trying to prevent a foreclosure or just can’t sell an extra property and want to turn your property into a money generating property to save your equity, that is another form of confidence.
It can be done but you need to know going in what is in store for you. My course can help give the knowledge you need to build the confidence need to be a Landlord. Check out the How To Rent Your House Now Package.
Recently, a tenant I placed contacted me on the second anniversary of his placement looking for a statement about something I allegedly said.
The circumstances were that the Landlord was to give a $100 credit towards the purchase of the house if their rent was on time and they chose to buy the house.
This is a typical clause in rental agreement forms or lease agreement forms (can even be a lease with option to purchase form).
The Landlord was not contesting this because the tenants did not want to buy (tenants RARELY actually buy the house but almost ALWAYS say they will when renting it).
What was in question was the tenant said that I told him $50/mn would be credited towards the second to last month’s rent. Which was not true. This would equate to a free month’s rent, which anyone that knows me and my rental lessons, I would never do.
You don’t need to offer a free month’s rent to get a house rented in this hot rental market. An apartment; yes. House; no!
Well there is several problems with his story. One, everything the guy asked for, I wrote on the bottom of the contract and he asked for a lot of weird concessions which I was more than happy to add to the bottom of the lease agreement form. But none were in regards to a free month’s rent.
Second problem is that I always attached a schedule to a lease if there was a free month’s rent concession that clearly stated the terms and I have both the tenant and Landlord sign and date it. I learned this very early from a good Landlord.
The last problem is that ultimately, just as in the sale of a property, I work for the Landlord, not tenant.
Now the lesson of all this is to get everything in writing that is agreed upon by both parties.
What is likely going to happen in the above matter is it will go to small claims court with me testifying. The Judge will likely say to the tenant, where is the piece of paper that the Landlord’s agent is speaking of that would have been executed with a free month’s rent? Case closed.
I’ve dealt with several of these situations where things were said in negotiations and later twisted. Sometimes each party can remember what was said, sometimes not. But isn’t it easier to just look at a piece of paper to see EXACTLY what was agreed upon?
Just as a quick update. I have been finally able to collect a hundred bucks from the couple.
How?
By simply looking at it from their perspective. I told them I was a firm believer in Karma and I would like them to at least pay $1 per month until they are able to completely pay me the total amount.
The guy was on my doorstep with a hundred dollar bill the next day.
I guess (and I know they do) believe in Karma as much as I do.
Who would have thought that being nice and believing in a universal checks and balances system would work?
Good luck on your collection efforts this year.
John
P.S. The image above is not the actual bill as I reside in Canada and we use monopoly money here.
Most tenants I dealt with only required rent receipts once a year and all in a pile. This meant having to prepare twelve individual receipts all in one sitting.
Not a problem.
But when you have say 50 tenants all asking for them at tax time it can be an issue.
The method I most use is to simply prepare the receipts in either PDF or Word format and email them to the tenant as a zip file containing all 12 months.
(NOTE: In my Province. I am not required to provide rental receipts unless the tenant asks for them. And I would say half of the tenants I have dealt with never ask for them unless they are students or on government assisted programs. However, for my records, I do provide them either electronically or by paper.)
Another thing I do is print them out and sign each so I have a paper record for the tax man. Not necessary, but I do it anyway.
I am going to try this year to only prepare and submit a rent roll to the tax man. Not sure if this is aloud. I will be sure to ask my accountant.
Another way is just to make sure you keep up with the receipts each month and make sure you store them in a package for that house.
I also write off a percentage of my computer equipment and office supplies, telephone, ads and mileage pertaining to the rental (I can do this because I keep a log of everything including mileage and calls).
So be sure to keep your records up-to-date, make sure your tenant gets their rental receipts and everything should go smooth.
One last thing is I do recommend is having an accountant at least prepare your taxes in relation to your rental. Remember the cost is likely going to be greatly offset by what they save you.
Many homeowners coming into hard times consider renting out a section of their home out to a stranger.
Perhaps you have a finished basement or even a room with access to shared common areas.
Although it seems to be an ideal solution to make your bills at the end of the month, I do advise against it (generally).
Why?
Because each scenario has 2 sides or viewpoints: your viewpoint and the other party’s viewpoint.
Look at the viewpoint of the potential tenant. Do you want to live with your Landlord?
My sister’s Landlord is on the property nearly every day in a back section and THAT makes her nervous enough to not want to rent from him anymore. Don’t get me wrong, the old guy is a fantastic Landlord. It is just weird to her to see him each time she steps out.
So imagine if you have to see, hear, smell, intermix with your Landlord day in and day out.
Now imagine if a rift begins between the two of you.
I can’t stand living with my own family; let alone a stranger!
Now, saying the above, let me give a different viewpoint. Some people can live with anyone but remember both parties (Landlord and Tenant) would have to match that description.
What I do recommend is some kind of physical (and mechanical) disconnection in the properties. For instance, make sure there is a separate entrance, heating controls and hydro meter even though the properties share the same building.
Another thing to consider is the rental agreement or lease. Be sure to CLEARLY define what is what and who is responsible for each item.
This means who can park where, when, how many people are aloud to occupy the unit, pet considerations, repair responsibilities, lawn cutting, snow shoveling, EVERYTHING.
The lease cannot contain too many considerations.
So to sum it up, I do not recommend renting out just part of your property until you have considered the above notes.
People often ask how to screen a tenant to see if they are going to pay their bills.
John J. Adams, Rental Sytstem Expert.
