Many investors perform some level of due diligence when screening potential renters or tenant-buyers, however few investors perform as thorough of a check as they know they could. We become lazy, complacent, and trust others are just as honest as us – many times they are not. Next time you screen a potential renter or tenant-buyer, make certain to verify rental history and rental experience with his/her previous landlords. (Below I have given you a form you can use.)
When performing due diligence on your renters or tenant-buyers do you…
- Perform a 3rd party background check (state and nationwide)?
- Check paystubs and W-2's? Verify sexual predator status?
- Verify condition of applicants current home? (organized home = organized-type of person)
- Call current boss(es) to verify work history?
- Call past/current landlords to verify rental status and history?
Pro Tip: Aim to make your prospective applicants jump through many hoops while becoming approved. Listen for complaints, lies, victim mentalities, frustrations or sounds of giving up. You want an applicant that will fight for this home and understand the opportunity they are getting,assuming of course the home is a decent value and appropriately priced. If these applicants get tired of the application process they may not be satisfactory long-term renters or tenant-buyers.
Due Diligence: Get Permission.
A Release Of Rental History form is a separate form or a paragraph in your tenant application. This agreement gives you permission to ask questions about the applicant’s rental history from their past/current landlords. Some landlords and management companies require written proof the applicant agrees to their private information being shared.
Written consent from your applicant comes in many forms. A simple agreement signed by the applicant will do. If creating your own Release Of Rental History form, aim to include the following sections:
- Renters personal identifying information (SS#, DOB, Drivers License #)
- Previous property address and rental amount (Account for past 2 years)
- Landlord's contact phone number and details.
- A sentence naming you as authorized to ask questions about applicant.
- Dates and Signatures of applicants
Download this Form: Release Of Rental History
Reality: Personal experience has shown that many landlords will not require any written-proof before answering your questions. By confidently stating the applicant’s name and why you are calling, many landlords will openly talk about these past/current tenants.
Pro Tip: Regardless if needed or not, obtain a signed Release Of Rental History form to keep in this applicant’s folder if approved.
Hope this real estate investing training article helps you Landlords, Mobile Home Investors and Rent-To-Own specialists.