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SHOW NOTES FOR EPISODE 129: FINDING AND KEEPING GREAT TENANTS
One of the greatest challenges to maintaining profitable rental properties is finding and keeping good tenants. In this episode, Steve White, founder and CEO of RentPrep, a leading nationwide screening and background check company, shares practical tips on how to strategically find great tenants who will renew their lease year-after-year.
What You Will Learn
- What is the NUMBER ONE mistake landlords make that hurts finding and keeping great tenants?
- What is the most important tenant attribute of a great tenant?
- The leading job titles help by great tenants
- What job titles produce the worst tenants?
- The most overlooked tenant need
- Tips to insure applicants aren’t giving a friend’s name as a “previous landlord”
About Our Guest
Steve White
Steve White is a published author, podcaster and national speaker in the real estate industry. He is the founder and CEO of RentPrep, a screening and background check company supporting over 30,000 landlords nationwide since 2007.
More About Steve
- Spent eight years in the Marine Corp
- In 2004, at 25 years of age, he took over family’s chimney sweep business but didn’t like it
- Started working in the credit industry for a company that helped businesses with their account receivables
- Later, he started his own credit and collections business
- One client of his company was a property management firm that asked him if his company could help screen prospective tenants
- Figured out how to do it, working backwards, and it became their most effective service
- Enjoyed the screening side
- Sold his credit and collections company and started a tenant screening company
RentPrep & Fidelis Screening Solutions
- Created Fidelis Screening Solutions (taken from marine’s motto “Semper Fidelis”) and worked primarily with large property management companies
- Built and refined it a bit more
- Then founded RentPrep
Biggest Mistake
- When he launched RentPrep his approach was different. He felt tenants should screen themselves and share the info that with their landlords
- Poured a ton of money into marketing and launching the new concept and only generated $50 in sales
- He learned from it (that he should have tested and surveying clients first) and went back to the traditional approach with landlords doing the screening
Biggest Landlord Mistake
- No screening at all and trusting their gut
Screening Criteria
- Establishing and practicing good screening criteria is the most important thing for a landlord is to do to find and keep great tenants
- Criminal background is very important:
- You must be clear on what kind of crimes will exclude a tenant – you must be specific, for example
- Violent crimes
- Sex offenders
- Recent destruction of property
- You must be clear on what kind of crimes will exclude a tenant – you must be specific, for example
- How much weight should a landlord give to prospective tenant’s credit scores:
- Landlords are split 50/50 on the importance of credit scores
- Most renters have lower credit score — 650 is average tenant credit score
- Most important tenant attribute is prioritization
- Which bills do they pay first?
- Housing needs to be on the top of that list
- If car or cell phone are higher priority, could be a problem
- Which bills do they pay first?
- Past Evictions
- If they have been evicted before, they are less likely to fear being evicted again
- As of July 1, 2017, eviction record will no longer show on credit reports
- Also on July 1, no previous judgments or liens will be included on credit records
- Use a national screening service to cover multiple states
- Don’t just trust the national eviction database – dig deeper
- If current landlord is not listed – red flag!
- Bankruptcies
- Multiple bankruptcies – red flag!
- Free Application Template on Steve’s website includes many critical questions
What Job Titles do the Best Tenants Hold?
- Nurses and medical employees
- Security personnel
- International students that have passed admission requirements
- You want people with steady paychecks
- Job titles to avoid
- Attorneys can be a problem – lawsuits
- Business owners – unsteady income
- Look at 3 months bank statements
- 1040s not as reliable
- Commission based jobs
Biggest Success
- Property management company client
- Bought an apartment community with a lot of problems
- Crack dealers
- Crime
- Lots of police calls
- Nuisance neighbors
- They wanted to turn it around and they expected that to take at least 3 years
- Step 1 – Re-screened tenants when leases came due
- Replaced problem tenants with good tenants
- Step 2 – Started physical improvements to property
- Step 3 – Increased rents
- Everything was contingent on Step 1’s success
- Step 1 – Re-screened tenants when leases came due
- The company moved from “problems” to “profits”
- Bought an apartment community with a lot of problems
Most Overlooked Tenant Need: Good Tenants Want Other Good Tenants as Neighbors
- You need to get rid of problem tenants and replace them with good tenants that have been carefully screened and vetted
How to Find Great Tenants
- Create and follow strong tenant screening criteria
- Know what your “perfect” tenant looks like
- Create a tenant “avatar” pf your perfect tenant and target that type of tenant
- Choose “vacancy” over allowing a potentially “bad tenant” to rent – it will cost more in the long term than taking the gamble
How to Keep Good Tenants
- Tighten-up and stand firm to your screening criteria
- You have to make the verification calls
- Cross-reference and make sure you have the right landlord phone number (not a friend’s number)
- Can call property owner (through county assessor’s office) to get landlord’s number
- Ask them questions on app like property address, move-in date, move-out date, rent amount (most friends won’t know all this info)
- Must speak to their current or last landlord
- Most landlords will be very honest
- Cross-reference and make sure you have the right landlord phone number (not a friend’s number)
- Application should have “no blank space” policy
- Steady address history — Look for tenants who have not moved around a lot from state to state
- Avoid job hoppers – look for a minimum of 12 months at same job
- Look for STABILITY in your tenants
What’s Ahead for His Business?
- Started online community (Facebook Group) that ready caught on with landlords
- Great place for landlords to ask questions of other landlord or to ask Steve and his organization questions
- Most landlords want to help other landlords
- Currently 1,700 members
- Looking at way to integrate this community with their own website
- You can find it one Facebook at: RentPrepForLandlords
Rap-It-Up
- Favorite real estate/landlording book: The Book on Managing Rental Properties by Brandon Turner
- Favorite business book: The 4-Hour Work Week by Tim Ferris
- Most valuable web site for success (other than your own): BiggerPockets.com
- Favorite app: Google Keep (electronic sticky notes)
- Favorite quote: “There is no try, only do” – Yoda
- If you had to start all over, knowing what you know, and you only had $1,000, what would you do to launch your business? Would take him a long time. He would invest in mentor to help him put a good plan together
How Can You Reach Steve?
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