Doing a Credit Check

After narrowing the field of applicants based upon the information in rental applications, you are now ready to do credit checks. Why is this step necessary? A credit report gives you a good indication of how responsible each prospect is when it comes to handling money. It's more difficult today, however, because so many people have had homes foreclosed or bankruptcies, job losses, and medical bills they cannot pay because they don't have health insurance.

Some landlords want to give the family a break. Others believe you should stick to your standards for qualifying tenants and that it's better to keep the unit vacant until a qualified renter comes along. If you decide to take the risk, carefully scrutinize the credit report to find out if the prospect has a long history of not paying bills or if it started with a mortgage that became unaffordable or medical expenses that tipped the scale.

If you decide to relax your standards on credit checks, do it consistently. If you forgive someone whose only black mark is an ongoing hospital debt, be sure that's the criteria you use if someone in similar circumstances applies for the vacancy. Otherwise you set yourself up for a discrimination complaint.
Credit reports will tell you if a person pays rent and bills on time, was evicted (this information may not be available in some states), is involved in a lawsuit, and whether he has a credit history. Keep in mind, however, that credit bureaus make mistakes and some reports may contain inaccuracies.

What's Involved in a Credit Check

Credit ratings are based on an individual's credit-paying history, the amount of money owed, the length of the credit history, new credit, and types of credit used. The report will give you specific information about the applicant's bank loans, credit card accounts, real estate loan payments, student loans, bankruptcies, and accounts in collection.

The data is given a numerical score ranging from 300 to 850. The higher the score, the more likely an individual is to pay bills in full and on time. Most people have a score in the 700 range. The following chart will help you interpret the score an applicant receives:


Credit Score

Delinquency Rate

800–850

1%

750–799

2%

700–749

5%

650–699

15%

600–649

31%

550–599

51%

500–549

71%

300–499

87%

How to find a "Good" Tenant

This is one of the most asked questions: First things first! Choosing a tenant is not an easy process. First, landlords face the notion of non-discrimination in picking a prospective tenant. State and Federal law prohibit landlords from discriminating against tenants based upon race, sex, age, gender, family status or size, nationality or disbility. As long as a landlord has a legitimate business based reason for denying a rental to a prospective tenant, such as bad credit or negative references, a landlord may reject a prospective tenant. The non-discrimination laws are complex and all landlords should familiarize themselves with these laws. More to come on that later In a nutshell, a good tenant is money. Money in the bank, money in the landlord’s pocket, money saved from legal and other expenses. Assuming that a landlord is reputable, the ideal tenant is one who pays rent on the first of the month and is forgotten for the next thirty days. A tenant that asks for repairs is not necessarily a bad tenant. A good landlord will gladly make repairs as repairs are a cost of doing business just are paying property taxes. A tenant that breaks personal property and does not pay is a bad tenant. This is the tenant that must be screened out The tenant screening process begins with a prospective tenant. To avoid difficulties and claims of discrimination, all prospective tenants should be treated equally and an identical process should be followed when checking out the applicants. A landlord should begin by opening a manila folder for each applicant. This folder will contain all information regarding the prospective tenant’s application process and should be maintained for at least two years (perhaps more in some states). In all cases, a landlord should truthfully and carefully deal with a prospective tenant. The landlord should expect a truthful dealing back from the tenant. In most cases, a truthful tenant will opt not to rent from a dishonest landlord and visa versa. The place where the landlord most requires truthfulness from a prospective tenant is on the tenant’s rental application. All landlords should require written applications which should be completed by all prospective tenants and retained by the landlord (in the case of a discrimination claim). These applications should be carfully reviewed by a landlord. If a potential tenant refuses to fill out an application, a landlord should, in no instance, consider renting to that person. This is a sure sign of trouble. The application should request, at a minimum, the following information from all prospective tenants over the age of 18 who will live in the property: tenant name employer name and monthly income driver’s license number and social security number (get a photocopy of the driver’s license) credit and bank information, including monthly debt payments credit report authorization automobile information including license plate number rental history (at least the past three places the tenant resided and the name and number of the landlord) references (at least four references) The application should include a credit check authorization portion that informs the prospective tenant that the landlord intends to verify and check the information contained in the application. The authorization should include a sentence authorizing the landlord to obtain credit, employment and any other information, including that contained on the application, from a credit bureau in the form of a credit report, from the creditors directly, from employers, references and prior landlords. Too often, landlords fail to check up on references, employers and prior landlords. It is worth the effort to screen out poor tenants. When contacting these people, landlords should keep excellent written records. Landlords should note the actual answers to questions as well as the attitude of the person giving the answer. Employers should be asked about the prospective tenant’s attendance at work and income levels should be verified. Prior landlords should be questioned about noise levels, complaints from other tenants, lease violations, promptness of rent payments and evictions or other lawsuits against the prospective tenant. References should be quizzed regarding the character of a prospective tenant, but in general, these are the least important persons to contact as they would not be listed unless they were sure to respond with positive feedback to a landlord. People rarely want to bad mouth another person, so they will be evasive with their answers. Obviously, if a reference does speak with disfavor about a prospective tenant, this is a sure red flag. The key is to actually check with these persons to make sure that the references are valid and perhaps to learn a bit more about the applicant. Once a landlord has a completed and signed application and credit authorization which looks promising and the landlord has checked references, employment and prior landlords, the landlord should find a credit reporting bureau and order a credit report. As a side note, landlords can pass along the credit report charge to prospective tenants as long as the tenant knows that the fee will cover only a credit report. If a landlord does pass this cost on, he or she must charge only the actual cost of the report, no more. The report should be reviewed for a history of late payments, prior bankruptcies and outstanding debts. The report most likely will not disclose prior evictions or landlord information because this information is rarely reported to these agencies. It will give a landlord a general idea of a prospective tenants creditworthiness. If the credit report turns up a valid reason to reject a prospective tenant, the Fair Credit Reporting Act requires that the landlord notify the prospective tenant of such and inform the prospective tenant of the name and address of the credit reporting agency along with a notice that the prospective tenant can get a copy of the report if he or she files with the agenct within sixty days of the landlord’s notice of rejection. Remember, if the landlord collects a fee for a credit report and does not obtain one, the money must be refunded to the applicant. It is essential to make the time for tenant screening. Failure to do so can result in future problems. The next post will discuss after you accept a new tenant.......

Why it's a good idea to Join a Landlord Association for 2013

Massachusetts is one of the toughest states to own and manage income property. By joining a local landlord association you could be saving yourself some heart ache by: Discovering inexpensive ways to fix up your property and make an apartment attractive. Learning the laws, codes, and permits affecting landlords and tenants before getting started. Learning about insurance and liability issues and what is needed to avoid lawsuits. Determining a competitive rental rate that will cover expenses and bring in a return on investment. Figuring out what it takes to find and keep the best possible tenants, and then do it. Learning to avoid discrimination complaints when marketing and showing the property. Developing systems for record keeping and maintenance logs.

Getting Problem Tenants to Leave Without Trashing Your Rentals

by Jim Watkins


Consult your attorney to find out the legality of this technique in your state

Getting a tenant to move peacefully and without causing physical damage is hard to do.
Tenants being evicted tend to feel victimized and when they get upset they are a risk to do physical damage to the house and leave behind mountains of trash.

It will take a minimum of three weeks to legally evict a tenant and can cost in excess of $500 (Texas Law).
Owners tend to reason that they will keep the security deposit to offset losses but a tenant can cause thousands of dollars in damage in minutes.

Here is a plan that has yet to fail:

Let the tenant know that you have filed to evict them and give them a copy of the eviction papers. (Making sure to follow the courts procedures)
Tell the tenant you will only talk to them 30-minutes before the court hearing and there will be no contact until then. When they laugh at you, tell them you will refund their full security deposit, in cash, the date they move out.

(30 minutes before the hearing) Offer to issue their FULL deposit back to them the day they move out as long as all belongings and trash are removed.

Set a date for them to be out (date needs to be before a date the court will set), add the requirement that they agree to leave the property completely free of belongings and trash which includes small things such as a candy wrapper
Have them sign your prepared agreement and proceed to your court hearing.

Tell the judge that you have reached an agreement and you would like him/her to endorse it (This is the only time I remember telling the Judge how I want them to rule and they agree).

The judge should (and has) accept the agreement and inform the tenant that if they break this agreement, he/she will authorize an immediate eviction.

Finally, once the tenant is officially out, then withdraw the eviction.

It is hard to justify giving the tenant cash to leave after losing money with them already. I can only point out that in a situation such as eviction, there is NO winning! There are only degrees of LOSING!
Evicting a problem tenant only to face a damaged property is bad enough. Give the tenant the one thing that is of use to them…. cash. And offer it when it will be needed…. upon move out! This is also known as a “Cash for Keys” settlement.

Question 3 : Medical Use of Marijuana

Question 3 on the November Ballot is a proposed law that would eliminate the criminal and civil penalty for the medical use of Marijuana to qualifying patients. This question has me thinking on if passed how will it effect my rental properties. Currently most of my buildings are smoke free. Should tenants and or their guest choose to smoke then they need to do so outside. If not then they are in violation of the lease agreement and it is grounds for eviction. The dilemma I have with Question 3 if passed is: If my buildings have a smoke free policy then does than where does that leave me with the 71 tenant that has a prescription for medical marijuana for her glaucoma. Do I really want granny smoking a dubbie outside during the cold months of January where she can catch a death of a cold or does she have to resort to making batches of hash baked brownies to relieve her symptoms? Can I actually enforce the no smoking policy with a perscription for MJ or is the Massachusetts Commission Against Discrimination going to sue me for discrimination? I have no idea how I'm going to vote. Right now I'm exploring the pro's and con's. What's your take on it?

LETTER: Prevey Responds to 'Salem News' CPA Editorial

The following letter to the editor courtesy of Councillor Paul Prevey is in response to an editorial published by the Salem News on Aug. 29. This letter was published at SalemPatch.com on August 31, 2012. Myself and five of my other colleagues recently voted against putting the Community Preservation Act (CPA) on the ballot this November. As noted in the editorial, this initiative was affirmatively voted on by the City Council in 2007, however it was ultimately rejected by the voters at the ballot box. It’s now being put forward again by the Administration, however many of us on the Council that supported its placement on the 2007 ballot believe that this initiative had its opportunity in 2007 but the proponents are back for round two. What the editorial alleges is that somehow the Council denied the voters the right to vote on this. Quite the contrary. The proponents of this initiative did not like the answer the voters of Salem gave in 2007 so they decided that they will put it forward again in the hopes that their coordinated efforts to turn out a more sympathetic electorate will ultimately prevail. Interestingly, when the Council held its special meeting to take up this matter, several proponents who addressed the Council advised that they did not want this effort on the ballot via voter petition. Instead, the proponents urged the Council to "show leadership" on this issue, and so we did. The majority of the Council decided that it was not in the best interest of the taxpaying residents of Salem to have this on the ballot for a second time. Unlike 2007, we are in a much worse financial situation in Salem, the Commonwealth and throughout the U.S. People’s homes are being foreclosed on, they continue to lose their jobs or have been unable to find a new one, and in general, are desperately struggling to maintain their financial obligations and make ends meet. As city councilors, we constantly hear stories throughout the City of residents trying to stay afloat in a sea of financial turmoil. To suggest that the average increase in the surcharge tax would be "only $30" annually is to belittle those who are struggling to stay on top of all of the fees, taxes, fines, charges, surcharges, surfines and rate increases which have consistently ballooned over the years. Thirty dollars a year, in and of its self, is very minimal, but when you add it to every other increase, it becomes a crushing financial burden for so many people. The cumulative effect is truly a death by a thousand paper cuts; some people have the blood to withstand it, while other are quickly being bled dry. The editorial asserts that the Council’s stated objection to the tax increase is "not credible" given that it’s a small tax increase. If trying to stem the increase in taxes is not a credible argument to stand on its own, then I know of no other argument which is worthwhile to be made. Taxes do not appear overnight. They grow ever so slowly over time and sprout new roots which slowly entangle the taxpayer. The steady increase in taxes and the creation of new ones has far out paced people’s income levels to the point that they cannot keep up. And to what end? So that we in government can say we accomplished a large list of items which will serve only the people who can continue to afford to live here in Salem. It is true that there are many items and projects throughout the City that would benefit from the enactment of the CPA. On its face, the benefits offered through the adoption of the CPA seem attractive and are designed to target specific needs each individual community has with respect to historical preservation, open space/park & recreation and affordable housing. Unfortunately, enough is never enough when it comes to the insatiable thirst of government bent on extracting more tax payer money on the backs of the already tax-strapped homeowner. At some point, we have to look at the cold economic reality that we find ourselves in and exercise restraint in wanting more at a cost which will ultimately far exceed an additional $2.50 per month, because we know it will not stop there. Paul C Prevey Councillor Ward 6

Salem Puts CPA on the Ballot

Salem Puts CPA On The Ballot Salem CPA is on the ballot for this November, thanks to supporters who collected nearly 1,700 signatures in record time, just before the final certification deadline. A question to adopt CPA can be placed on the ballot either by a vote of the legislative body, or by obtaining the signatures of 5% of the registered voters on a petition. The petition effort in Salem was launched in hopes of reversing the Salem City Council's The morning after the decision, the group began their ambitious effort to gather the required 1,350 signatures, despite the fact that the deadline was just seven days away. Encouraged by Salem Mayor Kim Driscoll, dozens of volunteers solicited signatures at homes and downtown businesses. Despite the tight deadline, the group collected more than enough signatures certified by the city clerk. The CPA proposal in Salem is for a 1% property tax surcharge, with exemptions for low-income homeowners, the first $100,000 of residential property value, and the first $100,000 of commercial/industrial property value. Like Somerville, the city will be voting to adopt "Blended CPA," a provision of the recently passed CPA legislation which allows communities to add a limited amount of municipal revenues to their local CPA fund. With this ballot question petition success, Salem joins three cities and five towns considering adoption during the upcoming November elections.