Hands On Real Estate Investing

Many years ago, when we were beginner real estate investors, we advertised a 1 bedroom condo for rent in the local newspaper. A woman with the initials VW called to make an appointment to see the condo. When she arrived, she told me she was in a situation where she had to move right away (1st red flag). At that time, we didn’t require a copy of the prospective tenant’s credit report. Instead, VW presented an offer from a furniture company giving her credit to buy a certain amount of furniture (2nd red flag).

The 3rd red flag was she offered all cash for the security deposit and 1st month’s rent. At that time, a one bedroom was $625. She pulled out $1,250 dollars in cash! I literally felt my eyes getting bigger! We arranged to meet the next day to sign the lease, and VW moved in. Unfortunately, VW never payed another dime of rent. Each month she had an excuse. Her grandmother was ill, her car broke down, she lost her job. We eventually went to court and filed papers to evict her. Fortunately, the property was located in a county that has a responsive and efficient court system. The entire process, from VW moving in until she was evicted took about 6 months. Fortunately, she did not trash the property!

What 3 valuable lessons did we learn?

1. Require the prospective tenant produce a recent copy of their credit report from one of the 3 recognized credit bureaus: Equifax, TransUnion, and Experian.
2. If the prospective tenant says they need to move right away, it’s possible they are being evicted from their current residence. Do your research. Contact the current landlord. The credit report will show their current address. Contact previous landlords if possible.
3. Huge wads of cash can affect anyone’s objectivity! Don’t be blinded by the cash! Have the prospective tenant fill out a rental application and do your typical processing; credit checks, reference checks, and employment checks.

For 8 ways to screen prospective tenants, click here.

The opinions expressed herein are solely those of the Author/WebMaster. Before taking any action, please consult your real estate, financial, and legal advisors.