Mistake #1 - Trusting Too Much
FACTS. If you don't want to lose money, you must evaluate rental applicants based on facts, not instinct. Trusting too much is mistake #1 of our five mistakes that cost you money series.
Let's face it. Trusting your instinct about someone is faster and easier, especially when the prospective resident is friendly, courteous, and clean. Maybe even someone recommended them, or you "click" with them. It's essential, so let me repeat it. Trusting your instinct is not good enough; you must make this business decision based on facts. To do that, you must develop objective rental criteria and screen all applicants based on these criteria, regardless of who they are. Some well-intentioned people aren't even honest with themselves about where they are financially, so they can't be honest with you. They're living paycheck to paycheck and don't even know it.
I'm not talking about low-wage earners either; I'm talking about people that make six figures. I see many credit reports and bank statements. I have had many applications from people trying to rent a home where the rent is 50% - 60% or even more of their monthly take-home pay. If something goes wrong, you'll be caught holding the bag. At that point, they'll want you to be their bank and borrow money for ten to 15 or 30 days until they can get back on track.
You're asking for lots of personal information. Still, don't feel bad for asking for all the information you need to make a sound decision. It's not meant to be offensive. It's not personal. It's just business. Some people will get offended that you're asking for this information. They're going to refuse to give it to you. On the surface, they look great, so it will be hard to keep going despite their demands. Still, your asset can be worth several hundred thousand dollars, and you're effectively letting them borrow that money. You're letting them borrow that asset, so you stick to your policy. Don't let them dictate the terms.
Sometimes you'll have applicants try to sidestep your process by giving different documents than you requested. You ask for a tax return they want to provide you with a 1099. A 1099 doesn't provide the information you need. Sometimes they're going to flash cash at you, or it's prevalent for somebody to try to sidestep the process by offering several months of rent upfront. That's a big red flag. Anytime they try to avoid your procedure, you hold to it because that's when it's most important. Several clients hired me to manage their property because they didn't hold to proven rental criteria, costing them thousands.
Not sure how to develop your rental criteria. Don't worry. Go here to view our criteria. There's no need to recreate the wheel. These criteria are based on more than 15 years of experience and hundreds of applications, and we're constantly evaluating them. Don't make the mistake of trusting too much. I hope this video helps. Watch for next week's video, Mistake Number Two, Taking Shortcuts. Let me know if you need help evaluating an application and need help with how to handle your rental criteria. I'll be glad to help it anyway.