Today’s REI Classroom Lesson

Steve Rozenberg chats with us today about picking tenants, the right way. Most importantly, you want to stay legal in your selection process. Know what you can and can’t ask. Call their references and stay standard across the board.

REI Classroom Summary

You can’t say ‘yes’ to everyone but you need to be legal when you tell a potential tenant ‘no’. Have policies in place and stick to the book.

Listen to this REI Classroom Lesson

Real Estate Investing Classroom Show Transcripts:

Mike: Welcome back to the REI Classroom where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Steve: Hey everyone. This is Steve Rozenberg and I am the owner and co-founder of Empire Industries Property Management Company located in Houston, Texas. I’d like to welcome everyone to the REI Classroom. I am your host today, and today we’re going to talk about something that always seems like a big thing that concerns people and they have a big question mark under which is, what do you need to know about picking a tenant.
Mike: This REI Classroom real estate lesson is sponsored by, FlipNerd’s private investor coaching program and your blueprint to investing success.
Steve: As a property management company, as an investor first and a property manager secondary, I can tell you that I have made a lot of mistakes picking tenants. I would go off of my gut. I would have a good feeling about the person. They were the first ones with the money. I didn’t do the background checks. These are all things that prove that I was going to fail at my business model because I wasn’t running it like a business. I didn’t have policies. I didn’t have procedures. I didn’t have structure. Most importantly, I didn’t have qualifications of who I would accept. I didn’t stick to those qualifications.
First and foremost, I would say write down who you will and will not accept, number one. Number two, make sure those are legal because there are a lot of legalities with fair housing and discrimination laws that owners have no idea about which recently actually just changed on the first of the year. There are new protected classes in fair housing such as service animals and felons now have some protection rights to them. I would be very cautious when you are saying no to people.
Make sure you understand what you can accept and what you can not accept and what you say to people, because there are a lot of people out there that . . . it’s not the people that get accepted that may get upset and turn you in. It’s the people that don’t get accepted that may file a complaint against you. Make sure you know what questions you can ask and what questions you can not ask.
I would have a very standardized form. I would make sure that all of my qualifications are disclosed on everything that I have so that they’re very clear. I would always call all of their references. I would call their employers. I would call everybody. If you don’t want to do it, there are services out there. We use a great service. They take care of all of our background checks. We have a 1% eviction rate.
You have to remember just because you put someone in the property and you rush to get them in because you have a gut feeling on them or because you’ve had a vacancy for a long time, it doesn’t mean that you’ve filled that property with a paying tenant. You may have just put a deadbeat in that property, and now when the tenant doesn’t pay you may have six, nine months of someone, especially if they know the law and they file what’s called here in Texas a pauper’s affidavit or squatter’s rights. Now you may have six months of that person in the property with legal costs, and now your problem just got extended a lot bigger.
Don’t rush to put someone in. Be very careful of who you accept. We like to say that we say no more than we say yes. We make sure that we’re standard across the board. We do not deviate our qualifications for anyone because that is where you get in trouble. Make sure you have policies, you have procedures and you stick to those procedures. Make sure that you’re very clear of what your policy is, so that down the road if you are ever standing in front of a judge and he says, “Tell me what your qualifications are,” you can hand him a piece of paper and say, “Your honor this is exactly how we run our business and we do this for every single person that comes to ask to rent our property.”
Hopefully this was helpful. This was Steve Rozenberg, Empire Industries, and I was your host of REI Classroom. Thank you very much.
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