Establishing a tenant-landlord relationship with an individual is serious. If someone is going to be living in a property that you own, then you have the right to know who they are and what risks they pose. Unfortunately, many landlords – both inexperienced and veteran – often choose to forgo this critical aspect of the tenant acquisition process.
Unless you’re willing to assume large amounts of risk, you need to do your due diligence before signing a contract or lease agreement. And while there are many different ways to perform due diligence, the reference check is one of the strongest resources you have at your disposal.
When analyzing a potential tenant, there are a variety of tools you can use. Credit checks, background checks, job history, paystubs, and intuition can all be used to quickly judge and assess an applicant’s worthiness. However, the numbers – and even your own instincts – often don’t tell the entire story. What you really need is to talk to the people who have, and still do, interact with the individual.
References can come in all shapes and sizes. Don’t be foolish enough to assume that they’re all the same. If you want obtain unbiased and information-rich references, then you need to be very clear with prospective tenants. Let them know who does and doesn’t count as a reference.
If you’re unsure of who should and shouldn’t count, keep the following hierarchy in mind. As you move down the ladder, references become less valuable and more biased.
As you’ll learn, it’s imperative that you clearly outline what a valid reference is. If you simply ask applicants to provide three references, they’ll most likely give you the information of friends and family members. It’s best to say something like, “Please list one previous landlord and your current employer.” The more specific you can be, the better.
For the purpose of this article, we’ll forget about personal references and focus on previous landlords and current employers. Here’s the information you should attempt to glean from each type of reference:
Reaching out to a previous landlord is usually pretty simple. As previously suggested, they understand who you are and what you do – so there’s little awkwardness or withholding of information. Sometimes they’ll even offer information you don’t ask for. With that being said, make sure you’re asking some of the following questions:
There are plenty of other things to ask about – but these four questions will tell you a lot about who you’re dealing with.
Next, turn your attention towards their current employer. When speaking with them, touch on the following questions:
Start by asking the employer these questions and then feel free to delve into other areas. In many cases, the information you discover here will make or break a prospective tenant’s application.
When evaluating prospective tenants, few things are as meaningful as reference checks. These all-important checks can provide you with valuable inside information into who an individual really is. However, there’s no denying that collecting and following up on references is time consuming and draining. For busy landlords who understand the importance of reference checks but don’t have time to personally handle them, it’s important to align with a partner.
At Green Residential, we partner with some of Houston’s most successful landlords and real estate investors to handle property management tasks like tenant screening and reference checking. If you’re looking for a reliable partner to handle some of the burdens associated with being a landlord, you’ve come to the right place. Please contact us today for more information on our services!
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