On today’s episode of the InvestFourMore Real Estate Podcast, I speak with Steve White and Eric Worral of RentPrep. Steve started RentPrep to help large property management companies screen their tenants after working in the debt collection business trying to get bad tenants to pay their bills. I talk with both Eric and Steve about how they screen tenants, how they help landlords find great tenants, what it is like to try to collect debts from tenants, and things landlords need to watch out for when renting their properties. There is a ton of great information on this podcast, and I learned a lot, as I am sure many of you will as well.
Click on the green button below to listen to the podcast
How did Steve White start Rent Prep after working in the debt collection business?
Steve had a debt collection business where he tried to get people to pay judgments and other bad debts for a number of different industries. Steve talks about trying to collect debt and says that tenants who have judgments against them are the hardest bad debts to collect. His company successfully recouped debt less than 10% of the time. Usually, when someone loses their home, they are close to rock bottom and have no money left to pay anyone.
Steve was working with a large property management company helping them collect debts when they asked him to help them find better tenants. Since they recovered so little money from their tenants who stopped paying, they wanted to start with better tenants in the first place. Steve agreed to help them screen tenants, and he started a new business. Steve was helping property management companies with more than 1,000 doors when he went to an REI meeting and discovered many mom-and-pop landlords needed his services as well.
What are some key factors to consider when screening tenants?
Steve and Eric have been screening tenants for many years and have learned a lot about the business. The first thing they mention is that while background, credit, and criminal checks are important, you need to do much more. Here are some of their tips:
- Always make sure the potential tenant fills out the entire application—no blank spaces allowed.
- Always call all references, past landlords, and employers.
- Keep track of whether they are on time for meetings or not.
- Always charge an application fee and let them know you will be checking credit, background, etc.
- See how they treat the house when you meet them. Do they track mud all over? That is not a good sign.
- You can use your gut to make a decision, but most of the decision should come from data first.
They also have some tips for renewing leases with current tenants and making sure tenants take care of properties after you rent to them, which you can listen to on the podcast.
Why does RentPrep think it is best to use a property manager?
I started using property management after I bought my 7th rental. Not having to manage the properties anymore was a huge relief, and the properties performed much better with a property manager as well. Here are some reason why Steve, Eric, and I think property managers can do a better job with rentals than the owners can:
- Property managers are not emotional. I used to listen to sob stories, waive late fees, and keep bad tenants in properties too long. Property managers are not emotional because it is their job.
- Property managers can handle the after-hours calls and maintenance requests. One of the biggest pains with rentals is repairing things that break while tenants are living in a property. Property managers eliminate that headache.
- Property managers should have a great system for screening and choosing tenants. You have to make sure the property manager you choose does not have incentives to have high turnover on your property.
- Property managers know all about the rules for discrimination and renting. The fine for a first-time discrimination offense is $19,000.
How can you contact or work with RentPrep?
RentPrep is very easy to find: RentPrep.com. They offer tenant-screening services for single properties all the way up to large property management companies. They also will make phone calls and do all the leg work to make sure tenant screening is done properly. The also offer a ton of education for landlords:
- Private FB group for landlords
- Landlord Water Cooler book on Amazon
- Free Udemy Tenant Screening Course
- RentPrep Court – Fun educational podcast
[0:00:13.9] MF: Welcome to the InvestFourMore Real Estate Podcast. My name is Mark Ferguson and I am your host. I am a house flipper. I flip 10 to 15 houses a year, I own 13 rental properties, with a goal to buy 100 by 2023. I’m also a real estate agent. I’ve been licensed since ’01, I run a team of nine and we sell close to 200 houses a year.
So on this show, we like to interview house flippers, landlords and the best real estate agents in the business. So stay tuned for some great shows, if you want more information on my rentals, on the numbers, how I buy properties, check out investfourmore.com.
[0:00:58.7] MF: Hey everyone. It’s Mark Ferguson with InvestFourMore and welcome to another episode of the InvestFourMore Real Estate Podcast. I have a couple of really exciting guests on for today show. Steve White, who is the owner of RentPrep and then Eric Worral, who is the Director of Marketing for RentPrep and they’re going to come on the show today, tell us a little bit about themselves, their company and talk a lot about tenant screening.
So, I know for people with rental properties this is a hot subject especially for me. On the last couple of years I’ve had some tenant problems and hopefully we’ve got those figured out but, you know, it’s one of the most important things you can do as a landlord is screen your tenants, you know, extremely well. And, if you are lax on that, you don’t put the time in to it, it can really come back to bite you.
So, Steve and Eric thank you so much for being on the show. How are you guys?
[0:01:46.2] SW: Awesome, thanks for having us Mark.
[0:01:47.5] EW: Yeah, doing well.
[0:01:49.0] MF: Great, yeah, you know, I appreciate it. I know Steve you’re the owner of the company you started out. Can you give us some background history on how you, kind of, got in to real estate in this business of tenant screening.
[0:02:00.3] SW: Yeah, I kind of have a backwards approach to it. I never set out saying, “I’m going to tenant screening someday.” So, we started off, believe it or not, as a credit collection agency and we had a very large property management company that we were collecting on past due rentals from and they came to us and said, “Hey, you know, we’d like to do something on the front-end to help manage our risk and limit the amount of people that go to a collection status and limit hopefully the amount of evictions that we run into. Can you guys help us with that?” Of course, like a good business owner we said, “Yes,” way before we knew what we’re getting in to and said, “Yeah, yeah, we can do that for sure,” and just worked backwards towards what it took to become a screening company.
So what we had was the benefit of working directly with a large company that did high volume and could tell us exactly what they wanted. So our first, you know, sort of foray into tenant screening was really built on the exact specs and requests of what a property management company wants out of their screening.
[0:03:07.8] MF: I’m curious being in the credit and collection business can you give us a few insights on what that was like? Was that a fun job? Was that a stressful job? How was that?
[0:03:15.2] SW: Horrible. Well first off, we started the company in 2007. So being around during the great recession of 2008 was not the best time to be trying to collect money from people for sure. So, that was terrible. But in a lot of ways the business was somewhat recession proof because we obviously, you know, there is no shortage of business we just had to be really creative and be important enough to people that, you know, we got them to make their payments as they were supposed to or scheduled to. But it was definitely a tough time for sure and the insights I can give you is not going to be great for anybody in the real estate business.
So, the real estate industry as a whole has the lowest recovery rate of any other industry, lower than dentists, which dentists are usually at the very bottom of the list of recovery rates and the amount of money they turnover versus the amount of money that they get back. We were finding that in the real estate industry, you know, once you evict somebody your chances of getting paid on that, even though you have a judgment, even though you have all the legal paper work in the world to get that money back, you’re dealing with somebody that just lost their house.
You know, the chances are they’re sleeping on someone’s couch or, you know, flying low on to the radar at some new place, probably switching jobs an awful lot so garnishing wages becomes near impossible. Freezing bank accounts becomes next to impossible with new state restrictions that they impose that you have to have a certain amount in the accounts before we can freeze them. So, it became really, really, difficult and that’s why the property management client basically said, “Hey, listen we got to do something on the front-end to help curb our risk versus, you know, putting all of our effort in to trying to collect this money that just not very collectible at all.”
[0:04:57.9] MF: I was actually going to ask you that exact question, “What do you think the percentage of getting paid for landlords is?” Do you have a number? Like 5, 10 percent, less than that?
[00:05:10] SW: It is less than 10%. So in the dental industry it’s 11%, which was in my credit experience and I’ve got — jeez, going on 20 years now, credit experience. Dental was always the lowest. We just always looked at that as industry as, you know, just one of the lowest recovery rates until we started working with a lot of property managers and a lot of people in the real estate industry and said, “Man, this is worst than dentistry. This is really, really, really low,” and so categorically across the board it was less than 10% for every one of our clients and wasn’t necessarily anything that they were doing wrong. Although, we learned a lot of really interesting things about things that can do better.
One really good nugget that I’ll give you right now is we learned pretty early on that property managers or landlords that adopt a no blank space policy when accepting rental applications had a way better chance on the back end of collecting money that was owed to them. So, the landlords or property managers that would just sort of let blank spaces slide, right? So, somebody doesn’t put a phone number in for an employer. They don’t list their next of kin or their nearest relative. Whatever it is, if there’s blank spaces on that rental application that’s the first thing you go back to when they become a issue or when you have to evict them or when you’re looking for information that you might find useful even to obtain a judgment, right?
So, a lot of times their social security number that’s the one place you have it. So, what we found is that property managers and landlords that were sort of lackadaisical on gathering that information or allowing those blank spaces to slide would have a much, much, harder time on the back end trying to collect anything. So, any landlords, property managers, the best thing that you can do, easiest thing you can do right off the gate is just institute a no blank space policy on your rental applications.
[0:06:56.9] MF: That’s great advice and I know I’ve had problems and others have had problems and seeing that percentage, I mean, less than 10% and that’s using a professional company to do it. That’s not trying to collect it yourself. So I’m sure if you’re trying to do it yourself that is even lower in making sure all your paperwork’s filled out, all of that’s perfect. So that’s pretty eye opening on how important tenant screening is.
[0:07:17.4] SW: Yeah, what makes it even harder, what we would hear a lot of especially with, you know, individual or private landlords what we call the mom and pops, right? You know, they own a handful of properties maybe 10 or so, they are certainly not property managers where they have leasing agents and people on the front office working, there’s a lack of emotion attached to it when you have a property management company in place. When you have a landlord in place who’s managing these properties and you’re doing the screening and you’re making the decision and you’re the one that’s hit hard on eviction, there’s a huge emotional element that’s at play and what we would hear a lot of times is these landlord just going crazy because they see this people around town. You know, they see them driving in their car, pass them, you know, on the road or see them in stores and things like that. It would make it really, really, difficult to bite your tongue or stay professional, not let the emotion, you know, get the best of you. So it can become very, very, difficult for landlords to have to deal with this.
[0:08:20.9] MF: Yeah, I went through that myself. I managed my properties until I had seven of them and not only was I really bad at screening tenants because I let emotions get in the away and trying to use my gut to, you know, “Oh they’ll be good, I’m sure.” But, yeah, then when you have problems, you know, it’s harder to charge them late rent or you don’t want to call them because you don’t want a confrontation and once I let a property management company take over I made more money even thought I was paying them because they are better at collecting rent, better at late fees, better at screening, and it’s just — I wish I would have switched much sooner.
[0:08:53.3] SW: Yeah, no doubt. Look, the biggest problems that we see with landlords are most often the landlords who are now renting the place that they used to own, right? So, they instead of selling their house they decide to just rent it and so we hear all kinds of crazy, you know, feedback from landlords saying, “Oh, you know, I put it in a $3,000 front door and they’re scratching it.” We say, “Well, this is a sign that your way to emotionally attached to this property, if things like that will drive you and it will continue to drive you crazy.” You know, so having that property manager in place to sort of be the buffer in between there definitely save your sanity for a lot of landlords.
[0:09:29.7] MF: Yes, the accidental landlord as I like to call them. Yeah, in general I think it’s a bad idea to rent a house that you lived in unless the numbers work. But there’s lot of other reasons as well.
Cool so, obviously you started this company for tenant screening. What was that like? What road blocks did you run in to and what did you learn about that side of business?
[0:09:51.1] SW: So, we started off, like I said, really catering to a large company. So I would consider as more or less to be a boutique agency in a lot of ways in our beginning and to this day, we’ve carried a lot of that sort of element along the way. So, when we first started, we were only working with that one really large property manager and of course they knew ten others and we started working with other property management companies. But really catering to these high volume property managers that had a thousand plus doors. And so, they required a lot of attention and a lot of special treatment.
They wanted somebody on the other end of the phone immediately when they called to ask questions about a report. They wanted special, you know, services. So for example, they wanted us to be able to make phone calls in their behalf to call previous and current landlords and the employers, which is something that not a lot of screening companies were doing at the time.
So, and of course we had collectors and staff and so we thought, “Well, we can easily make a shift here and get collectors to make this phone calls.” In a lot of ways this phone calls is way easier for a collector to be able to make than calling somebody specially during the recession and saying, “Hey, your money we want you to make these payments.” So it was an easy transition for us in that way and it wasn’t until I went to a Landlord Association Meeting, a local meeting that they ask me to come and speak at and I’m in a room with a hundred plus landlords and I’m giving them a presentation on how we do screening and some principles to use and some tips and tricks and those kind of things and at the end of it.
I think I have a line of probably half the room waiting to talk to me that wanted to do business with us and we didn’t do business at that time with landlords, with individual landlords. We were only working with these large property management companies and so it really hit me at that point that there is a huge need for landlords to have access to good quality screening, the same level of screening that these large companies had access to. But in the industry, you know, landlords are really often looked at as, you know, just having very little to no value in the industry because they are not dealing with enough. There is not enough volume there to make money.
So, that’s really where the premise and the idea of RentPrep came about. We thought well we could take what we’re doing right now with these large companies and extend it to landlords and sort of that individual private sector and give landlords access to this and it took off way bigger than we could have possibly imagine. It didn’t take very long until we hit our 30,000 client mark and today we’re working with landlords all over the country, way more than just our local area, which is how we started and again it was something that I couldn’t have foreseen or predicted. It just sort of guided me along the way as we went and I just listened to what the market was saying that they needed.
[00:12:45] MF: No, very cool. It sounds like you do a little more than, say like the TransUnion which, you know, will check your background and credit but it just gives you report. It doesn’t really help you in any other way.
[00:12:57] SW: Sure. Well, a lot of what we’re doing is providing that human element, right? So, we live in a society where everything is moving towards that technology and instant gratification. But in screening instant gratification is not always great, right? You don’t always want an instant result especially more and more courts and counties are starting to house these records just by name and maybe name and date of birth but they are not using social security numbers anymore. So, when you use an instant search a lot of times you’re getting the wrong person. So God forbid you have somebody like John Smith or even my name Steve White.
[00:13:38] MF: Yeah.
[00:13:38] SW: You know, there’s 76 people with my exact name, same spelling, that live in my county alone. Over 2,500 hundred in the country. So three of them are sex offenders, so when somebody runs — if somebody were to run a background check on me it’s very easy for them to get false positives or information that doesn’t belong to me. So that was another area that we saw huge opportunity to say, “We can do this better.” Putting a human being in there, somebody who is trained and certified in screening and knows what to look for, adding that extra layer in there of somebody actually rationalizing and looking at the data versus just scraping it and dumping it on to a plate, so to say. It was a much better way to do screening and gave much better results.
[00:14:20] MF: Well, that makes sense and I know we use, you know, some of those reports but I also have, you know, some of my team actually manages my properties for me and they have the human element of calling all the references, making sure you’re going through it not just relying simply on a report, like you said, and I know somebody named Steve White as well.
[00:14:38] SW: Oh, awesome.
[00:14:43] MF: Yup.
[00:14:43] SW: I’m glad you brought up the phone calls. That’s so important and I know so many landlords that just skip that and like you mentioned before about trusting your gut. There is a time to trust your gut. We always say the perfect formula is two parts data, one part gut feeling. Don’t discount that gut feeling. A lot of times that can steer you in the right direction but you got to know when to use it and if you’re using that gut feeling after you look at the data, after you know the facts, that’s the appropriate time. You definitely don’t want to go in to the situation and say, “I got a good feeling off this guy.” It never works out. We’ve heard from so many landlords, you know, there’s two really, really popular reasons that we get new clients, one is they’re brand new to landlording, they’ve never done it before. Two, is that they just have to worst situation with a tenant and they never want to run into that situation again. So, they just got burned and we’re seeing them immediately following that and they’re learning a lot of lessons in that.
So we hear a lot of times landlords say, “I went with my gut and it was wrong.” Or, “I never made the phone calls, I never called the previous landlord, I never called the current landlord to verify any of this information.” So, that’s super important for landlords to not discount that, don’t skip that step, it’s critical. So if you’re a landlord and you’re collecting rental applications and somebody turns one back in and says, “I don’t have my landlords phone number,” and they just leave that blank, there is your opportunity to push it right back across the table and say, “We can only accept this when it’s complete.” Because if you have everything then you as a landlord or you as the property manager can do your due diligence and go through and verify all that information.
[00:16:20] MF: Right, that make sense and I just thought of something that’s kind of inline with what we’re talking about now, but one of my worst tenants I had this last summer where they did like $20,000 of damage to one of my houses and we had rented to them for almost five years. And, in the beginning they did pretty well but just something happened, I don’t know if it was drugs or jobs or whatever. But in the end in six months they just went down and spiral to the abyss, I don’t know? It was crazy. But, what do you think about long term tenants?
I mean, my thought was whenever we renew a lease maybe we should re-screen that tenant over again to make sure they still have their job, they still have big credit, they still have everything the same as it was. Because it seems like most of my problems come from long term tenants not brand new ones.
[00:17:08] SW: Yeah, so there’s two parts to that, I think that are really important. The first thing which every landlord can do or should be doing is annual or even semiannual inspections. You know, say it’s to go in there and change filters or change light bulbs. Whatever the reasoning is that you need to make or even just be up front about it and say it’s an annual inspection that you’re going to do, but a reason to get in to that property and take a look around and take a look at things so hopefully you could stay ahead of it, right? And, I know that you mentioned that yours happened within a short period of time. Sometimes you can’t avoid that, especially if it’s being done intentionally. But a lot of times you can catch stuff before it gets too far gone or too bad.
So that’s really important and definitely re-screening I think that’s pretty important. If you’re re-screening, it’s tough because you have a long term renter and we all know good credit, great credit doesn’t always mean good tenant, great tenant, right? So, it’s tough to run a background check on somebody and look at their credit after they’ve already been renting from you for a year or two years and they’ve been paying their rent on time and let us say they start to fall behind and other credits going downhill. It’s tough to say, “Hey, we’re reconsidering, you know, renting here still.” Because by all means, they are good renters for you so there’s not going to be a ton that you are going to see in there.
I would say criminal records might be the only thing that might be a great indicator, right? So, maybe they’ve got some drug offenses. I know in a lot of municipalities they use sort of these catch all citations like in Iowa where they have what’s called a disorderly house citation. That means if a police officer has ever been to a property and found drug paraphernalia not enough to maybe arrest somebody and throw him in jail for the night, but certainly enough to give him a citation and say, “Hey, we’ve noticed there’s a problem at this property.” So those are things that a landlord can certainly look for and try to recognize a problem before it becomes way out of hand.
[00:19:10] MF: You know, that’s a great idea. I never thought of that, but I know in our county and other counties around here, you can search for someone’s name or an address in, you know, the criminal database and it will show you if someone ever got arrested, all types of information. So you can actually do that online without having their information a real simple check to see if they’ve ever been arrested recently or whatever it was for. So that’s a great idea.
[00:19:35] SW: Yeah, the only thing that I’ll caution against with using simple online searches is again, like I mentioned, most counties don’t house records by anything other than a name and maybe a name and date of birth. So the problem that you run in to we had a problem this morning with a super, super common name. I think it was Jose Rodriguez, which is the equivalent of John Smith, right? So, we had a landlord that said, “Hey, I looked up online and I found these records and this guy has had all kinds of problems,” and so we do a little bit of digging on our end and find out it’s not the right guy. It’s not the same guy.
So, definitely proceed with caution but the very least it’s good to keep your eye out, look at police blotters, look at that information, Google their name. If something comes up it’s always worth a conversation. I think the biggest issue we see too with landlords is they are, like you had mentioned before, you’re afraid to rock the boat, right? You don’t want to be confrontational so, you don’t want to call them and say, “Hey, I just saw your name in the police blotter, what’s up with that?” But really, that’s a super important conversation to have with them if you do see something and maybe they’ll tell you, “That’s not me. You know, it wasn’t me. That’s a different guy or I don’t know anything about that?”
But maybe they will say, “You know, yeah, I had some issues or you know it was a one time thing.” Or maybe you scratched the surface and you uncover something a little bit bigger but communication is definitely a huge part of landlording. If you’re the type of landlord that doesn’t like confrontations and doesn’t like those situations, finds them uncomfortable, get a management company because you’re going to have to at some point have those uncomfortable conversations.
[00:21:12] MF: Yeah, that’s a great point. I thought of something I haven’t thought of for a long time; back in high school, one of my old friends want to talk to me for a couple of years because they thought they stole his car stereo and it turns out it was another Mark Ferguson in our town that had stolen his stereo and he thought it was me. But, yeah. Good point on making sure that’s the right person.
[00:21:32] SW: Absolutely.
[00:21:34] MF: So, you tell us about the tenant screening. I mean other — if someone wants a landlord themselves or you know even from other property management companies, you know, we’ve talked about no blank spaces, obviously making the calls. You know, what other tips can you give for making sure you’re getting really good tenants in your properties?
[00:21:51] EW: Well, I think a real simple one that we’ve picked up, we actually get a lot of tips actually. We have a Facebook group online. It’s like RentPrep for Landlords and it’s really cool. We have like thousands of landlords in there and they are always sharing stuff that’s working for them and one of these I think is a little strange, but we have one guy that swears by people’s shoes. So, he says, “You know, take a look at their shoes. See how they’re treating their own property.” He’s like, “If they’ve got mud all over their shoes and they’re tracking them into your property on a showing that you’re doing, that might be a bad sign because that’s what they’re going to do when they actually are, you know, renting for meal.
Another easy tip that you can do is there doing a showing, welcome them back to their car. Take a look at their car, you know, peak in the back of it. If it looks like a dumpster inside their car, it’s going to look like a dumpster inside your rental. So, there’s kind of a combination of, you know, getting data on people running a background report but also just kind of those intuitive things that you can do and, you know, did they show up on time? Were they five minutes late? Did they, you know, was their car trashed? Are they wearing muddy shoes? Just different things like that, that you can kind of keep aware of.
Some of the more standard things that some of the listeners might be aware of, establishing a rent to income ratio. A lot of people like to, you know, about two and a half to three times the amount. So that means, you know, if you’re charging a thousand dollars a month for rent that person should be making $2,500 to $3,000 a month in income. It depends on the landlord, what people want to do. Some do gross, some do net income, just really up to you. But one of the easiest thing that you do is just come up with a screening criteria before you start doing any kind of screening for tenants.
So it’s basically, it can be even as short as one sheet but it’s just, “This is what I’m looking for a rent to income ratio. This is what I’m looking for job history,” and then you can just go down the line as far as like evictions, criminal history, all that kind of stuff and then that kind of creates a little bit of a guide for you that you can use when you’re screening your tenants. So, that’s what I would recommend for people.
[00:23:46] MF: Great information, and then I’m assuming, you know, you always do background, you always do credit check, you guys probably always charge an application fee as well, right?
[00:23:54] SW: Yeah and on top of that I’ll just add, it’s important to be consistent, right? So, I’ve seen a lot of landlords deal with this discrimination cases and one of the best things that you can defend yourself against any discrimination case is show a history that you’ve done the same thing for every single applicant and every single tenant that you had across the board. So, you just can’t decide to run a background check on this guy because he look shady and the next applicant you get, you’re going to just go off your gut. You’ll find yourself in trouble real quick as a landlord doing that.
So whatever you’re doing needs to be across the board and application fees, absolutely. We always say that’s one of the best screening tools you can use, if you tell people ahead of time, “Hey, there’s a $30 application fee and it’s going to go towards paying for a background check,” let’s hope that they’ve got anything on there, they’re going to realize, “I’m going to be wasting this guy’s time, my time, my money. I don’t want them to see all the evictions that I have so I’m just not going to even bother to go forward with this and waste anyone’s time.” So, a lot of times having an application fee and being upfront about what’s it’s going to be used for can be a really great screening tool for you too.
[00:25:03] MF: No great information. I was going to ask you about the discrimination too; If someone gets convicted of discriminating do you have an example of what the penalties could be? And, I’m sure it’s a huge range but what would happen if somebody if they’re convicted of discrimination on a rental.
[00:25:19] EW: Yeah, actually yeah. I believe it was not June I can’t remember if it’s this year or last year that those – the numbers for the fines actually went up.
[00:25:26] SW: 2016.
[00:25:26] EW: 2016, June of 2016 the numbers went up and I want to say for a first time offender it was like $19,000 and change is what you can be fined for a first time offense of being accused of discrimination and then it goes up from there. I think that the top tier was up around like 90 something thousand dollars, $99,000 or something like that. And that’s if you’ve been accused two times before and convicted two times before. As far as the tenant applicant or tenant depending on the situation, they can also get a part of that pot there and I believe it’s up to a thousand dollars that they can get for, you know, if you want to call it pain and suffering and they can also get their attorney fees covered.
So, they make the barrier of entry to a tenant applicant pretty low if they were looking to file a claim. They can basically go online to a quick search. They can actually file a complaint online with HUD pretty easily and then if they realize they’ve got a good case they can get a thousand dollars, get their attorney’s fees covered and then also put you, you know, $19,000 in the hole. So, it’s definitely something that, you know it’s something that not a lot of landlords take serious enough because it hasn’t happened but it only has to happen once and then all of a sudden you’re going to change your entire process going forward.
[00:26:42] MF: Right, and I imagine that’s another good reason to use a property management company, because they know how to do that and then, I don’t know this is probably a tough question to answer; but if you have a property management company and they get convicted of discrimination is that on the property management company, the owner or both of them? I imagine it varies.
[00:26:59] ST: The property management company, I mean, you as the owner, you’re going to end up feeling the, you know, the backlash of it regardless for sure. But if you bring up a good point that as a landlord, you know, you definitely want to scream your property management companies as well, you know, there – state by state sometimes varies but there’s certifications that they can have. You remember the, what the certification was, the top one there?
[00:27:22] EW: I can’t remember off hand it’s like, yeah, there’s a certification there was about 50 property management companies in the United States that have it. We had a Kim Hampton on who was in Florida who has it. It’s like a certified residential property manager I think might be the title of it. But there’s definitely some certifications that people can have and then just asking them questions, asking them about their fee structures. Are they incentivized to get a good tenant and that’s going to want to stay or are they incentivized to, you know, to create turnover, those are things that you can look at if you’re screening a property management company. How long have they been in business for? You know, can you get a list of clients that you would call as referrals if they can provide that to you, that’s not a good sign. So those are all things that you might want to ask if you’re screening a property manager.
[00:28:07] MF: That’s a great point about how they’re paid because if they have a one month leasing fee, then, you know, that’s where they make a lot of their money is releasing the property all the time and they have really no incentive to keep someone in there but –
[00:28:19] ST: Probably the number one complaint that we hear from landlords about property managers is that alone. That they feel that there’s too much incentive for them to have that turnover and you’re right, you know, when you look at just from the fee angle and how they’re charging and how they’re making the money, they do, they make a lot of money on that turnover process. So, you want to be weary of that and you want to be careful for sure. But you just really want to avoid the property managers that seem like they’ve been doing it on the side and now they’re trying to pick up more clients or more landlords.
We see a lot of that where they’re not certified, they haven’t been doing it long enough, they haven’t — they’re not doing it professionally and there’s a big difference there between, you know, a guy whose been a maintenance man for ten years and feels like he wants another step into getting into some property management versus a company that has the proper structure in place, insurance, bonding all of those things in place that really you need to have in place otherwise when you do run in to a discrimination lawsuit or if something happens. If the property management company can’t handle it or it comes to find out that they’re not operating legally it will absolutely then fall on you.
[00:29:32] MF: Yeah, another great points. One thing I always suggest people do to is pretend you’re a tenant and see, you know, can you find a rentals easily are they online, are they advertised and then call them up and see how fast they call you back if they don’t answer, if they know about the properties. That can give you a really good idea about how well they will market your properties if you’re acting as a tenant and not an owner.
[00:29:57] EW: Yeah, one of the things too, a local property manager that we deal with here. He’s a client of ours but we also make some content with him, really knowledgable guy, his name is Andrew Schultz. He created a document it’s called The 10 Questions You Should Ask a Property Manager Before You Hire Them. If anyone is interested in that too that’s actually inside a — I added that as a file inside of our Facebook group. If you search for “RentPrep for Landlords: on Facebook you can find that in the file just sitting in there. That’s a really good read if somebody is interested in hiring a property manager. I learned in time reading through that, that document as well.
[00:30:28] MF: Cool. Alright well no, great information on screening, property management, discrimination and all types of different things. So, if somebody wants to work with you guys, they want to help with tenant screening, how does that process work? How can they get in touch with you?
[00:30:41] ST: Sure, go to rentprep.com and it’s basically, you know, you get a menu of options that you get to choose from. If you’re the type of landlord that wants to do some of the lifting yourself and make the phone calls. We got packages that, you know, we could just do the criminal and credit portions or eviction searches. If you’re the type of landlord that is phonophobia and hates even calling for pizza or something like that, we’ve options for you there that will make the phone calls on your behalf and do it professionally and document everything so that, you feel like a fly in the wall, you know, during this phone calls so you get a sense of whose answering, how they’re answering the questions and you’re — you know, anymore insight that you can get on the front-end to help mitigate that risk is definitely going to limit it on the back end and having to deal with problems.
[00:31:32] MF: Oh, awesome and you guys charge on like per property basis or per tenant basis, how does that work?
[00:31:36] EW: Yeah, everything is pay as you go. We actually, believe it or not, we do get quite a few request from people who want to use us as like a membership type of basis. But it’s all pay as you go because we found that, when dealing with vacancies as a landlord whether you have 10 or a hundred you’re going to run in to a monster where you just don’t run a lot.
Maybe you don’t run any background checks? Maybe you got a 100% vacancy and everything is, you know, clicking along pretty well and you don’t have any vacancies that month. So we’ve got landlords that use us once a year every other year when they have a vacancy and so in that way it’s great because it’s just pay as you go. Use us when you need us. When you don’t, we’re out of sight and out of mind in that way but the Facebook group is great for landlords to stay connected and interact with other landlords, learn from what they’re doing.
So we found that to be a great way to sort of just stay top of mind for landlords when they’re not using us because we realized it’s, you know, far and few between when we’re going to jump in and say, “Hey, now we’re going to do our part.”
[00:32:39] MF: Great, awesome. Well great information from both of you. I learned a lot myself on different things but before we head out of here, anything else you want to add or any other tips you want to throw in there?
[00:32:50] EW: Yeah, I would just if somebody wants — if they don’t have a vacancy right now, they’re not kind of working the screening process. You can still check us out at rentprep.com. We got a ton of free resources on there. We have a free tenant screening course, which we have a couple of thousand students take on Udemy. We’ve got the Facebook group we mentioned already. We have our own podcast, RentPrep for Landlords and kind of doing some fun stuff with that. We have RentPrep Court, which is kind of a goofy way of giving lessons for landlords. It’s a real cheesy, you’ll have to listen to it to check it out.
But we’re having Mark, you’re going to be on our podcast too as we kind of go back and forth between RentPrep Court and interviewing people and, yeah, if you go to our website there’s a section on there where the resources. So if they have questions on even tax and legal strategies we team up with industry experts to provide us resources for that kind of stuff too. Because we’re all about just giving away free resources whenever we can. We even have a book on Amazon, The Landlord Water Cooler and all the proceeds from that book actually go right back to the Facebook group that we have so we got a ton of stuff check us out at rentprep.com. It’s all sitting there waiting for people to check out and take advantage of.
[00:33:57] MF: Cool, well Eric and Steve that’s all I have. So thank you so much for being on this show a lot of really good information from the tenant screening, credit collection, all that good stuff that I have not heard before. So I really appreciate you guys coming on. I’m sure my listeners will enjoy as well and, yeah, we will have to keep in touch for sure.
[00:34:15] SW: Yeah, thanks for having us Mark.
[00:34:15] EW: Yeah, thank you.