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Investing In Country Properties - Is It Smart Investment Choice?

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Chances are good that any time you get a group of people together you will find at least one person in the group who says it is his or her dream to own a nice country property. One with a lot of land, rolling hills, a nice stream running through it and the standard farmhouse with the swing on the porch and the red barn in the back.

In fact, if you took a survey, you would find that probably 10% or more of the population has had this dream at one time or another in their life.

So on the surface, investing in a country home looks like an exciting market. Lots of interest all tied into dream fulfillment. In the marketing world, this is considered a slam dunk.

Except for one thing…

Where someone lives has a dramatic impact on lifestyle and opportunities. And that keeps it a dream for most people.

Life at a country property is a bit isolated. It is a long drive to anywhere - to work; to friends; to shopping; to new opportunities that are offered in a suburban or urban environment. This challenge means that the dream stays a dream for most people as in the back of their head, they just know living there would not work. In other words, this housing dream is much different than the dream of say a certain type of boat or new car. The former impacts all aspects of life while the latter only impacts the wallet and a small time segment of their life.

So the reality is that there are many, many fewer people actually willing to buy a country property than are interested in the idea of owning a country property.

And that makes it bad for investors. You may be able to buy a country property for very little cash but it may take a very long time to sell - and that means huge holding costs, a long term tie up of capital that could be better used elsewhere and the prospect of a property sitting empty and deteriorating while you seek a buyer.

When you invest, it is always best to seek the slam dunk deals. Real estate offers a variety of these - REO, foreclosure, short sales, rehab projects, abandoned properties and of course nice properties. The key is to be sure they are in a desirable area.

If your city has areas where houses sell quickly and areas where they sell slowly, where are you going to invest?

Probably where resale can happen quickly unless you have a strong business case for purchasing a property in an area where resales are slow. An example of a good business case might be a neighborhood that is turning around and you intend to hold the property as a long term rental unit while the neighborhood improves so you can cash in on the appreciation that revitalization of the neighborhood is bringing about.

And country properties - what business case can you make for an investment there? Can you make it a vacation home for yourself or package it as a vacation home for a well to do city dweller who needs a place to decompress a few times a year? Can you find a family who wants to get away from the hectic pace of city life? Or… well you get the idea.

If your interest is in stacking the deck in your favor, always analyze your real estate investments with a solid exit plan in place. How will you generate cash in your property both for the short term and for the long term? Does the business case make sense? If you cannot build a sensible business case for the deal, it is best to walk away no matter what the acquisition cost is for the investment property.

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The Truth Behind No Money Down Real Estate

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You’ve seen all the commercials on TV describing how you can buy properties with no money down. But can you really? And are they a good deal?

There is some good news and some bad news.

First the good news. Buying real estate with no money down is quite possible and with a bit of skill in sniffing out the right deals, can be quite easy to accomplish. But you must understand that no money down really means little or no cash out of your pocket. The deal still requires money but it does not have to be cash out of your pocket.

Some sources of cash for no money down deals are:

  • A home equity line of credit against your house
  • Your credit cards
  • A personal loan
  • Loans from relatives or friends
  • The seller taking back a mortgage on the house
  • A combination of traditional financing that equals 100% of the purchase price
  • A 97% FHA loan with a 3% grant created by the seller through one of the many grant programs out there.
  • A hard money or private money lender will give 100+% on the right deal

There are many others but this is a good starter list to get the mind thinking about ways to get the cash needed to do a no money down deal.

And remember that to truly do the deal no money down, you will have to come up with a way to cover the closing costs too. If the seller is motivated, these can often be covered by the seller giving a credit at closing to cover these costs. Or else you will just have to borrow a bit from a private source like your credit cards to cover those fees.

Now the bad news. Just because you can get a piece of real estate for no money out of your pocket, does that make it a good deal for you? For a deal to be good, the financials for the property need to make sense.

For instance, if you are rehabbing a property for later resale, you need to be sure that the purchase price/costs plus the repair costs plus the holding cost plus the cost of sale are covered. And after all those costs are covered, you need to be sure that you make a profit for your efforts.

Or if you are purchasing a property to rent, you need to look at your monthly costs vs rental income. Will you be making enough to cover your mortgage payment plus taxes and insurance plus anticipated vacancies and occasional repair and cleaning costs.

If the numbers do not work, the no money down deal that you structured would be a bad investment. However, if the numbers work, it can be a great investment.

When you understand the outcome you desire on a particular house or apartment building, you can then work backwards to figure out how to structure a deal to ensure that your outcome is achieved. Only when you have a deal that can deliver that outcome should you move ahead with a purchase. And if you can structure the deal to be a no money down deal, that is just icing on the cake.

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Managing Your Real Estate Support Staff Contact List

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If you are serious about your real estate investing career, you are going to be developing a list of useful people who can support you in your investment career - Realtors, attorneys, accountants, tradesmen, attorneys, lenders, etc. Chances are you will have more than one in many of these categories - especially the tradesmen category.

When you are just getting started, post-it notes or names/addresses in a notebook or a collection of business cards can work pretty good. But once you have talked with several people and/or completed a first deal, you will find that system unwieldy. Cards will get lost. Post-it notes get thrown out. And notes that should be kept about the quality of each contact never get recorded because it is too much effort to look for the contact name to write down your notes.

So if you are serious about your real estate investing, you need another way.

There are three ways that can work good for you depending on your temperament and your needs. They include using a rolodex/contact book, a PC based contact manager like ACT! or a more portable electronic contact manager like a PDA or a Blackberry. Each option has its pluses and minuses and each will be discussed below.

Rolodex/contact book - A rolodex is a great contact management system. It contains business sized pieces of cardboard and an alphabetic list of tabs. This lets you enter names alphabetically or by category - plumbers, carpenters, etc. Each card allows you to write quite a bit of information on it so you can record when you did business with a particular contact and your opinion of that contact. You can also easily rearrange the cards by pulling them out and moving them to an other place. If you were keeping the names by categories, this would let you put your favorites contacts in each category at the front of the section and your less favorite ones towards the back of the section. If one card gets damaged, you can just take it out, copy the contact information and put it back in. And you never need to worry about your rolodex crashing and eating up your contact list. In fact, short of a fire in your home or office, this is about the safest way to keep your contacts forever.

One final note about using a rolodex (or any contact manager) is to never remove a contact from it. You might find that you hated dealing with a contractor and want to throw the name out. It is a normal impulse but try to resist it. You might forget that person if get busy and be tempted to try that "new" person three years later because all your contacts in your rolodex are taken. If you keep the name in the rolodex with a note saying not to do business with this person, you will always know to head elsewhere if at all possible.

The only disadvantage of a rolodex is that it is not portable. That can be easily solved by getting a pocket sized address book and recording your top contacts that you may need when you are on the road. Chances are it is a small subset of the entire list so it shouldn’t take too much to create and maintain this portable contact system of your important real estate contracts. Names you would probably want in this portable book are names of contractors and tradesmen in case you run into an emergency while on the road. You may also want the names of a few trusted advisors that you could call when looking at a deal.

PC Based contact manager - PC based contact managers can be fairly simple or quite complex. Some can even dial your telephone for you. There are several nice things about PC based contact managers for your real estate business. They can be used to keep extensive dated notes about every contact. They can keep your calendar so you know when to follow up with someone. They often support exporting your contact list to a portable electronic device like a PDA. The calendar feature and limitless notes makes a PC based contact manager very powerful.

The main drawbacks of PC based contact managers is that they can be complex to install and setup and you can lose your data if your computer crashes. But if you follow a good backup program, that should not be an issue.

Note: There are also web based contact managers that you could install on your domain. These let you access your contact list anywhere you have access to a computer on the internet.

Portable electronic contact manager - PDAs and Blackberries and similar devices are a great way to keep your contacts portable if you are comfortable using these devices. Many people use them in conjunction with a PC based contact manager to reduce the somewhat tedious effort of typing in all your contacts on the tiny keyboard or touchpad offered by such devices. They often allow you to keep name and address details, a calendar function and some space for notes. And if it is integrated with your phone - like in a Blackberry - calling your contact is a one touch operation.

Backup operations on portable electronic contact managers generally require you to connect the device to your PC and upload your contact list to your PC. This is a reliable way to backup your list - or synchronize your PC based contact manager with your portable device without a lot of repetitive retyping. And as always, be sure to make a backup of your PC based copy of the list. One of the most painful things that can happen is completely losing several years of contacts.

So which system is best for the real estate investor? It all depends on your level of comfort with technology. I personally use a web based contact manager and a paper based book of important on the road contacts as I find that combination works best for me. When it is time to upgrade my cell phone, it is very likely I’ll get a Blackberry or similar phone and migrate to that for my portable contact list.

Whatever system you choose, be sure to keep it up to date. It truly becomes more valuable the bigger it gets.

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The Value of Professional Referrals

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One of the most difficult aspects of real estate investing is developing a netowrk of quality professionals. These are the people who can make your life a joy or pure misery.

Depending on how you invest in real estate, your professional rolodex may contain just a few categories like realtors, insurance agents, attorneys lenders and accountants. Or it could be an expanded rolodex containing the names of a wide variety of contractors and craftsmen to help you prepare ugly houses for resale.

Whatever your needs, if you have been in this business for any period of time, you have encountered people who love their profession and pay attention to every detail. And you have met others who seem to coast through life and make you cringe every time you need to call them to move a deal forward.

There is a simple way to avoid the latter situation and stack your rolodex with the very best of the best in your community.

The way to do this is to simply ask everyone you meet for referrals.

For instance, if you are talking with 3 different realtors this week, ask them for a list of suggestions for mortgage brokers, attorneys or accountants or whichever service area where your rolodex is weak.

Then simply take those lists and see if the same name pops up on multiple lists. Chances are great that if more than one realtor is making a recommendation for a professional in another area, that is a professional you want to get to know.

Then repeat this same process every week to keep building those lists. And start calling some of the people on these lists to get a feel for how they do business and also ask them for referrals.

Keep this process up for a few weeks and pretty soon you will have a million dollar rolodex of the best of the best in your community. This priceless resource will pay you huge dividends in high quality problem free service for years to come.

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Postcards - A Power Lead Generation Tool For Pre-Foreclosures

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Postcards - A Power Lead Generation Tool For Pre-Foreclosures

There is gold in mining pre-foreclosure real estate. But like real gold, it can be quite difficult to shake a nugget loose from the ground.

Let’s begin by examining what a pre-foreclosure property is. In its simplest sense, it is any piece of real estate where the owner has stopped making payments on the loan. An owner may miss a payment from time to time and then catch up. This is not a pre-foreclosure. A pre-foreclosure exists only when the owner has missed several payments in a row and the lender has started the foreclosure process to acquire the property or their funds.

As an investor, you generally find out about this sort of property when a notice is filed with the court (a lis-pendens.) This notice is publicly available and published in a local newspaper. And there are services you can subscribe to which will give you a daily list of new lis-pendens. A service will cost you money but it is well worth it as a time saving tool.

Once a lis-pendens is filed, the foreclosure clock starts ticking. Depending on the state and the situation, it can be very short or drag out for a year or more. Things that can cause it to drag out are bankruptcy of the homeowner, the homeowner working out a repayment play with the bank and later sliding on the repayment plan, a lenient judge who gives the homeowner more time to catch up and many other factors. So while a home could possibly be heading towards a foreclosure (court house) sale after more than a year, it is more likely that the problem will either be cured or that it will be for sale to the highest bidder a few months after the lis-pendens is filed.

The two things that will "cure" a foreclosure is the homeowner working out a deal with the lender or the house being sold prior to the foreclosure - either in a straight sale or through a short sale.

Like all real estate investments, only a percentage of foreclosure deals will be good. Some of the homes have no equity and are not worth pursuing. Others are so damaged that they are generally not worth pursuing unless you know your fixup costs real well and can work a deal with the bank (in effect doing a short sale.) And then there is that sweet spot in the middle - solid equity properties that if acquired would leave sufficient equity to make a profit when it is repackaged and resold.

As with any type of cold lead, there are a variety of ways you can attempt to interact with people in this situation. Some are "hard" marketing methods like phone calls or knocking on the door. Some are softer methods like letters and postcards. I personally prefer the postcard approach for a variety of reasons that are explained below.

To understand why a correctly crafted postcard is good you must first understand the mindset of the homeowner. If the homeowner is going through a foreclosure, it is very likely that he had other financial problems. He is probably not paying his credit cards and maybe his car loan. The electric and water may be in danger of being shut off. And he is constantly being barraged by bill collectors - both on the telephone and through letter writing campaigns.

The person is living with a great deal of stress and fear. If he picks up the phone, it is with trepidation and dread. If someone knocks on the door, chances are he will be peeking out the curtain to see if he knows who it is. Mail gets sorted and thrown into the trash very quickly. Anything that looks official is thrown out (or put in a dresser drawer) after just a second’s glance.

So how do you penetrate this wall of fear? How can you get your message of a solution across? And do so in a dignified manner that will net noticed and read?

The answer lies in creating a property crafted postcard campaign.

Postcards are a great way to get a message out to targeted markets because even while they are sorting their mail over the trash bin, a postcard is already "opened." The viewer will very frequently glance at both sides of a postcard even when it is poised over the trash bin. So if you have a message that resonates, it will probably be read. After all, a postcard is short copy - maybe 50-100 words. All in all, it is just one minute of reading.

Because of the characteristics of a postcard as described above, they slip through the wall of fear. Just by evaluating the pile of mail, the person is forced to at least read the headline before making a keep/toss decision. It is a very stealthy way to get a message into the hands of the homeowner.

But that is not the only step to make postcard marketing to pre-foreclosure prospects a viable solution. The dignity factor comes in.

Imagine for a minute that you sent a postcard that said something like:

"Foreclosure sucks! We can help!!! Call today and we will fix your problem!"

The message is quite accurate and certainly resonates with what the person is feeling. But is is public. You just announced to the world that this person is in financial trouble. Ouch! You just lost a potential deal.

Suppose instead that you sent a different message. Something like this.

"We are buying three houses in XYZ neighborhood this month and need your help. If you know anyone who is interested in selling their house quickly, we have a variety of solutions. We buy houses in all conditions from people with all sort of situations - people who have to relocate for a new job, people who haven’t been able to sell their house for months, people in financial trouble looking for a solution and people who just need to sell their house this month. If you know of someone in XYZ neighborhood that we can help this month, please pass this message on to us. The sooner we can get together, the sooner we can help that person move on."

This message is generic. It reads like it is going to lots of people in the neighborhood. It doesn’t announce to the world that this person is in financial trouble. It doesn’t suggest you are going in to do a hard negotiation and "steal" their house. And it is written in a helpful and dignified manner.

Think about the two approaches a bit and think about which one you would be inclined to respond to if you were in a foreclosure situation. I think you will agree that it would be the latter situation.

Like all marketing campaigns, you will want to do repeat mailings for best effect. Depending on the amount of time an average foreclosure takes in your city, you might be able to mail out 3, 4, 5 or more postcards during the process - one every few weeks. Just change the message a little bit on each one and you will maximize the number of potential deals that you can explore in this lucrative market.

As every good door to door salesman knows, getting your foot in the door is 90% of the battle and this method really helps to get that door open. Give it a try next time you decide to work the pre-foreclosure market. You will be pleasantly surprised with the positive results you achieve.

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Zillow.com - Is it right for your real estate business?

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Zillow.com is a fascinating what if type of tool. It allows you to zoom into neighborhoods to see estimated prices. On the surface, that would be a very attractive tool for real estate investors trolling neighborhoods. But once you peek under the hood, you may get a whole different story.

Zillow - like most tools of this sort - relies on publicly accessible data. In some localities, the data is quite thorough. In others, it is quite poor or nonexistient. For instance, the house I lived in while in Florida has accurate information for the size of the house and number of bedrooms and bathrooms. In the house I currently live in - in South Carolina - the square footage is way off and the bedroom and bathroom data is nonexistient.

So where I currently live, Zillow is quite useless. While it does show actual sales and their sale prices, the data on those houses and the other houses in the neighborhood is so incomplete, it is not worth the time to use it as a research tool. However, from where I lived in Florida, it has pretty decent house data on houses where I lived for several years. So as a real estate investor in that area, it would be quite useful for doing quick comparisons of recently sold houses to houses I was considering buying.

As for using it for price estimates and comps, it is again only as good as the data it has. For instance, where I live right now, I would not rely on any of its comp values or home value estimates. And in Florida, because the market is pretty much in stasis, the information is not too valuable - but that is no the fault of zillow. When the market was active in Florida, the estimates were a decent enough ballpark of reality that they had some value.

The other challenge zillow offers - even in cities where the data is good - is that it knows nothing about the condition and upgrades of a home. A real life appraiser evaluates many things when calculating an appraised value - and will often throw out anomalies. (Anomalies include things like houses that were in a foreclosure or houses in a stick built community when evaluating a brick home community.) Zillow calculates automatically based on the data it has and while I don’t know for certain, I’d bet that they do not have the ability to filter like an appraiser can.

So, is zillow a good tool for you? As the above has shown, it really will depend on where you live. The best way to "test" zillow is to check out known properties. Get a list of properties from the MLS. They will probably be offered at around their appraised value. And you will have details on bedrooms, bathrooms and square foot estimates. Take that data and compare it to what zillow is showing you and you will have a good feel for what zillow can and can’t do for you in just a few short minutes. If the data looks good, add it to your suite of research tools. If the data is not so good, just bookmark it and check back in six months to see if it has improved.

As a final note, just remember that zillow is only as good as the data they can get for their database. Where I live here in South Carolina, the only good source of comps, accurate details of recent sales, etc. is through the MLS and unless you are a professional who is allowed access to that data, you can’t get it through zillow or any of the paid comp services that exist out there.

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Credit Card Financing VS Hard Money Lending - Are They The Same?

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As a real estate investor, one of your concerns is always where financing for your next deal will come from. In spite of all the creative techniques out there, there are times when you just have to bite the bullet and actually borrow money to make a purchase.

While the ideal scenario is borrowing money from a bank or mortgage company at the best rate possible, that isn’t always an option. For instance, if you are doing a rehab project, a traditional lender may not be willing to lend money on the project. The willingness of a traditional lender will depend on how much rehab is needed and how flexible they are in their lending guidelines. Generally anything more than light cosmetic rehab could have you scrambling for funds to close on a super deal.

So how do you come up with the cash to close on this super deal the traditional lender won’t touch and that the seller won’t do any take back financing.

You have three basic options.

1) Borrow money from a trusted source - a friend/family member or private money lender you have a relationship with. This is probably the most cost effective way to make the purchase. A family member won’t charge points or outrageous interest rates and if a deal is good enough, you can usually negotiate a reasonably sweet lending deal through a private lender.

2) Hard money lender - These folks are EXPENSIVE but are sometimes the only option to make a deal work. Expect to pay 3-6 points for every 3-6 months that you have the loan out. And expect to pay 15-18% interest or more on your money. Also expect to pay periodic inspection fees to get them to release funds periodically to cover your fixup costs. These fix up funds stay with the lender till the work is signed off on so you pay interest on funds not in your hand plus you have to come up with the cash up front for each stage of fixup - or negotiate with the work crews to not get paid till the funds are released.

All in all, hard money is a good solution for the right deal but it has many drawbacks that can make it a risky financing option - especially for a novice investor.

If you decide a deal needs a hard money lender, do some shopping around. Ask other members of your local real estate club for recommendations. Terms and points can vary dramatically from lender to lender and from deal to deal.

3) Credit card financing. This can only work if you have a large credit line that you can access on one or more credit cards to do a deal. For the sake of this article, lets assume that you do have enough available credit.

Depending on the specials happening with your credit card companies, this can be an effective way to scrape up funds to close and/or pay for rehab of a property.

There are two aspects of credit card interest - a purchase interest rate and a cash advance interest rate. If your credit is good, the purchase rate is almost always better than the cash advance rate.

The options in credit card financing depend dramatically on the offers the credit card companies have running at the moment so it is difficult to say what situation you may experience. But here are a few examples.

a) Write a convenience check for $16,000 into your bank account for a fee of just $99 and a fixed interest rate of 5.99% until the balance is paid off. This is from a recent Chase bank offer.

b) Pull cash out of your credit card as a cash advance at 18% variable rate interest with a 3% fee charged on the amount withdrawn. This is a fairly typical cash withdrawal scenario and it is very similar to hard money terms.

As you can see from these two examples, offers can vary widely. But if you have enough credit available on credit cards, you can generally get a combined deal interest rate that is much better than the hard money lender. Just be sure to keep track of all the accounts and payments so you don’t get slammed with an interest rate readjustment for a late payment. And be sure to pay them all off when you sell or refinance the property.

As you can see, there are money options out there for fixer uppers. It is just a matter of choosing the one that works the best for you in the situation that presents itself to you. After all, even with the high expense of a hard money loan, if the numbers work on the deal, the expense is just a cost of doing business to bring home a profit. If the after expense profit projection is good enough, don’t fret over "lost" profits due to high money costs.

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Powerful New Map Feature at Realtor.com

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Have you been over to Realtor.com (http://www.realtor.com) lately? They recently added a new feature in their search called "View on Map." It is still being tested and refined but it is a really powerful visual tool for working your neighborhoods.

Here is how it works.

Go to Realtor.com and enter your search paramters as you normally would (city/state or zip code, price range, etc.) and click on the search button.

On the next page, you have the choice of either viewing the properties realtor.com found on a map or on a list. Click on the map button.

This will bring you to the first page of search results based on your input parameters.

On the left hand side of the screen is a column showing 10 listings and on the right hand side is a map of your area with the houses marked on it numbered one through ten.

To learn more about a house you only need to click on a number (or on the listing at the left.)

The map is also zoomable so that you can go all the way to street level. And you can overlay satellite images to get a better idea of where the house is and what the area looks like.

This is a pretty good way to quickly scan Realtor.com for houses in the area where you invest.

Could it be better?

Yes it could. Many of us canvas specific neighborhoods rather than entire cities. It would be nice if they could refine their search feature to allow one to put in a street address and tell it to search in a radius around that address. That would allow one to see houses within say a mile of a specific address. That
would be a tremendously useful feature for investors.

For now though, it is still pretty good.

I personally use it to search in specific zip codes (to narrow down the search results a bit) and with a specific price range to get a small sample that I can skim in just a few minutes looking for newly listed properties in areas I invest in. And I use it to get a quick overview of new neighborhoods when I look for other areas to invest in.

If you haven’t given it a try yet, you should. If nothing else, it is a new way to look at listings that just may help you find that next deal.

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Vision and the Real Estate Investor

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This week we are going to talk about how your vision is impacting your real estate investing career. While there are many attributes and skills that make for a successful real estate investor, vision is perhaps the most important.

An investor without vision will look at a broken down house and see a wreck. An investor with clear vision will see a diamond in the rough just waiting to be polished and profited from.

An investor without vision will walk away from a good deal when the negotiating gets tough. An investor with clear vision will keep coming up with new angles to bring the negotiation to a successful close for both parties.

Be aware that vision can also have a dark side.

We’ve all heard of the person who looks at the world through rose colored glasses. This is a person who sees the positive side of anything - often even when there is no positive side. This is the type of person who will buy a fixer upper that has rehab costs that make the deal unprofitible.

So how do you develop clear vision?

The best way to develop clear vision is through experiential education. For instance, if you walk through Home Deopt or another building store and touch the materials and get to know their prices, you will learn about the quality and prices of different materials. If you take one of their classes, you will
learn the steps involved in doing various repair projects.

When you have your home inspected, walk the property with the inspector and ask questions. Go to every open house you can in your target neighborhoods and see what makes for an exciting house and a bland house in that neighborhood. Study sales trends in your neighborhoods.

Get involved. Ask questions of all professionals - realtors, mortgage brokers, insurance agents, etc.

Think about what you learn, apply it and see the real results that are brought about by your actions.

By taking proactive steps and constantly growing your base of experiential learning, you will soon have that clear vision that separates the winners in the real estate investment game from the also rans.

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Why Tenant Background Checks Are A Good Investment

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If you are a real estate investor - or just thinking about becoming one, chances are that you have at least thought about tenants and tenant horror stories that you have heard. Whether you do a straight rental or a lease option deal with an "owner minded" tenant, you can still find yourself with many sleepless nights and heartache when you finally see the condition of your beautiful unit when the tenant moves out.

This fear of tenants keeps many would be real estate investors from jumping into the business. No one wants to invest a ton of cash into a property only to have a tenant not pay and have you go through the time, expense and income loss of a protracted eviction process. No one wants to walk into their property after the tenant left and find it destroyed.

Fortunately, these horror stories only make up a small portion of the tenants out there. Most are decent people who will treat your unit nicely. You will get standard tenant style wear and tear on your rentals but most of the time, a deep cleaning and some paint brings the property back up to snuff. This is the normal and expected condition of the average to good tenant. And some even leave the apartment in better shape than when they come. These are the tenants you want to have as they make the landlord - tenant relationship pleasant.

While it is impossible to completely protect against bad tenants, there are several steps you can take to stack the deck greatly in your favor.

The process begins with a complete application - name, address, place(s) of work, prior landlords, personal references, SSN for credit checks and a permission statement to allow you to perform a background check. Additionally, a fee should be charged for processing the application. If a potential tenant takes the time to completely fill in your application AND pays a fee, they have passed the first hurdle. Most bad tenants, once they understand that you really will do a background check, move on to easier pickings.

You may be wondering what fee to charge for your applications? Just call some of the big apartment complexes in your area and see what they charge to help you set your fee rate.

You may also be thinking that if you charge a fee, you are going to have less people looking at your apartment. And you are probably right. Once a potential tenant knows you are serious about background checks, etc., they will generally not bother going any further with the process. But really - do you want a lot of potential tenants of unknown quality or just a few tenants who have the potential to pass muster?

The next step is to actually perform the background check.

There are generally two parts to a background check - the part you can do yourself and the part where you hire a tenant screening service. You can do things like verify employment and prior landlord references yourself but things like pulling a credit report or doing criminal background checks are more time effectively hired out to a professional tenant screening process.

There are many tenant screening companies out there offering a menu of services at various price points. To find a tenant screening company, just go to your favorite search engine and type "tenant screening" in the search box. You will find a variety of companies that you can work with. Find one that offers the background activities you want analyzed at a fee that is covered by your application cost and start the process. You generally get results back very quickly - sometimes even the same day.

Here are just some of the items you can get checked for a very reasonable fee:

  • SSN Validation
  • OFAC/Patriot Act Search
  • Evictions + Suits
  • Liens + Judgments
  • Bankruptcies
  • Criminal Records Search
  • Sex Offender Search
  • Applicant’s Credit report
  • FICO Score
  • Bankruptcies
  • Judgments
  • Collections
  • Previous Addresses
  • NSF Check History
  • DL State of Issuance

By gathering the information from your personal reference check activities and the data returned by a good tenant screening company, you will paint a pretty detailed picture of your tenant. Combine that with the personal tenant interview and you should be able to choose quality tenants 99% of the time. And be able to sleep much better at night.

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