Management Tips

Below are discussions and tips that have been shared by landlords nationwide.  Please be sure to know the applicable laws in your area as they may differ from some of the offered suggestions. 

Minimum FICO Score Accepted?

A landlord was trying to determine what would be the minimum FICO score he would accept from a rental applicant. He asked the following question to get feedback from other successful landlords: 

“As you all probably know, FICO scores range from a low of 350 to a high of 850. In addition, there is a relationship between a person’s FICO score and the likelihood that the tenant will pay their rent by the due date. That being said, what is the lowest FICO score you will accept and not immediately disqualify the applicant?”

One landlord responded as follows and offered a challenge to not only the landlord who asked the question, but to all landlords who are trying to determine what minimum FICO score they should accept. 

“Landlords find a comfort spot in housing quality and housing style, which also differs with location. So the answers will vary for everyone. I offer a challenge to everyone as this is an awesome question. With two or three years of your archived move-out paperwork in hand, some even hold it longer, compare how your former tenants moved out (Early termination, non-renewal, extended, lived in the unit for 3 years, room mate break up, divorce/break up, landlord asked to terminate or had to evict, etc) and compare THAT to the credit score at move in.

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WOW – this was an eye opener for me. I thought I was giving some folks a second chance, but I was getting bulldozed by the snow jobs. I was worried about filling units because I was losing money. Nope. Turns out, turnover costs, especially those that happened early and often, were killing me.

At this point, if you have a 520 credit score – I really don’t care if you have Warren Buffet as a Co-signer. In my opinion, a 520 credit score means they are out of control and life is driving the person. Even now, with a score below 580, I will probably not accept you in my worst rental. These lives are too unstable, but having Warren Buffet would be a huge plus. 

Again. Excellent question. Hope this answer (and my challenge to you to analyze and compare your former move-outs to their original credit scores at application) increases someone’s cash flow like it did to me. I need to thank Jeffrey  for saying your turnovers cost money. That made me ask the follow-up question and determine where is the breaking point in my area.”

Dog-Proof Your Rental Property

If you allow dogs, how do you “dog proof” your rental property or minimize repairs needed? Two primary tips shared by landlords that may save you thousands of dollars, include:

  1. Remove all carpet.
  2. Conduct home inspection of applicant’s current home BEFORE accepting them into yours.

Are You Charging Fees?

A landlord shared the following observation: If you are not yet aware, some big hedge fund billionaires are buying up rental houses. Two are working in my small town. This is changing the face of renting houses. One has over 35,000 homes nationwide. The other has thousands and buys 1,000 each week.

He then went on to share how one of these companies  is charging the following fees to residents, just to name a few:

Application fee: $75 per person

Animal Registration Fee: $350 each animal

Animal rent: $50 each animal

HVAC filter fee: $15 per month

What’s the point being made? I believe that the landlord is simply pointing out that some of the “big” players in the rental industry are charging fees and they’re charging larger than the amount most mom and pop landlords are charging. And while the idea of charging fees or large fees may not currently be part of your business model, it may be worth considering charging a fee for some of the services that you do provide as long as any fees  stay within your state laws.

Curtains for Closet Doors

A landlord shares below what she recently discovered that will add to the overall look of her rentals:

“I hate swinging doors. They take up so much space and we have small places. Bi-folds are also terrible. They’re always getting broken and falling off. Sliding barn doors only work in certain spaces. The same is true for pocket doors.

In our small cottages we have been using curtains on closets for years, but ready-made curtains only come in 63″ or 84″ inch lengths. Shower curtains can be bought in 78″ length but either they look cheap or they are super expensive, and they need hooks which tend to look cheesy too.

Closet door heights are usually 80″. With a tension rod that means about 79″ inches needed for a curtain. The other day, for no good reason I searched 79″ curtains and lo and behold, they do make them. They even say ‘Closet’ in the title! I simply never searched for them before. They were $29 each.”

Don’t Wait Long!

A landlord mentioned on the MrLandlord Q&A forum that he receives a lot of inquiries (in one particular case, over 1,000) and hundreds of applications. However, by the time he gets back to a couple of the truly qualified applicants, they have already found another rental home. I offered the following suggestion: How long do you take before you get back with applicants? I used to take a day or two going through the entire verification process. Then after that, I get back with the ones who met my qualifications. To my frustration, every now and then, when I finally got back to a qualified applicant, he or she responded that they had already rented another property. Ouch!

So, I changed my screening process. Now, I make it my goal to do an initial “surface” review of the main application criteria plus run a couple of quick screening reports (credit, eviction, and criminal). I do this within one or two hours maximum of receiving the application.

If the surface review of the main criteria (income, rental history, credit score, cooperation level, etc) of the applicant meets my minimum criteria, I immediately get back with the applicant. I congratulate them and let them know they have been pre-approved!

After implementing this new process, I now do not have anyone who I pre-approve and call to congratulate respond that they have found another property. Once they get the phone call from me, they do not keep looking for another place to rent, which used to happen while applicants were waiting a day or two for me to call them back with an answer.

By the way, I still have the right to finish my verification process after informing the applicant that they have been pre-approved. If I am not able to fully verify anything on the application, I can call them back and inform the applicant that we were not able to verify something on the application.

Again, the beauty of this strategy is that I never lose any qualified applicant because they kept looking and found another place while waiting around for my answer. In this day and time, many applicants will not simply wait a day or two when there are so many other good looking homes or apartment options who are willing to respond very quickly.

If you are a landlord who finds very few truly qualified applicants, using a similar strategy may help you not lose out on one of the rare qualified applicants who come your way. Best of success to you in your landlording!

 

The tips in this column are shared by regular contributors to the popular MrLandlord.com Q&A forum, by real estate authors and by Jeffrey Taylor, [email protected]. To receive a free sample of the Mr. Landlord newsletter, call 1-800-950-2250 or visit their informative Q&A Forum at LandlordingAdvice.com, where you can ask landlording questions and seek advice of other landlords 24 hours a day.