As a landlord, if you have not worked with Section 8 before, it can seem a little overwhelming.  There really isn’t anyone that can walk you through the process and no good information exists on-line (except maybe the Section 8 posts here).  And to top it off, the Section 8 tenants don’t know much more about the program than you do.

A common question is “How do I screen Section 8 Tenants”.  That is pretty simple.  You screen Section 8 tenants just like screen tenants that do not have subsidized rent, with a couple changes:

• Most Minnesota Section 8 tenants have to pay a small percentage of their rent (10-25%).  Very few have their entire rent paid by the government.  Consequently, the tenant needs to have some other source of income.  Where are they going to get the $100-250 per month that they have to pay out of their pocket?  Plus, how are they going to pay for utilities, if they are not included in the rent?  Weigh your decision heavily on the fact that a large portion of the rent is guaranteed from the government, but be concerned about the remainder.
• Call their Section 8 coordinator to confirm they are able to rent your apartment for the proposed rent.  Confirm they are able to move from their current residence.  You don’t want to make the same tenant screening mistake I made.
• If their credit is bad or non-existent, confirm that they have income to pay their portion of the rent and then consider waiving that requirement of your rental criteria.
• Confirm they are able to pay the damage deposit upon move-in.  They may need to go to emergency assistance to get the deposit, so have them get a letter to confirm the subsidy.

Screening Section 8 tenants is just like screening anyone else with a few additional steps.  There is no need to over think the process!

Here is an example of a recent email exchange that I had with someone interested in my 2 bedroom plus loft, new construction townhouse in Forest Lake, MN. I was using Craig’s List to rent this property. I decided to post the exchange so you can notice the interesting way they are trying to avoid having to complete a rental application and why red flags were going off everywhere [note the grammar and spelling errors are from the original text]:

Prospect:

Hi. Me and my fiance’ are very intrested in your town home. When will it be available for renting? We just had our first child and need the space asap. Let me know, also quick note we would be willing to pay a few months up front if you’d take 1100 a month plus we got a dog. But we like what we saw so please let us know.

Me:
Thanks. It is available on June 1. I can take the dog (depending upon size and type), but I can’t take $1100. I would be willing to go to $1150 if you paid in advance. [rent is advertised as $1175]

Prospect:
OK we could do 1150 a month. Dog is a pointer terrier and about 45 pounds, does that work? Also were not looking to fill out application that why we’d paid a few months up front, does that work for you, you can also call or landlord now, would that work?

Me:
What is in your background that you prefer not to fill out an application?

I am OK with bad credit as long as you have good income (paying in advance will cover that also).
How long have you been at your current apartment?

Prospect:
We were on the market for buying and had our credit run to much, so we perfer to do what our current landlord did and meet us face to face and we liked each other. Wrote the check and have lived here for over a couple of years. It just tough because alot of people scam people so anyone that is interested in the face to face way is what were looking for. And that is why we want to pay a little extra up front to show that the trust can build. So what do you think?

Me:
I would be happy to rent to you, but it is simply my policy to run a credit, criminal, and rental check on every adult in every one of my properties.

A single credit check run for a rental application is going to do nothing to your credit. Even if it was run 10 times, your credit recovers quickly from those type of checks. Plus, unless you are planning to open new credit line in near future, it doesn’t matter anyway.

Attached is a copy of my rental policies for your review.

Prospect:
Yeah see were trying to by pass all that because were trying to not mark anything.

Me:
Thanks for your inquiry, but I can’t lease to you without a full rental application which includes credit, criminal and rental background checks and verifications.

Clearly this person is trying to hide something. Why else would they not want to fill out a rental application for an apartment they claim they are interested in? Plus, why not simply tell me what the problem is (felony, evictions, collections). I will not be renting to this person!

Craig’s List is an excellent place to advertise your investment property vacancies. I wrote a post about doing Reverse Prospecting for Tenants on Craig’s List about 6 months ago. Although this is a very effective way to find new tenants, you should plan to post your apartment for rent. Here are a couple tips to get your best response:

• Include your phone number as some prospects will want to call.
• Make sure to check the email address that you set up in Craig’s list often, especially in the first 24 hours. I have had emails from prospective tenants within minutes of posting.
• Always post pictures of the property. Many tenants will not even consider your apartment or contact you without pictures. The pictures can be from a few years ago, just insure they show the property well.
• Craig’s list does allow some HTML in their postings. Check with your friendly web designer, but you can do bold and change the color of text.
• I always put the available date in the heading to allow readers to quickly see it. Such as: “Avail-June 1″
• Highlight anything unique about the property (pool, freshly updated, hardwood floors) in the title also.
• If you are a licensed Minnesota real estate agent, remember that you are required to disclose that fact on everything you publish (this included).
• Take a trick from retailers, drop the rent just below the $00 mark, such as $999 or $1099 or $599, instead of $1000, $1100, or $600 respectively.

With just a few changes to your ads, you will find you will generate many more calls and have your properties leased faster.

Have you always wanted to buy investment property, but never knew where to start? Don’t Wait! Get Started now.

Here is a great question that I received today: “Obviously this can only be done when the lease renews, but how do you decide when and how much to raise the rent on your tenants?”

As you imagine, that can be a touchy subject. I think raising the rent depends upon a couple items:

• If the tenant decides to leave, can you re-lease the property for minimal cost and no vacant months? Losing a month of rent at $1200 is not worth the extra $20 you were going after.
• Do you feel like the tenant is paying a fair market rent? If it is low or average, the tenant may not be able to find anything better and so they may be fine with an increase.
• If you are leasing in the spring, you can be more aggressive because it will be easier to re-rent that property than in December.
• Hopefully you are talking with the tenant 60-90 days prior to the lease renewal about their plans and the rent increase, to give you time to release the place if they decide not to renew.
• Work with the tenant to see if they will let you set the lease renewal to 18 months (locking their rent) in exchange for the rent increase (you actually get a benefit of locking them in longer).
• I would have the conversation with them verbally or in person so you can read their response. Also, it is tougher for them to say no to your face.
• Use your best sales techniques to show them why they should both stay and accept the rent increase. At the end of the day, be honest.
• Lastly, if they are a great tenant and I am nervous about replacing them, I may just leave it alone.

Landlords: When is the last time that your read your lease from start to finish? Do you really agree with and enforce everything that is on your rental lease? Did you download your lease from the internet when you bought your first investment property and have never looked back? Here are some extra add-in clauses that will give you extra leverage or reduce your headaches with your tenants. Feel free to cut and paste them directly into your leases:

Disclaimer: I am not an attorney in your state, nor do I play one on TV. Your should seek competent, local legal advise regarding these suggested lease clauses.

1. All drains, waste pipes, and plumbing are accepted as clear by the tenant at the time of occupancy and any material blocking them after occupancy shall be repaired by the tenant except blockages caused by roots or backups from the street.
2. Glass breakage is the responsibility of the tenant unless caused by landlord or nature.
3. Leak in pipes, unless caused by negligence of tenant are to be repaired by the landlord within a reasonable time after notice, but the landlord shall not be liable for any damages resulting from such leaks and/or overflows.
4. No signs (including political signs) shall be placed on the premises by the tenant or at the tenant’s direction without the prior written consent of the landlord.
5. Light bulbs are the tenant’s expense and responsibility.
6. The unit is accepted as insect, rodent, and pest free by the tenant at the time of the occupancy. Tenant is responsible for insect, rodent, and pest control. If tenant choses not to correct problem, landlord may pay for pest control and bill tenant applicable costs.
7. Use of property for business is prohibited: The premises shall be used and occupied by the resident(s) exclusively as a private residence. Neither the premises nor any part thereof shall be used at any time during the term of this lease by the tenant for the purpose or carrying on any business, profession, or trade of any kind.
8. No auto repairs lasting more than 1 hour may be performed on the premises nor on any city street adjacent to the property.
9. Resident(s) agrees not to park or store a motor home, recreational vehicle, or trailer of any type on the premises without prior written consent of the landlord.
10. Resident(s) agrees to use said dwelling as living quarters only for ____ adults and ____ children and to pay $____ for each week for any other person who shall occupy the premises as his/her living quarters.

Again, check with your local attorney about the legality of these clauses in your area. Plus some may not apply or be contrary to local rental standards/customs. While not a complete list, many of these clauses will give your investment property leases extra teeth to insure compliance from your tenants and keep your rental units is the best shape possible. Take the time to power up your leases!  You will be happy you did.

In my posts Tenant Applications-Red Flags and Tenant Applications-Part 2, I write several times about the different items that I am looking for when I meet and then process a tenant application. I have heard of more than one seasoned real estate investor actually developing a points based system for tenant screening, but I have not seen one until now.

Connie Brzowski guest writes an excellent post, on BiggerPockets Blog, outlining a tenant screening checklist/scoring system. It is simple, but effective as it screens each tenant by the same standards. There is very little room for someone to claim discrimination. I would argue that it also keeps you and I from bending or breaking our own rules because the prospective tenant was nice, had a great sob story, or appears to be well intentioned.

Check out tenant screening criteria.

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