Landlord Horror Stories and How To Select the Best Tenant

We don’t inherit someone else’s problem that they’re trying to jettison and now it becomes our problem. It’s going to be tough for the next several years. The key is we need to go through some criteria and how to establish who we should be renting to so we’re not going to be caught in this vicious cycle of bringing tenants in and then kicking them out two or three months later.

You know what it’s like. If you’re using a professional management company, property management company, every time there’s a churn, that’s more money out of your pocket and you’re actually going backward and never forward. We want to use great screening processes.

The person I wanted to bring on today is someone who is an expert in this field and has a background in doing background searches on individuals. His name is David Pickron with Rent Perfect. David, thanks for coming on.

David: It’s glad to be here, Clint. Thank you so much for having me. Clint, before we get going, I’m going to ask you a question. We’re always talking about property, taxes, and how we can save money. But how much is a good tenant worth? How much are they worth? We never really think about that.

If we can find the right person that pays you a couple of grand a month for five years, that’s $120,000. Let’s look at these guys. It’s just a lot of money and let’s spend some time to find that person who can pay you that in the next five years. I’m excited to talk about it with you.

Clint: It’s just like when you’re buying a property. But if you find that there’s a tenant in there that’s been in there for four years, that becomes a very attractive property to you because it’s likely that that person is going to stay there for another four years. Those are the things I look for. My partner and I, when we’re investing, we do a lot of investing as people know in Winston-Salem. You’re right, to have stable tenants is key to managing your own cash flow.

David: Absolutely.

Clint: We got to make sure we get them in there. All right, here’s a question that’s really come up, I think it came up even more. It’s come up with me. If you look out there and you had all these moratoriums on collecting rent that our government wanted to pass another one, they finally got shot down, and states are getting in there, this ends. It’s going to be a landlord’s nightmare. What’s going to go on?

David: It’s a little hard to seize people’s personal property, take it over, and start managing their property. I tell a lot of my property managers right now, listen, you’re not really the owner of the property. You’re partners with the government right now because if you try to evict someone you can’t, so how can you be the owner in a way? They’ve taken our property, but hopefully now we get it back.

How do we protect ourselves in the next month, two months, a year, or two years? What can we do to find those right renters? Because like you said, we want long-term renters. That’s the way we make money in the long-term holds. We don’t make money flipping properties, as everybody knows. We don’t make money painting and putting in new floors. We want to set it, forget it, and let them go. We want to talk about that today.

Clint: Tell me then, where do you see this going in the next several months as far as, if I’m a landlord and I’m screening tenants, what are some things I need to look out for in bringing in tenants?

David: I love that. First of all, there are a lot of things stacked against us. Let’s just be honest. I’d love to be positive, but there’s a lot of things stacked against us. There’s a lot of regulations, still. There are a lot of courts that are withholding data.

Did you know two years ago that credit bureaus pulled off all evictions? They pulled off all judgments and all liens. They’re not on the credit bureaus anymore. If you’re going to get an eviction search, you have to get a company like ours to go into the courts to pull those evictions.

The reason the credit bureaus took all those off is because they were getting sued. They were putting the wrong data on the wrong people’s files. If you had a John Smith, when we filed our evictions, we don’t put the date of birth in the file or Social Security because that’s people’s private information. They were having a hard time matching these liens and eviction records up to the right credit bureau records.

They said, you know what, we’re done getting sued. We got sued by the federal government, we’re taking them off. When we report rent payments through our company to the credit bureaus, we can only report the positive rent payments, not the negative ones. My point is credit bureaus are actually working against us a little bit. They’re still valuable, but they’re not as valuable as they used to be.

Have you heard of that new Experian Boost? Have you seen those commercials? They’re realizing that they’re not giving us all the information we need on those credit bureaus. They’re allowing the consumer now to start reporting their own credit to their own credit bureau. That’s what consumer boost is because they realize they’re getting irrelevant if they can’t give us evictions. They can’t give us the things that we need to make those right decisions.

We have to know, as landlords, the odds are stacked against us a little bit. You want to make sure you get the right company. We’re a private investigation company. It’s a little bit different from the standard online database company in that you get instant results. You’ve got to spend some time on the front end and really understand who’s applying with you. Because can a bad applicant be nice, Clint? Can a bad applicant be a nightmare?

Clint: Yeah, they are.

David: Absolutely. Everybody wants something, so you can never tell. Some of my own clients are always like, oh, my gut feeling was I let them in because they were just really good people. Gut feelings are out the door, they’re gone. It is now a good background screening and good criteria to find you a renter that will be there for five years.

Clint: As it stands right now as we were talking about before we started here if I’m screening a tenant, can I find out if they were evicted because they weren’t paying rent during the pandemic?

David: As we know, there’s an eviction moratorium. It doesn’t mean that there weren’t evictions that went through. They had some parameters that they had to jump through. If they couldn’t jump through the parameters, actually, people could be evicted during the eviction moratorium. But very few evictions went through. There’s not a lot of things for screening companies like me to look at over the last year because there weren’t a lot of evictions filed.

If someone didn’t pay their rent, how do we know that? How can we find that out? One of the things we’re teaching here is a lot of people old school will say, hey, call the landlord. If I called you and you had a guy not paying you for two, three, four, or five months, are you going to be super honest with me?

Clint: You’re making your problem, right?

David: Yeah. I mean I love landlords. We have great, great clients and everything, and I want everybody to be successful. But I probably—in a selfish way a little bit—have my own back and say, hey, I need this guy to move out because I need to get someone who’s going to start paying me rent or I’m going to lose the property. Unfortunately, a current landlord right now might not tell you the truth.

You want to go two landlords back, but I’ve got something even better. It’s going to sound a little tedious at first. But the reality is our next applicants, we want them to work a little harder to move into our property. We want to see who is willing to work a little harder. When a pandemic happens and they lose their job, who’s willing to go get another job instead of sit home and cry?

We want that behavior of, I am going to not be a victim and I am going to move forward. I’m going to be responsible. That’s who I want as what I call my business partner or my renter. I want them to work a little harder, so here’s what we’re teaching—12 months of bank statements.

Now, I have a lot of my clients’ 12 months bank statements. David, that’s a little excessive, isn’t it? No. I even will probably go over 12 months because I want to know last July and last August were you paying your rent? I don’t care if you’re on unemployment. I don’t care if you lost your job. That happened to some of my tenants, but they made me a priority and they paid me rent.

That’s what I want to know. Because if I’m going to have the next tenant for the next five years, there’s going to be problems in the next five years. I don’t see our next five years being perfect. There are going to be problems in people’s lives. How do they handle it and how do they make sure to make me a priority?

So 12 months bank statements, most people have it on their phones. Print it out, circle all the rent that’s going out the door in those bank statements so you can see that they paid their rent. That’s proof, paper, that’s on paper. As a private investigator, I just don’t trust prior landlords and what they tell me.

Clint: Yeah, the bank statements make a lot of sense too because then you get an idea of, like you stated, who did they prioritize? Did they prioritize spending money on a new boat, or was it paying rent?

David: Yes, absolutely. When you and I buy properties, if our mortgage company says, hey, Clint, I need your bank statement for the last 12 months. It’s no big deal. You just go get it, you give it to them, and you don’t think twice about it. You don’t go, oh, that’s a little excessive, don’t you think? You just do it. I’m looking for those tenants who will just do it.

Clint: Yeah, I was talking to one of my clients the other day. He was complaining about the fact that he was speaking to his tenant and he said, listen, the government will pay your rent for you. He was behind on the rent for several months. He said, listen, all I need you to do is sign this form and then they’ll pay it.

The tenant said, I really don’t care because I don’t have to pay you, I’m not going to spend any time doing this. It astounds me because that guy’s going to be out of there. As soon as that man is able to evict him, he’s going to evict him, and then where else is he going to go?

David: If we went through this whole PPP money thing for businesses last summer and the banks got that money out fairly quickly and they even went into round two. If the government wanted to get money to landlords, they could get it to them. They got it to businesses, but what they did is instead of going through banks or going to landlords, they went to the government then to go through applicants.

Applicants aren’t signing up for this rent relief. That’s why they’re saying, hey, there’s so much money, we’re not getting it out the door. Well, they’re acting like the bottleneck is in the government. It’s more than just in the government. The bottleneck is because the tenants are not going to apply for that too because they don’t care. I’m making a general broad brush. I’m sure some do care, but it’s not just in the government. The bottleneck is in the tenants too.

Clint: Yeah, for those of you, if you’re not aware that I cut a video—you can find it on my YouTube channel—about things you could be doing now, where to apply to get funds. If you have a tenant that has not been paying rent, there’s a lot of money floating around out in the system that you can go back and collect on if you can work that out with your tenant.

All right, moving on then. We talked about, you’re going to ask for bank statements, but there’s something else. Because credit checks, it sounds like, are out because of the fact that they don’t report on whether or not they’ve been evicted. You can’t find out from the landlord. But how do you know you’re just not going to get some deadbeat in there?

David: Because a company like ours is going to go right into the courts that are in the area where the applicant or tenant lives. We’re going to be looking for misdemeanor records, we’re going to be looking for felony records, we’re going to be looking for eviction records, we’re going to be looking at that credit, and we’re going to give you all that information.

You usually don’t see somebody who has a three-year-old drug felony with a 750 FICO score. We get you so much information that usually, if the credit scores are bad, there might be some history there, some criminal history there. My key is let’s get you as much information as we can. We can’t rely on just the credit bureau anymore. We can’t rely on just a criminal history check anymore.

We have to get a bunch of data as much data as we can, and we have to look at the totality of the person, and then we have to have detailed criteria. A lot of people don’t have that right now, Clint. That is so critical to have to keep you out of trouble.

Clint: What do you mean by that? What’s a detailed criteria?

David: You have to lay out now, exactly who qualifies for your property on paper so everybody’s treated the same. At this property, I expect a 650 score to be approved, 600–650 conditional. I’ll put it in a little bit of a gray area, but then 600 and below, you’re not approved for this property. I also won’t allow anybody with a felony record within the last five years or misdemeanor within the last three years. I don’t allow collections against landlords for the last two years.

We have a sample criteria that we will send out to everybody if you want to email info@rentperfect.com. It really gives you this detailed list. The reason we need it is because we can no longer make these decisions on whether we’re going to rent someone. We have to run them through this criteria, treat everybody the same, and they either get approved or they get declined based on our criteria. You better have your criteria perfect. It can’t be too high and it can’t be too low.

Clint: To that end, I’m going to put my attorney hat on and play devil’s advocate. I agree with all that because it’s an objective criteria. It takes away this, oh, I looked at them and there’s something about them I didn’t like. You can say, no, they just didn’t fit here. But there was an interesting case a few years back out of Savannah, Georgia. Here’s an individual landlord. He had it set up and even ran this for years. If you had a prior felony conviction, you were not qualified then to rent from him.

He was sued for racial discrimination. They said that his felony conviction had a disparate impact on a certain segment of the population that was more prone to have felonies, therefore was inherently biased or racist as a result of that. It was an interesting legal argument for someone to bring.

David: It is, but fair housing is looked at like this. If they have a criminal history, you really have to do now. I said, have a criteria and treat everybody the same. We’ve heard that, but now they’re coming up with this. They want to do an individual assessment.

If you find criminal history, you have to do now an individual assessment, which is how long ago did the crime occur? How old was the person when they did it? Have they been in any rehabilitation that they can prove? And does this affect your property? Those are the questions they want you to ask.

If it’s a shoplifting misdemeanor 12 years ago, they’re probably going to say, hey, does this really affect your property? You’ve got to really understand criminal records and say, hey, this affects me, it affects the neighbors, or it affects my property. Two years ago, bank robbery or assault, you probably can prove that.

I would recommend not going over seven years on anything but sex offenses because you’re never rehabilitated from a sex offense. Other than that, I would not use the word ever. I would never say felony ever, misdemeanor ever. I would go to seven years max on that and then I would do the individual assessment. That’s covering what you’re just talking about.

Clint: I know, I agree. I would keep it recent. Because the other thing too is we don’t want to hold people to the standard where you did something, like you stated, 10 years ago, now you got a scarlet letter on. People can redeem themselves. I think you have to give them a chance to do that.

David: There are two people I find as I review criminal records every single day. They’re the ones that did it and learn from their lessons. That’s a good guy. Guys, national podcast, when I was 16, I stole a little candy bar. Just my frontal lobe wasn’t fully developed. I didn’t fully understand it. Luckily, I was underage.

There were things probably I did in college that were illegal, I just didn’t get caught on. I hope my kids aren’t watching this. But then there’s the guy who doesn’t learn from his lesson and just drug charge after drug charge after theft charge. That’s the criminal, the career criminal we do not want living in your property. Because think, Clint, when you have someone like that, who are they going to invite over as their friends?

Clint: Yup, they run a certain crowd. You’ll have more than that.

David: Yeah, you’re not just going to have one of them, you’re going to have a whole crowd over there. We’ve already seen, if it’s drugs, what do they like to do? What do you think they’re going to be doing on your property? That’s what we have to assume.

Clint: The way to do that then is what I’m hearing is, we want to make sure we’re doing a criminal background check and we’re getting 12 months of bank statements. We’re going through those to see how they prioritize their bills. Are there any other steps as well?

David: Not really. Some people teach about showing your property with a lockbox and not being there on the property. I don’t know what you guys teach. There’s good and bad to both. But I tell you, as a landlord myself, I love to meet what I call my future business partner the first time in person and I ask him a lot of questions.

Being a private investigator, I say, hey, where are you from? Where are you moving from? I listen for things like if they stutter on their answers. Your human brain wants to tell a lie, it needs to take a second and stutter before they can answer something immediately.

If I say, hey, where are you coming from? You’re like, well, and you don’t even know where you’re living right now or coming from, then I have to ask, well, wait a minute, probably in the background, we’re going to find some issues. They’re probably going to be living with their parents when they’re 40 years old because they don’t want me to see the eviction that they had on their past residence.

I would say, make sure that you show your properties in person. I also look for that victim mentality. I look for when they are bad-mouthing their current landlord. I know that’s how they’re going to talk about me too. They didn’t return my phone call, they didn’t fix anything. That tells me they might be a pain in the butt tenant. I just don’t have a lot of time to manage like that.

I can move that to property managers and people who want to manage those people, but I’m very selective. They pass my criteria, don’t get me wrong, but I’m very selective because I’m not a full-time landlord. I run a couple of businesses and I have all of my portfolios on the side that I manage myself. I’m a little bit different because I don’t like to manage, to be honest with you. I like to invest, I like to buy, and I like to sell. My favorite thing isn’t to deal with people.

Clint: You guys have a company. It’s called Rent Perfect.

David: Right.

Clint: What does it do?

David: Rent Perfect is really cool. I built it as a landlord. Rent Perfect, when you show your property and someone says, hey, I want it, you get on an app, you push a few buttons, it sends them an online application. They fill out their online application, it gives you their online application, their criminal history, and their credit. It gives you address histories where they’ve lived, not where they tell you they’ve lived, but where they’ve really lived and we give you that information.

You look over the application. You look over all that data. If you like them and you say, hey, this is my next business partner, then you go ahead and push the button and go to the lease process. You fill out your lease, you process your lease, you send it to them, they sign it online, you sign it online, and then we have a move in and move out inspection so you can make sure you document your property, what shape it was in when you give it to them. Then you can go ahead and set rent pay up on our platform and get your rent put right into your bank account every month on the first.

No more waiting for checks in the mail, no more than dropping off checks. It’s a complete platform, but the reality is the core of it is helping you find that right renter. It’s the background, it’s the credit. That’s the core of it. Everything else is just a great perk.

Clint: Let’s assume that I found four potential tenants. How do you take them and put them in your system? I’m not sure how that piece works.

David: Say you and I were having lunch, Clint, and someone called me and said, hey, I want your property. You and I could still have lunch. I’ll look down at my app. I get their email address and their cell phone. It would send them an email and a text inviting them to apply for my property. You and I then would continue with lunch while they go fill out the property.

I’m not meeting them with a paper application. I’m not faxing it. I’m not getting it off of Word, emailing, scanning. I’m not going back and getting it later. I’m not inputting all of your data into the Rent Perfect system. I’m letting them do all of that while I continue to have lunch with you.

Clint: How about their bank statements? How do you obtain those? Is the system set up to collect that from them?

David: Yes, it’s a system set up to collect their IDs. We’re going to get their IDs, we’re going to get their paycheck stubs, we’re going to get their bank statements, and they’re going to upload that all into our system. You have all the data at your hands. You don’t have to go chase anything. Even if they didn’t send something, say they sent six months’ worth of bank statements, you could go back and say, go back into your portal, update, and send in six more months. They can come in later and update that too if they don’t send it to you the first time.

Clint: How long have you guys been doing this?

David: Since 1992. We were around even before the internet came around. I actually owned an eviction company out here in Arizona. I started realizing I had all these evictions at certain apartment communities and I had no evictions at other apartment communities that were right next door to each other. I went in as a young 20-year-old, I’m like, well, wait a minute, I want to get more evictions here.

I soon learned that it was the way they screened their applicants. I said, well, I have the biggest eviction database in Arizona. I started having all these clients come to me and say, hey, run me a credit bureau and run them through your eviction database. That’s how I got into screening years ago long before the internet even was around.

Clint: Wow. All right, if somebody wants to learn more, where should they go?

David: So www.rentperfect.com.

Clint: Great, and I’ll have that in the show notes. Hey, David, thanks for coming on. Are there any parting comments you want to leave?

David: We’re going to put a discount link for your viewers down in your view. We’re going to give them a discount.

Clint: Great.

David: This is the great thing. We didn’t talk about price at all. But just so someone doesn’t have to go hunt for this, this is a $4.95 signup fee, one-time. Not monthly, not annually, just a one-time fee. Then the applicants pay for everything else. They pay $39 for the background, the credit. It doesn’t cost your clients any money at all other than the initial $4.95. It’s like an app fee to set it up.

It’s a no-brainer, but it’s a full landlord suite. We have clients that have 2500 properties on it. Most of our clients have under 20, it’s kind of our core. We work really well for those investors, like I said, with a lot. But most of our clients, 1–20 properties and it works perfectly.

Clint: Nice. I know this is something people are going to be needing going forwards as things get a little crazy out there just trying to find that right renter.

David: The rental pool is going to be tough and everybody gets evicted. I’m telling you, there’s going to be crazy stuff out there. Make sure you find the right renter for you.

Clint: Absolutely. David, thanks for coming on.

David: Thank you so much.

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