Podcast 391: Don't Forget About Renter Due Diligence

In this week’s episode, Podcast Host, Property Manager & Business Owner, Andrew Schultz, chats about the importance of doing due diligence as a landlord, including calling other landlords.

Well, you’ve found the best tenant ever and you’re so excited for them to sign the lease. But, yikes! It’s been ten days and you haven’t heard a peep. Find out what to do!

Last, but not least, one of your elderly tenants called to request a safety bar in your rental. How should you handle the request?

Andrew Schultz: (00:00)
Hey everyone. Welcome back to another episode of the Rent Prep for Landlords podcast. This is episode number 391, and I’m your host, Andrew Schultz. On today’s episode, we’re gonna be talking about elderly tenants making reasonable modification requests, sendings out for signature, and not doing due diligence on your renters. We’ll get to all that right after this.

Voice Over: (00:24)
Welcome to the Rent Prep for Landlords podcast. Now your host, Andrew Schultz.

Andrew Schultz: (00:29)
Before we jump into today’s episode, have you had a chance to join the free Rent Prep for Landlords Facebook group? We’re just over 13,000 members now, which means that we’re on the hunt for 14,000. And if you’re not a member, now is the time to join. If you have a question or a situation that you’ve never encountered or you just need to bounce an idea off a big group of housing providers, this is the place. If you haven’t checked it out yet, do it today over at facebook.com/groups/rentprep. Don’t forget to mention the podcast when answering the questions so we know how you found us.

Voice Over: (00:59)
Water cooler wisdom. Expert advice from real estate pros.

Andrew Schultz: (01:07)
We’re kicking this episode off with our water cooler wisdom segment. We’re gonna ahead and jump right in here. An elderly tenant has requested an added safety grab handle to assist in getting in and out of the shower. Is there a liability involved if I purchase and install it? What if they purchase and I install it at their request? So I’m not an attorney, so I’m not gonna speak to the liability on this. And if that’s your primary concern, I would recommend that you reach out to an attorney that specializes in that area. I do wanna spend some time talking about reasonable accommodations and reasonable modifications, what they are, who has to comply, and I’ll give some examples. First, reasonable accommodations and reasonable modifications are not the same thing. Looking at what the Fair Housing Act has to say about all this, we have some solid definitions and some good examples here.

Andrew Schultz: (01:54)
A reasonable accommodation is a change in a rule, a policy, a practice, or a service so that a person with a disability has an equal opportunity to use and enjoy an apartment or a common space. Examples of this would be things such as allowing a paper application instead of an online application, printing a lease in a larger font, allowing a service animal with no fee, assigning a parking space near the front door so that the tenant has easier access to their vehicle, things along those lines. Reasonable modifications are structural changes made to a premises so that a person with a disability, again, has that same equal opportunity to use and enjoy the apartment or the common spaces. Examples of a reasonable modification would be adding a grab bar to a tenant’s bathroom, installing a different style of fire alarm with a flashing a light to alert a hearing-impaired person, uh, or installing a ramp to make physical access to the building easier.

Andrew Schultz: (02:47)
One is largely policy related and one is mostly physical related. It’s kinda the differentiator between the two. Okay, so who has to comply with all of this? The FHA makes it unlawful to refuse to make, make reasonable accommodations to rules, policies, practices, and services when those accommodations may be necessary to basically give someone with a disability the equal opportunity to enjoy an apartment or a common area. There are very, very few exemptions such as owner-occupied buildings of four or less units, single-family homes rented by the owner without the use of a real estate agent or property manager because agents and property managers are always supposed to be fair housing compliant and housing operated by religious organizations or private clubs that limit occupancy to only their membership. So essentially, if you’re offering housing, I would say plan on being compliant with this. The next section comes right from the HUD website because I wanted to be clear on who pays for what.

Andrew Schultz: (03:42)
And frankly, like with most things government regulated, it’s about as clear as mud housing providers may not require persons with disabilities to pay extra fees or deposits or place any other special conditions or requirements on them as a condition of receiving a reasonable accommodation. Under Section 5 0 4, reasonable accommodations must be provided and paid for by the housing provider unless providing them would be an undue financial or administrative burden or a fundamental alteration to the housing program. Again, under Section 5 0 4 and the ADA public housing agencies or other federally assisted housing providers and state or local government entities are required to provide and pay for structural modifications as reasonable accommodations. Section 5 0 4 specifically states that private landlords, and this is the critical part, receiving Section eight vouchers are not considered a recipient of federal finance simply because they’re receiving Section eight payments. So as a technicality and this is my opinion here, I think that accommodations are largely going to fall to the expense of the tenant, but most of them are likely going to be the burden of the housing provider, and most of those are going to be pretty much low or no cost for the most part.

Andrew Schultz: (04:54)
We’re talking about printing leases a little bit larger and things of that nature. We’re talking about accommodations at this point now back into the direct information from the HUD website under the Fair Housing Act, reasonable modifications. Remember, these are structural changes. Those work differently under the Fair Housing Act, prohibited discrimination includes refusal to permit at the expense of the person with a disability, reasonable modifications of existing properties occupied or to be occupied by such person if those modifications may be necessary to afford that person full enjoyment of the premises. So a request for a reasonable accommodation or modification can be denied if providing the accommodation or modification would impose again, that undue financial or administrative burden on the housing provider. And the determination of an undue financial burden must be made on a case-by-case basis involving various factors. If an undue burden or a fundamental alteration exists, the housing provider is still required to provide any other reasonable accommodation up to the point where it would not result in an undue financial administrative burden.

Andrew Schultz: (06:01)
So here’s where things start to get a little bit tricky under that Section 5 0 4 and the ADA public housing agencies, other federally assisted housing providers, and state local government entities are required to provide and pay for those structural modifications as they’re considered a reasonable accommodation. But again, section 5 0 4 specifically states that private landlords receiving Section eight vouchers are not considered a recipient of federal financial assistance simply because you’re receiving those payments. So if you aren’t receiving federal funding, chances are your reasonable modifications are going to be the responsibility of the tenant. So you can kinda see what I mean here. Basically, all of this is as clear as mud and we’ve done as much as we can to kinda decipher what’s available to us on the HUD website. Anyway, going back to the root of the question, in this instance, it would seem to me at least that this tenant is making a request for a reasonable modification, and I would install those grab bars at the tenant’s expense

Voice Over: (07:00)
Forum quorum, where we scour the internet for ridiculous posts from landlords and tenants.

Andrew Schultz: (07:09)
Moving right along, we’re gonna jump into our forum quorum segment. This one again comes to us via the Rent Prep for Landlords Facebook group. Let’s go ahead and jump right in here. What should you do when the lease has been sent out for signature but it’s not being returned? Do you ignore it and move on? Am I supposed to officially withdraw the offer to sign the lease to avoid any confusion in the future? How long should I keep waiting? And again, this one comes to us via the Rent Prep for Landlord’s Facebook group. So we do digital lease signings out of our office. Essentially, we write up the lease and convert it to a PDF file, which we then upload into our signing software and send it out to the tenants so that they can sign off on their lease. We also get their security deposit in certified funds during this stage.

Andrew Schultz: (07:50)
From the time that we approve an applicant, they have five business days to get us their security deposit, again in certified funds and for everyone to sign off on the lease. We also explained to the applicant that the home is not guaranteed to them until both the deposit is paid and the lease is signed in full. Now, I understand that you can’t do this in every state. Some states do have restrictions such that you have to accept the first applicant through the door that qualifies for the apartment. In other states, you have the right to sort through applications and choose the best qualified. So double-check your state laws on that, make sure you’re in compliance with whatever the requirement is in your state. One of the nice things about doing digital lease signings is that it makes it impossible for a tenant to miss an initial or a signature because you’re specifying before you send the document out exactly where they need to initial and sign.

Andrew Schultz: (08:37)
This is also a nice solution because it gives the tenant the ability to spend up to five days reading that lease. If a tenant calls us and they have a question about the lease, we can’t provide them with any sort of legal advice, but we can tell them that they can take that lease to an attorney and have the attorney review the lease with them, and they have a five-day window in which to do that. They can basically share that lease with anybody that they want to during that five-day period to get the answers that they need in order to feel comfortable. We can also take a look at the time that the tenant opened the lease and how long it took them to sign it once they opened it. So if a tenant opens the lease and immediately signs it without reading anything, we’re gonna know about that and we’re gonna have a conversation with the tenant about the fact that they just signed off on a legal document without actually spending any time to read the legal document that they’re signing off on.

Andrew Schultz: (09:26)
As for security deposits, we require our tenants to pay in certified funds. Applicants have the option of dropping off a certified check or a money order in the Dropbox at our office. They can send us a wire transfer. And through our property management software, we’re also tied in with a service that allows them to make a payment at pretty much any Walmart seven 11 CVS, or Walgreens location across the country. So there’s really no such thing as I didn’t know how to get the funds to you. If you can’t figure it out, then you’re, you’re not trying at that point. Um, or you don’t have the funds available to make your security deposit payment. We don’t accept ACH deposits, personal or business checks or any other non-certified form of payment until the second month of the tendency. The reason for that is if someone gives you a personal check for their security deposit and that check bounces a week after they move in, you have to go through the full eviction process to get that person back outta your place.

Andrew Schultz: (10:21)
So making sure that you get certified funds upfront so that at least you know that your moving-in funds are guaranteed is pretty important to the entire process. My strong recommendation is that if you live in a state that does not require you to accept the first qualified applicant, continue to show your apartment until you have a signed lease and a security deposit. Don’t waste time taking your place off-market once you’ve offered it to someone until they’ve actually committed to it. By signing that lease and getting the security deposit into you, the time that you lose marketing and showing the home while you’re waiting for someone to sign a lease could be the difference between getting a new tenant and not getting a new tenant. If you’re taking the apartment off the market for five days every time somebody qualifies, it could be a very, very long road if you have a couple of people that don’t wind up signing.

Andrew Schultz: (11:06)
Now, I wanted to spend a minute and talk about a couple of different options for digital signings because that’s becoming more and more popular. There are a few companies out there that offer the service, and a lot of the property management software are starting to integrate it natively. But two companies that I’ve had good success with in the past are DocuSign, which honestly they’re starting to get more expensive, but they do have a free trial. And the other one that I like quite a bit is Panda Doc. Again, they do have a free trial. I think it’s a 14 day free trial, and then there’s a charge to it. But if you’re not doing a huge volume of leases, you probably don’t necessarily need to have, you know, a paid option or something like that. You could probably get by with one of the free options and just use the uh, the free trial.

Andrew Schultz: (11:47)
We also have used a service called the Sign in the past that’s actually tied right in with our MLS software. Honestly, I don’t know as though I would recommend that one versus the other two out there. It’s cost-prohibitive, number one. And honestly, I think that Panda Doc and DocuSign do a much better job overall. Essentially all of them are gonna provide the same service. They’re gonna give you the ability to upload a PDF so that you could send it out for digital signature to your tenants. And the nice thing is, as I’d mentioned, you get to specify where the tenants need to sign an initial so that things don’t get missed when you go ahead and send it out. And the, honestly, my favorite feature is knowing how long it takes someone to look through the lease and sign it. It’s ultimately up to them if they choose to put their name on a legal document that they haven’t read, but at least you’re armed with a knowledge as to whether or not that tenant has any clue as to what’s actually in their lease or not.

Andrew Schultz: (12:35)
But ultimately, at the five-day point, if we don’t have the security deposit in the first month’s rent, we’re just gonna continue moving forward and that person is no longer gonna be offered the apartment We, we basically send them an email at that point or give them a phone call and say, Hey, we haven’t heard from you. We’re assuming that you’re no longer interested. If you are still interested, let us know. But more than likely at that point, if they’ve been offered the apartment and then didn’t sign the lease and get, didn’t get their security deposit in, they’re probably not gonna be offered that apartment again because it’s a pretty good indicator that we’re going to have issues with them as a tenant moving forward.

Voice Over: (13:09)
Feed on the street, Real Stories from Real Property Managers.

Andrew Schultz: (13:18)
Our final segment in this episode of the podcast will be our feet on the street segment. This one, it comes to us via Reddit. Actually, this one does not come from the Rent for Landlord’s Facebook group. This is an interesting one on tenant screening. Let’s go ahead and jump in here. I’ve been booting egregious non-payers and troublemakers out left and right. They’ve all found new places to live. Not a single landlord is called for references for these people. I can save you so much pain, but you never called the applicant’s previous landlord. You haven’t looked up their history, you haven’t checked their credit, you haven’t done a criminal records check, you haven’t checked for evictions at your local tenancy body. Do you think that you’re taking on a new lessee? You’re taking on someone who’s going to destroy your place, occupy it for months without paying, ruin your common areas and be horrible neighbors?

Andrew Schultz: (14:01)
Do not invite pain into your life. Do your homework and investigate. And again, this one comes via Reddit, but it’s pretty near and dear to us as obviously, we talk quite a bit about tenant screening on this podcast. And this is a classic example of what I mean when I talk about people not doing proper tenant screening. So I read into this thread a little bit more, and essentially the person who posted this originally, they purchased a building with a bunch of bad tenants in it, and they’re slowly turning the building around by getting rid of the bad tenants and RET to good tenants. And they’re legitimately shocked that they’re just not getting landlord reference calls from anybody. They know that they’re throwing these people out. They know that these people are gonna live somewhere and they’re just shocked that they’re not getting any sort of calls for landlord references and things like that.

Andrew Schultz: (14:48)
Now, the reason that this landlord is now getting good tenants is because they have a strong set of written selection criteria and they’re following those criteria every single time. Obviously, as part of the screening process for this landlord, they’re doing landlord verification here at On Buffalo. We’ve stopped doing landlord verification for the most part, and I’m going to explain why a landlord verification is only as good as the information that you’re getting from that landlord. And essentially, a lot of the information that you’re receiving from that landlord is going to be subjective information. Were they a good tenant? Did they keep the place clean? Would you rent to them? Again, all three of those are subjective questions. Everyone has different definitions of good tenant. Everyone has different definitions of clean, and everyone is a little bit different when it comes to whether or not they’re going to rent to someone again.

Andrew Schultz: (15:37)
So essentially you’re making decisions based on someone else’s opinion. I like to make my decisions based on fact, and that’s why we’ve stopped doing tenant verifications. Now, I can already hear some of you screaming, Oh my God, you’re not doing landlord verifications. You’re leaving your clients at risk on every tenant placement. The fact of the matter is that no, we’re really not. Instead of doing a landlord verification, we’ve taken to requiring our tenants to provide us or our applicants to provide us with proof that they’ve paid their rent on time for the past 12 months. They could show us bank statements with canceled checks. They could show us money order receipts and online ledger, something along those lines. But if they’re paying their rent in cash and they’re not getting a receipt from their landlord, they’re gonna find themselves in a bit of a pickle at that point.

Andrew Schultz: (16:21)
The only way that we can verify the rent payments is for them to get a notarized letter from their landlord, which we then compared the tax record of the property to verify the property ownership. It gets real sketchy trying to verify people’s rental history once they are a cash-paying tenant and there’s not a good trail showing the money coming out of a bank account and being deposited with a landlord. But ultimately, we don’t accept handwritten receipts unless we can tie it back to something that we can verify. If I can see a bank statement with a consistent cash withdrawals that match up to the receipts, that’s something that I can tie back to and it makes sense. So, okay, we’ve stopped doing landlord verifications. What’s our success rate? Since we’ve stopped doing them, Only one of our tenants verified using timely rent payments have defaulted on their lease or been evicted.

Andrew Schultz: (17:07)
We’ve been doing this for about a year now, and I can’t tell you exactly the number of lease-up that we’ve completed, but I can tell you that our eviction percentage is low single digits. It’s something that is working for us the way that we set up our tenant screening currently. The bottom line is this landlord is right. Tenant screening is critical, and as technology improves, so do the scammers. Doing your due diligence is critical to having a successful tenant placement. But also understand that all tenant screening is a snapshot in time, and that tenant could literally lose their job the first week of the tenancy. So just because you screened a tenant and everything checked out great on the day of the screening, it’s not a guarantee that that tenant’s gonna be able to perform. It’s not a guarantee that they’re going to be a great tenant, but what it does guarantee is that you’ve done your due diligence and that you’ve given yourself the best possible opportunity to have a good tenant, to have a good and to not have the of concerns that this landlord has had with their tenants. Good luck and good screening.

Andrew Schultz: (18:08)
Do you know what it takes to rent to students and Rent Prep’s latest guide will review the pros and cons of running to college students how to run a background check on these renters and more? Check it out today over at rentprep.com/blog.

Andrew Schultz: (18:22)
That pretty much wraps up this episode of the Rent Prep for Landlords podcast. Thank you all so much for listening. We truly do appreciate it. Our goal with the podcast is to help as many people as possible make educated decisions when it comes to real estate, and you can help us to reach our goal. If you heard something in this week’s episode or any of our other episodes that will help someone you know, please do us a favor and share it with them. If you’re looking to get in contact with me, I can be reached over at whatsdrewupto.com. From there, you’ll find links to everything going on with me over at Own Buffalo, as well as the other projects that we’re working on. Grab a copy of our free deal analysis tool today over at what’s true up to.com. There’s no obligation, and it comes with a companion video showing you how to use it.

Andrew Schultz: (19:01)
If you’re looking Fort Tier tenant screening services, head on over to rentprep.com. There are multiple products to choose from, including a tenant-paid option, and if you’re over 50 doors, ask about the enterprise-level programs and pricing. I’ve been an enterprise user of Rent Prep for years now, and it’s definitely changed the way that we screen our tenants. Check that out today over at rentprep.com. Again, thank you all so much for listening. We’ll be back in two weeks with an all-new episode you won’t wanna miss. Until then, I’m Andrew Schultz with ownbuffalo.com for rentprep.com, and we’ll talk to you soon.

Subscribe To Our Podcast

Our podcast has grown over the years because of listeners like yourself. One way you can help us grow further is by leaving us a review of our podcast. It will only take a minute and you can find detailed instructions by clicking here.

Resources Mentioned on this Episode: