Podcast Host, Andrew Schultz, chats about screening and leasing to couples. Should you just put one person on the lease? What if one applicant’s tenant score is significantly higher than the other applicant?
Also in this episode, Andrew discusses the definition of “normal wear and tear,” and how to make it clear to tenants what is allowed and what is not.
Last, but not least, what are the best practices for move-in and move-out inspections? Should you conduct your inspections with tenants or no? Find out in our latest podcast.
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Andrew Schultz: (00:00)
Hey everyone, welcome back to another episode of the Rent Prep for Landlords podcast. This is episode number 344, and I’m your host, Andrew Schultz. On today’s episode, we’re going to be talking about screening and leasing to non-related applicants, the definition of normal wear and tear. And we’re going to talk about move in, move out inspections. We’ll get to all that right after this.
Voice Over: (00:22)
Welcome to the Rent Prep for Landlords podcast. Now your host Andrew Schultz.
Andrew Schultz: (00:27)
Before we jump into today’s episode, don’t forget to check out the Rent Prep for Landlords Facebook group. It’s a great free resource for you to network with housing providers from around the country. And if you have a question or situation that you’ve never dealt with, chances are someone in the group has been there before and can lend a helping hand. As of this recording. We’re at over 11,850 members, and we need your help and the push to 12,000. Check it out today over at facebook.com/groups/rentprep. Don’t forget to mention the podcast when you answer the onboarding questions. So we know how you found us
Voice Over: (00:57)
Water cooler wisdom, expert advice from real estate pros.
Andrew Schultz: (01:05)
Let’s jump right into today’s water cooler wisdom. This one comes to us via the Rent Prep for Landlords Facebook group. And we’re talking with a landlord today. Who’s having some difficulty in screening and leasing his apartment to non-related applicants. Let’s jump right in two young people have applied for my rental, a couple aged 24 and 26, who planned to live together. Person. One has stellar credit scores and references their income. As a nurse can easily cover the rent person. Two has a terrible credit history and an eviction from five years ago when they were 21 person, two claims that they moved away before the eviction and now has a stable job. Would it be best to just make a lease with person one? Are there any advantages to having both people on the lease and would you rent to this couple, thank you in advance?
Andrew Schultz: (01:47)
So I’m going to start by pulling a little bit from our own screening criteria here, and I’ll let you know right up front that we expect every person who plans on living in an apartment over the age of 18 to fill out an application in full and go through the full screening process. And that person also needs to be lamed as a responsible party on the lease for people who are under the age of 18, we actually have them on the lease as well, just as an additional, uh, an additional resident or something along those lines, not necessarily a responsible party, but for anyone who’s over the age of 18, who’s going to be living in the home. We want to screen those people full credit and background checks, everything that we would normally do on any other application to make sure that we’d have as much information as possible when we go to make our decisions.
Andrew Schultz: (02:31)
I think it also makes sense to mention here, the fact that you need to ensure that whatever screening criteria that you are using, you’re using it consistently across to everybody that you screen as well as make sure that whatever the criteria are that you are using are compliant with whatever the state and federal laws are in your area. So all that being said, going back to my original point, anybody over the age of 18 should be filling out an application and be going through that exact same screening process every single time. And do all of the steps of your verification before you come to sort of a conclusion as to what you want to do, make sure you have all of the information that you have access to before you start trying to make decisions. So specifically you had mentioned three different criteria. So I wanted to talk about each one of those criteria individually.
Andrew Schultz: (03:12)
Um, you mentioned that person one has great income person. Two has a stable job now. So it doesn’t sound like income is the concern here. Um, you mentioned that person one has great stellar credit and person two has terrible credit. Typically what we do in a situation like that is we average the two credit scores or however many applicants are. We would average all of those credit scores together to give us an average credit score. And that’s what we would look at when we’re screening an application. If somebody comes in and does not have a credit score, um, typically we would assign them a credit score of 500. That’s just the way our policy is written. As far as what’s an acceptable credit score. That’s probably going to be market dependent here in the Buffalo market. We typically look for at least a 600 credit score.
Andrew Schultz: (03:53)
I know some people prefer a little bit higher, six 25, six 50. Some people go as high as 700. If they have a higher-end asset, things like that, that’s a determination that you have to make based on what your market looks like. But here in Buffalo, we’re comfortable at that 600 credit score. One of the other criteria that you had mentioned was the eviction from five years ago on person two’s history. So here in the state of New York, we’re no longer allowed to use eviction as a criteria when we’re making our selection when it comes to tenant selection. So that’s not something that we can consider here. Um, that was actually a change that occurred in 2019 when they passed the HSTA here in the state of New York. But what I can tell you is that prior to us changing that criteria, we were looking for no eviction within the last seven years.
Andrew Schultz: (04:39)
That was the criteria that we were using. So any eviction within the last seven years would have been an automatic decline for us. So that was our criteria back when we could still use eviction as one of the criteria that we looked at when we were doing a tenant screening, unfortunately, that’s not a criteria that we’re allowed to use any longer. Uh, and I think that you’re going to see that becoming more and more common throughout the United States as time goes on. Another question that was asked is, would it be best to just make a lease with person one? And the answer to that question, at least in my opinion is a no. Um, and the reason I say that is because our leases indicate that both tenants would be jointly and severally liable for the rent. Essentially all parties are equally responsible, so it’s not person one’s rent and person two’s rent.
Andrew Schultz: (05:21)
It’s the people’s rent if you will. Um, and I think that that is critical in making sure that you have enforceability of the lease. So in this instance, let’s say a person to just up and disappears. You still have person one fully responsible for the entirety of the rent on that lease. And it goes the other way as well. If person one realizes that they don’t want to be with person two anymore and decides to split, you know, both of those parties are still responsible to that lease. So it’s important to make sure that your lease has that severally, excuse me, jointly and severally liable clause, speak to your attorney about getting that edit into your lease if it’s not already there, but that is certainly something that I would recommend having an, any sort of a residential lease. So the final question here was, would you rent to this couple?
Andrew Schultz: (06:04)
And I honestly don’t feel as though I have enough information to make a determination. We don’t really know what the incomes are. There’s no mention here of what the actual credit scores are. There’s no mention of the landlord references whether or not a landlord reference was obtained for either one of these individuals. So I don’t feel like I have enough information to decide whether or not I would rent to this couple. But one thing that I would want to mention here is there’s one critical piece of information here that would sway my decision-making in the way that I screen. And that would be the access to the eviction data. Um, it’s interesting that more and more States are pulling eviction data away from us. As we try to make decisions when it comes to tenant screening, I think that that’s going to create a even larger set of headaches down the road at some point.
Andrew Schultz: (06:46)
Um, but it is unfortunate when you are used to screening in a certain capacity and, uh, have a certain set of criteria set up. And then from no fault of your own via basically outside interference, you’re told you can no longer use the screening criteria that you feel most comfortable with. It certainly leads to a change in the way that you have to operate your business. So lots of things to keep in mind whenever you’re doing tenant screening, just make sure that you’re following that same procedure every single time and make sure that the procedure that you are following is compliant with state and federal housing guidelines, best of luck. And I hope that you find a new tenant very, very soon. Our next water cooler wisdom is all about normal wear and tear versus this tenant caused damages. This one comes to us via the real estate investing subreddit firstname.lastname@example.org.
Andrew Schultz: (07:30)
Let’s jump right in. We purchased our first investment property in October, and it was built in 1982 on Saturday. Our tenant called us to say that the toilet and the primary bathroom was leaking. We got a plumber to go out yesterday and my husband met him at the house. Apparently, our tenants put that blue stuff in the tank of the toilet, which ended up eating the gaskets or bolts according to the plumber, which then caused the leak. And we will have to replace the toilet. My husband pointed out that we should deduct this from their deposit when the time comes because it isn’t considered normal wear and tear. So our question for you seasoned landlords is would you deduct this from the deposit or just pay for it since it was likely going to need to be replaced at some point anyway. So I’m going to start here by saying, I think that you need to question your plumber a little bit further.
Andrew Schultz: (08:12)
Uh, and the reason I say that is because I don’t see any reason to replace this toilet when you can easily get a kit from Home Depot or Lowe’s, or any plumbing supply company to replace the gasket between the toilet bowl and the toilet tank, as well as the bolts, all that stuff comes as a kit. I don’t think you need to replace your toilet here. To be honest with you, I would be asking your plumber some serious questions beyond that. Um, this is a normal wear and tear type of a situation. In my opinion, I don’t see any evidence from what you’ve presented here, that the tenant caused any of this damage, other than by putting one of those blue tablets in the toilet to keep the toilet clean, which you would think that you would want the tenant to do. I’ve never heard of those tablets causing damage to any toilet.
Andrew Schultz: (08:53)
Um, and I would think that at point we would have experienced that issue by now given the number of units and the number of toilets that we have. I would think that we would have heard something like this by now, but I’ve never once heard of those, uh, tablets eating gaskets or causing damage to bolts in such a capacity that it would damage a toilet. I would have to think that if they were so strong as to cause damage to rubber and steel parts, that they would also be pretty caustic when it came to people, using them and touching them, and being near them. So I would think that that’s probably a non-issue beyond the fact that I think that your plumber might have some, uh, some ulterior motives and trying to get you to put a little bit, uh, you know, put a new toilet in or whatever the case may be.
Andrew Schultz: (09:33)
Um, I think that this is a normal wear and tear scenario. I went ahead and pulled a definition of what wear and tear is, and it’s actually defined as the expected deterioration of something via normal use. And it doesn’t necessarily mean a house, an apartment or whatever, you know, I, your pants will deteriorate as you wear them. You’re going to wear out, you know, the knee or whatever your shoes will deteriorate over the time that you own them. You’re going to snap a shoe, lace something along those lines. You know, a wear and tear is not something that’s limited just to the real estate industry, but it does seem to get a ton of discussion here because there’s always some argument as to what does constitute wear and tear versus what constitutes actual damages. Uh, some examples of wear and tear would be dirty grout, uh, a loose door handle.
Andrew Schultz: (10:19)
Recopying a bathtub. Um, you know, the, the finish wearing off of a faucet, something like that. Those would all be in line with what would be considered normal wear and tear the expected deterioration of something via normal use. Now let’s compare that to damage damages would be something like a hole gets punched through a door. There’s a burn mark on the kitchen counter from setting a hot pot down on it. A window gets broken. Um, the shelf in the refrigerator is broken something along those lines. Those would be considered damages in my eyes. I’ve never encountered a scenario where, you know, a countertop just randomly develops a bird Mark out on it, without someone setting a hot pot on top of it. Like that’s a, that’s a damage thing. That’s not what I would consider to be normal wear and tear. The damage can be accidental.
Andrew Schultz: (11:04)
Accidental damage happens all the time, but it doesn’t mean that the tenant is not responsible for taking care of the things they damaged, even if it was an accident, you know, and that’s, it’s, it happens. Sometimes things just break. The responsible thing to do is pay to get the thing fixed, um, pretty straight forward. I know that sometimes tenants don’t necessarily see it that way, but realistically, I think in most instances, the difference between wear and tear and damage can be pretty easily explained in about 95% of instances. Something else that’s very much worth a mention here is the warranty of habitability in most States. And certainly, in the state of New York, the landlord has a warranty of habitability, a responsibility to maintain the home, you know, in the condition that the home is in, essentially when the tenant moves into it, normal wear and tear expected.
Andrew Schultz: (11:49)
So in this particular instance, we’re talking about a toilet. This is a and tear repair in my eyes. It doesn’t seem to me that be a tenant caused issue. This is one of those things that your warranty of habitability would kick in. You already sent the plumber out. You’ve already got the issue taken care of by the sounds of things, but that’s why the warranty of habitability exists is to make sure that this is a two-way street and not just a one-way where the landlord is responsible for nothing. And the tenant is responsible for everything. The discussion on this, segment’s actually going to lend itself very naturally to our next segment in pharm quorum, where we’re going to be talking about move-in and move-out inspections. Let’s hop on over there.
Voice Over: (12:29)
Forum quorum, where we scour the internet for ridiculous posts from landlords and tenants.
Andrew Schultz: (12:37)
Our forum quorum today deals with move out inspections, which gives us an opportunity to talk about the move in, move out process. Let’s jump right in. This one comes to us via the homeowner subreddit over at reddit.com. And it reads as follows. I’ve read some conflicting information. Some places say it’s better not to meet the tenants for move-out inspection, but rather wait a few days and do a more thorough walkthrough by yourself. So you don’t have the tenants speeding you up and in case they covered up things or hid them if that’s the case, and you do notice a problem, how do you prove it was caused by them? Suppose I collect the keys and three days later, I see a tiny hole in the drywall or a corner of the carpet is stained or notice some appliances broken. I may have a photo, but how does that prove any damage?
Andrew Schultz: (13:19)
Also, we can do a superficial physical inspection, but is it worth it to get a professional contractor to do a more thorough inspection? The same as we might have done when we bought the place? I think I’m going to start by answering that question and say, no, I don’t think you need to have a home inspector come through and do an inspection every time you have a tenant, do a move in or move out. I think that that is a colossal waste of money. Um, I don’t think that that’s necessary in the slightest. I think your better option would be to learn how to properly document a move in and move out and make sure that you’re doing it in compliance with whatever your state guidelines are. That’s going to go a lot further in helping you than having a professional come in in this instance and spending, I mean, a home inspection here in Western New York is I think a minimum of four to four 50.
Andrew Schultz: (14:02)
So you’re talking a pretty substantial sum of cash every time somebody wants to move in or move out of one of your apartments. If you’re having a professional come in and do it. And I think it’s huge overkill. I’m in probably 95% of instances. So that’s my thought on that. I wouldn’t bring an inspector in, but I think that you can be well-served just by learning the process of how to do a good move in and move out inspection before we go too much deeper. I do want to mention that this is one of those sets of circumstances, like many things where you should be checking your state laws. As most States will dictate the timeframes for a security deposit refund. Some States will even dictate how you have to do your walkthrough, whether the tenant has to be present, or if the tenant requests to be present, then you have to accommodate whatever the case may be.
Andrew Schultz: (14:43)
Just check to make sure that you’re doing whatever you have to do in your state to make sure that you are compliant. And some States that like I had mentioned will mandate that you, the walkthrough with the tenant if you’re in a state where that’s not mandatory, my personal preference is always to do a solo walk after the tenant has moved out. So you have all the time in the world to look everything over. When we do our inspections, we’re checking inside and outside of cabinets inside and outside of appliances, making sure that the appliances run the dishwasher, sprays water, all four burners on the stove work, the oven works, the broiler works. You know the ice and water maker works in the freezer. If it’s equipped with one, we’re checking everything because we want to make sure that we’re as thorough as possible when we do those security deposit dispositions, because we want to make sure that the tenant is being charged for whatever it’s appropriate for the tenant to be charged for.
Andrew Schultz: (15:31)
We don’t think that the landlord should have to eat the expense of things that were damaged by the tenant. Obviously, we just talked about normal wear and tear versus what actually constitutes damage. And one of the things that’s going to help you make those determinations so much easier is having a good set of move-in and move-out photos that you can compare and contrast so that you can truly look at something and say, no, this was damaged or no, this is definitely a wear and tear type of scenario. So from a 37,000-foot view of things, the way that I would handle any sort of a move in or move out would basically be to make sure that I have excellent photo documentation. And like I’d said, make sure that it’s detailed inside and outside of cabinets inside and outside of appliances inside and outside of the property, if you’re renting a single-family or something like that, where there’s, you know, um, exterior maintenance that needs to be taken care of by the tenant, whatever the case may be, make sure that you have a really good set of photos and make sure that you have that tenant sign off on some kind of a movement inspection when they move in.
Andrew Schultz: (16:28)
There’s different softwares out there. You can do it pen and paper, if you want to, it’s all up to you and where you are at in your business, but there are a lot of options to make sure that you have this data available to you. When you go to do your move in so that you have that same data. When you go to do your move out, that’s going to be the easiest way to compare and contrast. Like I had mentioned before, and the reason that we’re looking at this from 37,000 feet is because I wanted to push you over to two different resources that rent prep has available. They’re actually top tier resources. In my opinion, like they’re very well thought out and put together. The first is a blog article over at rentprep.com slash blog, which actually talks more about the move-in move-out inspection process.
Andrew Schultz: (17:08)
And it includes a step-by-step set of instructions on how to handle both scenarios, move in or move out. There’s even a checklist that you can print out to help with the inspections. It’s a super detailed article. You can find that over at rentprep.com slash blog, you can read that post to download the checklist today. The other resource that I wanted to point you to is the Rent Prep, YouTube page, youtube.com/rentprep. From there. If you do a search for move-in inspection, you’ll find a four-part video series, um, that was shot back maybe two years ago. I believe that really walks you through the entire process of how to do a movement inspection or a move out inspection, how to document those damages, um, really like nitty-gritty level stuff so that you can get down and dirty with the process, figure out how you want to approach it, build the process that works best for you and your scenario and, uh, and move forward from there.
Andrew Schultz: (17:57)
One thing that I will mention is that some people have been advocating for just shooting a video walkthrough of your property. I don’t find video walkthroughs to be detailed enough when doing a property inspection. And the reason I say that is because often you miss the fine details that a photo would pick up. Um, in addition to that many courts are not set up in a capacity where you can pull a video up on a big screen and show it in the middle of a courtroom to show damages before and after versus being able to print off a set of photos and just hand a copy to the judge at the time of the hearing. I wouldn’t go so far as to say it’s a bad idea to do a video walkthrough. I think that anytime that you can add more information to your resources is a great idea, especially because that’s information that you’ll be able to reference for years and years and years down the road.
Andrew Schultz: (18:42)
I just don’t think it’s necessarily the best when it comes to going through the process of actually logging what an apartment looks like before a tenant moves into it. So that pretty much wraps up this week’s 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 that goal. If you heard anything in this week’s episode or any other episode 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 what’s drew up to.com from there, you’ll find links to everything going on with me over at own Buffalo, as well as other projects that we’re working on.
Andrew Schultz: (19:25)
There’s also a contact form over there where you can send me a message directly. If you’re looking for top tier tenant screening services, head on over to rentprep.com, there are multiple products to choose from including tenant paid options. 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. A bit of a programming note. We’re actually going to be moving to a bi-weekly production schedule with the podcast for at least the first little part of 2021 here. While we try a couple of things out. In addition to that, I had mentioned in our last episode that we are going to be looking at launching an interview series. We’re not entirely certain as to when the first one will come out, but we are very excited to be able to bring that to you. So all of that being said, there will not be a new episode of the Rent Prep for Landlords podcast next week, but the following week, we will be back with an all-new episode that you won’t want to miss until then I’m Andrew Schultz with ownedbuffalo.com for rentprep.com. And we’ll talk to you again real soon.