TENANT SCREENING TRENDS

RentGrow, a national tenant screening company sends out monthly newsletters and reports trends they are seeing. Although they are reporting national trends, I have found them to be fairly relevant to the Boise market and what we at First Rate Property Management have been seeing. Click here to view RentGrow’s entire May newsletter.

Bankruptcy

We have seen an increase in bankruptcies as well. First Rate Property Management will not accept any tenant with an open bankruptcy. We did however, make changes to our rental criteria to make exceptions for would-be tenants who have lost their home due to a foreclosure or filed bankruptcy due to a foreclosure. Depending on the circumstance, this can be difficult to show, but we do make the effort.

Thin to no Credit

About two years ago we changed how we looked at credit reports. We use to look and analyze the number of accounts and count and score the number of late pays, etc. Now we simply input the credit score into our decision model. So we are not penalizing our applicants for thin credit, as long as it’s good. When things go bad, we do review our screening criteria and I would have to agree, those with very little credit do pose a risk. Since the Boise rental market appears to be improving, this is probably one the first areas that we will change to tighten our rental criteria.

We have noticed a lot of bad credit. As I have said before, I don’t know if these bad credit scores are a sign of the times or an indicator of how unimportant credit is to the younger generation. It’s been amazing to see.

Identity Theft

This month’s RentGrow newsletter didn’t address identity theft, but this too is a trend we’ve been seeing. More and more applicants are blaming their poor credit due to identity theft. We are willing to work with tenants who have bad credit due to identity theft, but the documentation has to be impeccable, so we are actually unable to help very many applicants in this situation. However, it has opened my eyes to the damage a stolen identity can cause and how much time and frustration it appears to take to get it corrected. It’s devastating.

Medical Debt

Many years ago we actually forgave applicants for medical debt. However, after being burned a couple of times, we no longer allow it. The problem is that the creditor can and probably will at some point, get a judgment and garnish wages. The garnishment could be enough where they no longer can afford to pay rent. We’ve seen this scenario enough times that we realize this is a risk we no longer wanted to take.

Speaking of medical bills, I’ve been blessed to be relatively healthy all my life. Earlier this year I had to run some tests, so I’ve been dealing with medical bills and insurance. What a screwed up system. For one, the costs are absolutely ridiculous. Two, their billing is horrible. And three, between the insurance company and the service providers, it takes months to get it all sorted out. Oh, thank God the government is taking it over. I’m sure it will be much easier then. Right?

FRPM Widget

Soon, we will actually have a webpage that our applicants can go to and see where FRPM is at on their application. So it will show the application submitted, when it passes or is denied for credit, criminal background check, prior landlord references, and employment/income verification. Additionally, it will list any documents that we still need to compete their application such as payroll stubs and taxes. We are hoping that they will be able to upload these documents to us. This will eliminate the multiple phone calls we get from prospective tenants looking for an update on their application and it will drive more traffic to our website, which will improve our search engine optimization.

Summary

Tenant screening is ever changing. As new risks and trends are identified, the Landlord’s screening criteria probably needs to be tweaked too. Obviously market conditions have a role. If you have five applications per property, it’s time to tighten up your criteria. When you are denying a majority of your applications, like we were last year, it’s probably time to loosen up the criteria a bit.

Boise Rental Market

Below is a graph showing First Rate Property Management’s 2010 vacancy rate. As you can see, our vacancy is slowly increasing. However, I believe the rental market is improving. Our call volume, showings, and applications are all improving. So why is the vacancy rate increasing? The school year is almost complete and this is when tenants seem to make their moves. So even though our vacancy is increasing ever so slightly, I do see the rental market improving. We are increasing rents when possible.

Sales Market

There is just a ton of sales activity going on. I think the excess in inventory has pretty much been swallowed. However, the volume of bank owned and short sale properties is so prevalent, it continues to hurt value overall. Over the past year, I have mostly been selling 4 plexes. Mostly because as the prices drop, the cash performance improves. Really, to me a four plex purchase right now is a slam dunk good investment, if you are willing to hold for a minimum of a few years. The data is showing improvement in this market, but with the majority of recent activity being short sales and foreclosures, I don’t see values increasing yet. I’ll let you know when we do. Meanwhile, we’ll just continue to focus on buying these properties at these great prices while we can.

Rental Market 5/10/2010

First Rate Property Management’s vacancy rate continues to be low and I am predicting that the Boise area’s rental market will continue to improve. With rents and vacancy improving, we should start seeing other rental attributes improving as well. It’s a nice trend to be seeing.

Investment Market:

Distress sells continue to dominate the 4 plex and duplex sales and the main reason for values to continue to decline. However, with the interest rates starting what I believe to be an upward trend, I’m thinking NOW very well may represent the best time to buy. If you are looking to buy please take a look at our current listed investment properties. For those of you who I have been working with and trying to find the absolute best deal around, be ready for me to be pushing to jump on some properties as they come available. I just fear that the interest rate increases will hurt cash flow more than the potential of actually being able to buy something later at a bit lower price.

GOOGLE Reviews

When you do a search for property management or rentals in Boise, often the first thing you see is our GOOGLE Local Listing. This listing allows anyone to post a review. Over the past few years, we have had past and disgruntled tenants post negative reviews. There are always two sides to every story, but I c an tell you that in all these cases, the tenants were upset with the enforcement of their rental agreement and the fact that we charged them for tenant related cleaning and damages. Since prospective tenants may read these reviews and chose not to rent from First Rate Property Management, we are requesting that our owners post positive reviews written in a way that a tenant could relate to. To post a positive review, please click on here. With positive reviews I am hoping that it helps us fill our vacancies.

On-Line Statements May Change Again:

When we went to online statements years ago, our clients loved the 24/7 access, but the actual statements left a lot to be desired. Our online statements were created through the partnership of our management software, PROMAS and our web host, Homerentals.net. My requests to improve the online statements were ignored. To meet the needs of our clients, First Rate Property Management went out and hired the developers of RentalHomePros to create a new website that interfaced with our management software. This was no easy feat, nor was it cheap, but the end result seemed to make our clients happy. Well, our software manufacturer evidently didn’t like us going around them so they are making changes so that we no longer can do that on our own. We know that changes are on the horizon, we just don’t know how much. I just wanted to apologize upfront.

Additionally, we may take this opportunity to go ahead and change software. Its something I’ve been wanting to do for many years now. Two other companies actually contacted me years ago and asked me everything I didn’t like about my current system and what I wanted to see in a new system and they actual implemented all of it. Even now, they still contact me asking for recommendations. Plus we still have concerns with our current statements. For example, if we create a work order and put an estimate cost of $250 for the repair, the system will automatically hold that money back from the owner. There is no entry on the G/L or statement and no explanation; its just held back. So we are currently testing several new systems. Trust me, when we make the change, it will be for the better. If you would like to see a demo of these other systems and what the reports look like, let me know, your input would be appreciated.

Tony’s Travels:

Well, I returned for a few days and now head to Oahu to teach Tenancy, then to Dallas for the SC NARPM Conference, and then wrap up my May travel in Spokane Washington for the NARPM NW Regional Conference. The office is doing very good in my absence.