In this episode, I interview Stephen Michael White. Stephen is the founder and CEO of RentPrep, a resource site for landlords and real estate investors. The site’s core product is a unique tenant background check solution that has protected over 10,000 landlords since 2007.
I chose to conduct this interview a little bit differently. Because I am not an experienced landlord, I chose to change up the questions that I typically ask my real estate experts, and ask questions in a more conversational way. As someone very interested in getting more into rental real estate, I just fired questions that I have as a new and aspiring buy-and-hold investor. I think that by doing so I was better able to serve new and aspiring landlords, because a lot of my questions should be the same ones that they themselves would have if they had a chance to sit down and speak to Stephen.
After leaving the military, Stephen started and sold a few companies, until he eventually found himself doing background checks primarily for larger companies. These companies were using the background checks for hiring purposes. Eventually, his company found itself working with a few local apartment building owners. The business grew organically out of these relationships with smaller business owners.
Stephen realized that there was a hole in the market, and that small real estate investors didn’t have access, or at least readily available access, to companies that actually perform background checks. At the time, most products available to small business owners like real estate investors, were instantaneous reports. In other words, you type in someone’s information and some automated system spits out information on that person. Stephen realized that there was a need for background checks done by actual human beings, which would be more effective than the automated systems.
When I asked Stephen how really successful landlords find good tenants, he had a couple of great tips. Number one: good and successful landlords always have a large pool of potential tenants to choose from. They do not just look at one or two applications, but realize that the more applicants they have to consider, the better the tenant that they will end up with. Number two: adopt a no-blank-spaces approach to your application. This means that the entire application needs to be filled out completely. Anything you ask on the application is important and the potential renter should fill it out. If they cannot, or simply refuse to answer some of the questions, that is a huge red flag and you probably should not consider them.
Another really good point that Stephen makes is that good renters are looking for good landlords. The way you present your rental property in your advertisements, whether through post lets, or Craigslist, or any other way that you make it known you have a rental available, if it is well put together and organized, you will attract better tenants.
When I asked Stephen how many applications you should be looking at prior to renting to someone, he was very quick to answer and very definitive. He said ten seems like the magic number. That’s just what most successful landlords say.
A huge tip that Stephen gives during this interview is that you want to be extremely wary of any potential tenant who refuses to give their Social Security Number. They might have a reason such as having their identity stolen in the past, but if you are presenting yourself in a professional manner and are organized, they really should have no issue giving that information.
Something that surprised me quite a bit was the fact that Stephen says renters do not necessarily have a problem with their income or their credit. I was always under the assumption people who have good credit and good income would buy a house and not consider being a renter. Stephen says that this is absolutely not the case, and in this transient world we live in many people rent because their job is moving them, or because of some other personal consideration that makes owning a home less attractive.
Stephen also recommends that a renter’s income is equal to three times the amount of the rent you are charging. I think this is important to understand so that you’re not renting to someone whose income is going to be too tight and you will constantly be dealing with problems. That’s not to say that someone with good income will not have issues paying the rent, but at least you eliminate the fact that they are not making enough money to afford to live in your unit.
Stephen also mentions that once a person has been through an eviction, the fear of that process is gone. Therefore, you should really think carefully about renting to anyone who has an eviction on the record. It just becomes more routine; once you’ve done it, the fear of it goes away and you’re more likely to repeat that process.
There was much more said in this interview than I could ever hope to put in the show notes! Stephen has an incredible wealth of knowledge and information about being a landlord and specifically about screening tenants.
If you are a landlord or considering investing in buy-and-hold real estate, this interview is like a mini course in how to screen tenants properly. Check it out. It is more than worth your time to listen to what Stephen has to say.
RentPrep.com– Stephan’s tenant screening company.