03 Sep Are You a Real Investor… or Just Another Landlord?
Are You a Real Investor… or Just Another Landlord?
You buy homes and rent them to tenants in order to make additional income. So you’re just a landlord, right? Right? Of course not, you think to yourself, “I’m an investor!” For me, over the last 20 years I could technically be called a landlord but when asked, I will answer “investor” every time. Since you are reading this article, you probably feel the same way. The truth is, we like making the deal but then dread the time commitment of being a landlord. Over the years I have learned that putting the right tenant into my long term hold investments lets me be more “investor” and less “landlord.”
A lot has changed in the last 20 years as it relates to tenant screening. As investors, we used to sift through credit bureaus, call previous employers and landlords and require an extensive application. In short, we were invested in being investors. Nowadays, our trust in technology has made us a little less invested as we rely on so-called “instant” background checks. We sacrifice the hard earned knowledge about a tenant for fast and cheap results (often as little as $10). Unfortunately instant results, by themselves, fail to give you the information you really need to make a good rental decision.
The Battle of Instant versus Investigative Reports
We’ve all heard it before; “you get what you pay for.” Although instant checks are cheap and convenient, you actually often get even less than you think you’re paying for. You might take it for granted that when you enter someone’s name, Social Security number, and other information into one of these systems that you’re going to at least learn the basics about a potential tenant’s credit history, past convictions, and other personal details or risk factors.
Unfortunately, that’s rarely the case. An aging and inefficient database system has difficulty matching different identities, flagging information that has been wrongly entered, or spotting missing details. In fact, you’d be better off turning to Google for background help than turning to a database search, because the algorithm that search engines use would be smart enough to show you results that were somewhat similar to what you’re looking for. More importantly, database searches are completely automated, lacking the careful review of results with a critical eye and the benefits of detailed follow up that an investigative approach provides.
In addition to being an investor, I am lucky enough to be a Private Investigator as my day job. I can tell you from firsthand experience that an investigator has tools that you need to find that right tenant. An investigator can evaluate the reports, look for trends and missing pieces, and even follow up with potential renters to have them explain any gaps or discrepancies. Live investigators can also check recent data from courts around the country and look for past evictions in someone’s history. In other words, they can tell whether the person is who they say they are, and whether they are likely to cause you problems as a tenant. Research has shown that tenants who have been properly screened are 60% less likely to be evicted from your property.
The Bottom Line on Background Checks
Of course, working with live investigators isn’t as “cheap, easy, and convenient,” but should that really be the most important criteria when determining the person that you let live in one of your rental properties? As a landlord maybe, but as an Investor, never!
The wrong kind of tenant brings with them the risk of missed rent, damaged property, and even legal fees. Plus, dangerous men and women tend to scare away the other tenants who are more trustworthy and reliable, not to mention cause problems for you in protecting your investment. Proper investigative screening gives you more time to be an investor and less time to act as a landlord – which can make all the difference between having a profitable property that generates predictable income month after month and owning a business that burns you out, financially and emotionally, one day at a time.
When it comes to making a final decision on using instant or investigative backgrounds, it boils down to one thing: pay now or pay later. Would you rather spend a little extra time and money now, or a lot more of it later when you’re trying to overcome a bad decision? As an investor, you know the answer to that question every time.
About the Author David
Pickron has been a licensed private investigator for over 20 years, specializing in tenant screening for real estate investment owners and property management companies. His company, Rent Perfect, an Investigative Screening Company, helps clients onboard tenants from the initial background check to leasing and payment collection. You can learn more by visiting www.rentperfect.com or calling 1-877922-2547.