In my last post, I discussed the process of listing my property online to try to find good tenants. In this post, I’ll cover my process for screening tenants and how Properly helped make it fast and easy. (Note: this is NOT a sponsored post. I’m only discussing the Properly method here because that’s the service I used for screening tenants, and it made my life really easy, so I feel like it deserves a shout-out.)
Processing Applications with Properly
If you recall from the last post, I decided that I wanted my target demographic of renters to be people who had internet access and who used computers regularly. I only listed the property online, and put no signs on the property at all. As part of my online-only campaign, I decided to use Properly to have tenants submit their applications and to run their own tenant screening reports. George from Properly has been reading this blog for quite some time, and he’s mentioned his company as being an alternative way for landlords to screen tenants. I looked into it, and asked him about a million questions in advance—all of which he very kindly and thoroughly answered—so I figured I’d give it a shot.
I was initially planning to run tenant screening reports on my own through the Apartment Owners’ Association of California, since they offer a very comprehensive tenant screening for about $16, which is far, far cheaper than any other place that I’ve seen. Most alternatives are somewhere around $30 for a credit report only, with the prices escalating from there if you also want a criminal background check and eviction report.
The only problem with running the credit myself through the AOA is that I would have to have an inspection done of my office in advance, which means coordinating with an independent company to do the inspection. That most likely means some missed work hours, and there are specific requirements that company is looking for before they would approve me. Unfortunately, the AOA website doesn’t list all of the requirements to pass the inspection. Some of the items are listed, including having a shredder and a secure (locked) file area, but I’ve also heard that they require a separate locked office, and there may be some other requirements I don’t know about. Logically speaking, the locked office space requirement must also mean that the space is used only by the landlord/manager (otherwise what’s the point of the lock, right?). This poses a problem, since my “office” has been almost entirely taken over by my musician boyfriend. Even if I swapped out the doorknobs to be the locking type, it would be difficult for me to explain why my boyfriend’s upright bass, keyboard, trombones, drum set, and a host of guitars were in that same room.
My other issue with running the credit screening myself is that I had been so busy with the renovations that I hadn’t had time to get the office inspection scheduled. Oops.
Setting Up My Properly Account
So I gave Properly a try. I created a log-in as a landlord and set up the property address for each unit. That literally took only about 2 minutes.
Letting Tenants Know How to Apply Through Properly
After setting up my account, the website gave me a separate link for each of the properties (one for each apartment), so I could copy and paste those links wherever I wanted tenants to have access to them. Some landlords might put an application link in the online listing itself. I opted instead to put the application link in my stock email response that I sent to prospective tenants who contacted me through Craigslist, Zillow, Trulia, or Hotpads. In that email, I was able to explain my screening criteria, the basics of the Properly application process, and a showing schedule for the property. After reading that information and deciding whether they wanted to apply, the tenants could then click on the link for the apartment they were interested in, create a profile for themselves on Properly’s website, fill out a basic application, and pay the screening fee to run their own credit and background check.
If the tenant wants to apply with a co-applicant, the tenant just adds a co-applicant via email, and their applications are linked in the Properly system. Once the background check and application are completed by all co-applicants, the Properly system sends me an email notification letting me know that I can go in and review it all.
I had a number of applicants who applied, and only one of them said they had any technical difficulties figuring out how to apply through Properly. The others had zero problems, even though the system was brand new to them and virtually all of them had to figure out how to add co-applicants. As for the one applicant who had trouble, after further investigation, it turned out that she had mis-typed her co-applicant’s email address, and that was the source of her issue. Operator error.
The Properly format made screening tenants really easy. Each application is stored under the individual property address, so it’s easy to tell which tenants were interested in which apartments at a glance. In my case, since I had four units that were all fairly comparable and available at the same time, I had each tenant apply only once for their favorite apartment, and had them email me separately letting me know which units they were interested in, in order of preference.
There are essentially two parts to each application: the regular filled-out application portion, and the screening report. The basic application looks like this:
The screening report consists of a credit report, criminal background check, and evictions report. First, the credit report:
Next is the criminal background check:
That was easy. Last is the evictions report.
In all, I was very happy about how easy to read the reports were, and how thorough the information is.
What Makes Properly Different
There are several things that I learned about Properly during the process that set it apart from the other credit checking services.
First, the other credit checking services—the ones that don’t require a home office inspection, anyway—usually don’t give you an actual credit score. They’ll give you a “letter grade” for the tenant. How do they determine the letter grade, exactly? Good question. I haven’t found any that list their specific criteria. All I’ve seen are vague descriptions about regular on-time payments leading to an A grade and collection accounts leading to a D grade. Call me a control freak (everyone else does), but I want to know the tenant’s actual FICO score, and I want to see their transaction detail. Is there an old utility bill for $100 that they just haven’t bothered to pay in the last few years? Did they damage a prior apartment beyond the amount of their security deposit and skip out without paying for the repairs? That’s information I want to know. Also, sometimes you get a tenant who seems like a pretty good applicant but their credit letter grade indicates there might be some collection accounts on their record. The tenant claims that it’s an old medical bill from an emergency room visit that she was unable to pay. You have no way of verifying that with just a letter grade. You need the detail to review it.
Properly gives me the full credit score and detail about each of the accounts, including the amount of the monthly payment obligation (so long as that info is available from the credit bureau). That helps me better evaluate the reason for any dings on the tenant’s credit report. It also helps me factor in any large car payments or student loan payments that the tenant might be obligated to pay, which is critical when determining whether the tenant’s income is enough to pay the rent.
Another benefit of Properly is that the credit report is tenant-generated. The tenant goes online and fills out all of the documents and runs their own credit report through the service. Because the tenant is running their own credit, it counts only as a “soft pull” and doesn’t ding their credit. Also, the tenant can pay the single screening fee of about $35 and share that same report with multiple landlords. In a highly competitive rental market like Southern California, that gives the tenant the ability to apply to multiple places without spending a fortune just on application fees. For me, as a landlord, I like the idea that the tenant might be able to re-use the report. It makes it easier for me to recommend that a tenant apply, even if they might not get the unit. I don’t like to feel like I’m wasting a tenant’s money, especially because the average renter is a lot more strapped for cash than the average landlord.
Even though the credit report is tenant-generated, as in the tenant is the one ordering the report, the data itself comes directly from TransUnion, so you know it’s reliable and the tenant hasn’t tampered with it. There have been times in the past that I have accepted a tenant-provided copy of their own credit report, so long as it was dated within 30 days of their application. I did this as an accommodation to prevent the tenant from having to pay to run their credit report again and suffer another ding on their score. But it always made me a bit nervous because it’s so easy to Photoshop things these days. Because the Properly report comes direct from TransUnion, I don’t have to worry about its authenticity.
Properly’s online system was great for keeping me organized, too. The tenant is responsible for completing their application in full, and the landlord receives a notification only when the application is completed. This is a much better set-up than I’ve used in the past.
Before, I would show a property and get the tenant’s contact info. I would email the tenant an application and consent form to run their credit report. The tenant might have access to a scanner to fill it out and send it back, or they might not. I might end up having to coordinate an in-person hand-off. Typically, you need an actual wet ink or scanned signature on at least the credit check consent form. You could try to take an electronic (typed) signature, but your credit screening company often won’t accept it. Running the credit would be a separate process for the landlord. You end up having all of these applications in different states of completion, and then you have to keep them in a safe place so you don’t have social security numbers floating around. It can be a real headache. With Properly, though, all of the application information is kept in one place online, the credit report is already run, and I can review all of the candidates for each property in that one spot. I don’t have access to the tenant’s SSN or driver’s license number, so I don’t need to worry about confidentiality as much, either.
Properly costs landlords nothing. The tenant pays $34.95 (per adult) for their own screening report. Because Properly charges the tenant that $35 fee, I opted not to charge the tenant an additional fee to review their applications. California law caps the amount that you can charge a tenant for applying at around $44, I think. I wasn’t going to bother charging an extra $9 for each applicant. It’s just not worth it to coordinate collecting a check or cash from the tenant to cover that amount. Besides, I don’t think any landlords ever saw a meaningful boost to their net operating income by charging a ton of screening fees. If the costs are covered by the tenant, that’s good enough for me.
In addition to tenant screening, Properly also offers some other services, including processing electronic ACH rent payments. My understanding is that you can set up the system to bill your tenants a set amount per month, and the tenants can electronically send their rent payments directly to the landlord’s bank account. I’m not using this service, so I can’t tell you much about it, but it is free, and my guess is that a lot of landlords will use it. (I have my tenants deposit their own rent into my bank account using deposit-only ATM cards. I’ll probably post about that another time.)
Things a Landlord Needs to Do in Addition to Properly
There were a few things that Properly didn’t do that I needed to take care of on the side. It wasn’t a big deal, but just make a note of it if your issues are the same.
- Properly doesn’t show you the tenant’s SSN or driver’s license number. That’s great for applicants, but not great for tenants, because if someone skips out on the rent, you want to be able to collect it. Fortunately, this was easy to take care of. On the lease form itself, I had the tenants fill out their SSN and driver’s license numbers, and I asked them to send me photos of their driver’s licenses as well.
- There’s no way for tenants to upload pay stubs or bank statements to Properly. Again, this is easy to take care of. The tenant just sends a separate email with those documents. (In order for Properly to do this, it would have to have its own secure online storage. The whole point of the tenant-driven online screening is to avoid having any storage of that sensitive information, so I don’t fault Properly for not providing this service.)
- You have to make sure your tenants email you separately with the full names of each of the intended occupants of the property. Each adult has to run their own application and screening report through Properly, but as a landlord, you might need to know the total number of occupants, which would include children.
- Fair Credit Reporting Act compliance: keep in mind that if you reject an applicant based on whole or in part on their credit score or background check, you have to provide that tenant with an “adverse action letter.” The FCRA has requirements for what that letter must contain, and many states have their own laws prescribing additional information that must be in the letter. I was hoping that Properly would automatically send out adverse action letters upon denial of an application, but the separate state law requirements make that virtually impossible. Once I drafted my basic rejection letter, though, it was easy enough for me to simply email that to the rejected applicants.
Properly is Still Evolving
Properly is still a fairly new company, although I can tell that a ton of careful thought and attention to detail went into it. The really great thing about the company is that they’re interested in the long game. They actively seek out feedback from landlords, and in my case specifically, George bent over backward to see how the process was going and to make any changes to the system that were possible to meet my needs. Here are just a few of the things he was able to improve based upon my questions and feedback:
- Improved access to applicants’ and co-applicants’ email addresses, to make them easier to find
- Added a field on the application to indicate the tenant’s expected move-in date (helpful when you’re trying to fill a unit as of a certain date)
- Added the portion of the credit report which displays the monthly payment obligation on loans (if that information is reported to the bureau).
I don’t know how realistic it is to expect personal attention like that as the company grows, but I’m really impressed at how much effort they are making to address the needs of landlords. If you’re considering taking online rental applications and you haven’t given Properly a try, I highly recommend it.
Do you screen your own tenants, and if so, what is your process for doing it?