How Important are References?

As landlords, we skimp out on the incredibly important screening process all too often. This is never wise, and I’ll be the first to preach to you about just how important this process is. Skimping out will increase the likelihood of you ending up with a tenant from hell, who will give you nothing but headache, heartache, and most of all, wallet-ache. Professional debtors, as many like to refer to them, do exist, and they will squeeze you for everything they can. In fact, many landlords would argue that the board favors tenants. With the processes, and time required to successfully evict, it’s much wiser to do your due diligence right from the start.

References are quite possibly the most important aspect of the screening process; who better to provide insights on a tenant than the tenants past landlords? With that said, it’s shockingly frightening just how many landlords fail to properly follow up with the references provided by their potential tenants. Being the head of CMG Toronto, I handle a wealth of landlord properties, so I see it firsthand. In fact, this month alone we’ve had 5 tenants move out to new properties. Not one of their future landlords contacted us for a reference. This shocks me.

Your rental property is your investment, and you should protect it. A bad tenant can cause thousands of dollars in damages, and guess who will be left to pick up the bill? It won’t be the tenant. They’ll have moved on to a new property, and you’ll be left to pick up the pieces. This just may be enough for you to leave the landlord game for good, despite the potential for a strong return on investment. Bad tenant experiences are the number one reason why landlords sell their property in search of greener pastures.

So, follow up with references, and implement the entire screening process, religiously. With all of this said, I’d like to shed some honesty here: Many landlords will lie in order to get the tenant out of their space. You need to be privy to this, as a landlord with a bad tenant will likely have reached their wits end, and be willing to do whatever it takes to get the tenant out of their rental space. This can give you a false sense of security. So equally as important as following up with the references, is to know what questions to ask, and how to interpret the answers.

Some standard questions that you should include are as follows:

How long did this person live in the rental space?

When did he/she rent from you?

Did he/she consistently pay rent on time?

Did they have any pets?

Did the tenant cause any damage beyond normal wear and tear?

Was the tenant generally respectful of you and your property?

Did any other tenants issue complaints about him/her?

Did the tenant give you proper notice to end the tenancy?

Would you rent to this tenant again?

Some more open ended questions in which you should gauge the response (in these scenarios, you are fishing for any dishonesty in the initial answers):

Can you tell me an instance in which you had difficulty with the tenant?

How did the tenant handle this situation?

When the tenant failed to pay rent by the due date, did they openly communicate with you regarding why? And did they pay as soon as they were able? How quickly were they able?

What sort of wear and tear did you notice in the property?

What kind of instance can you think of in which you had a difficult time dealing with the tenant?

These are just handful of questions that you should consider asking, and really, you should get creative and ask any open ended questions that get the reference talking. The more they talk the better. If they are lying in any way, shape or form, you can find holes in their story by just letting them speak.

But it shouldn’t stop at the landlord references. You should also be calling employer references and personal references. I would argue that personal references are least important, but that’s not to say you shouldn’t follow up. You never know what sort of feedback you may get. The employer will, in all likelihood, be the least biased reference, so do not fail to contact them. In addition to providing feedback on the tenant’s character, they can provide insights into their pay scale which will give you peace of mind in knowing that the tenant does have the money to pay.

Take these tips seriously, and your “bad tenants” will be few and far between.