MacRo LTD Blog

When Traditional Background Checks Aren't Enough

Posted by Ashleigh Kiggans on August 02, 2017 Leave a comment

How do landlords protect themselves from from bad tenants?

MacRo-8.2.2017.jpgIt is no secret that the real estate world took a hit during the 2006/2007 recession. Foreclosures were at an all-time high. As leases came up for renewals, fully leased office and retail properties suddenly found themselves in a position to help tenants stay in place no matter the cost (literally). By 2012, the “landlord’s market” that had ruled the early 2000s had shifted to the tenants. The attitude was something out of a mob movie, “sometimes you gotta do, what you gotta do.”

Five years later, as mentioned in last week’s MacRo blog, the tables are beginning to slowly turn back towards the landlords and property owners. The “gotta do” attitude of accepting tenants with marginal credit has faded with most landlords. Recently, I have learned all too well the importance of doing my homework. We all ask for IDs, company information, and past two years of tax returns. But is that enough? The short answer: no.

The Why?

Knowing your tenants can be key to a successful landlord/tenant relationship. Here’s a scenario: A prospect views a space and loves it. The space is perfect for their business. The financials look good and he is planning to write you a check for the entire first year of the least. The icing on the cake, he wants to take the space “as-is”.

Sounds like the perfect deal?

Except for one thing, a gut feeling. Something told us that maybe we should do some deeper research on this prospect. Turns out, there was a laundry list of felonies and misdemeanor convictions. A situation like this puts landlords in a very awkward position. Should a landlord who still is faced with vacancies, lease the space to someone who is offering music to his ears? Or, does he choose not to put your property of potentially other tenants at risk? To the tenants if in a multi-tenant property? These are difficult decisions for a property owner to make.

The How

You are probably wondering how you can find out all of this information.

It is no secret in my office that I am a fan of many types of research: my specialty being people research. You don’t always have to pay for a background search through a formal company. Most of the information you would need to know is free to the public. As a “millennial”, it has been drilled in our heads that if we don’t know something “Google it”. By Googling someone’s name and city where they live, you can begin to learn a lot of useful information. If you are comfortable with the information you find out, there is no need to move forward with anything else. In the case of the prospects mentioned above, more digging was necessary. Court records are all public knowledge. If you know that your prospect or tenant has lives in your area, you can do a case state in your state/city. For Maryland, the recommendation would be Maryland Case Judicial Search. This can be an extremely useful tool in many aspects of life.

Patience is Golden

While it is probably not necessary to use these research tools with every tenant or prospect you come across, it is important to make sure you are informed. The ultimate decision is yours as a landlord. The world is about giving second chances. You don’t want good money to walk out of the door, but with some landlords still desperate for tenants, some deals don’t need to be made. Especially when a bad choice could put your property and other tenants at risk. Patience can bring opportunities for other prospects who may be a better risk the reliability and longevity every landlord is wants.

Want to know more? Feel free to give us a call at 301-748-5655.

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Ashleigh Kiggans, Sales & Leasing Associate, joined the MacRo team in 2015. She plays a key role within the organization, assisting the leadership team across a wide range of initiatives, including market research, data analysis, client communications and marketing while assisting with the sales and leasing transactional process. 

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Topics: Commercial and Industrial Real Estate, Ashleigh's Field Notes Ashleigh's Fields Notes