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For the first 100 years of being a country, the United States was comprised of small, rural family or ethnic groups that thrived upon sharing resources to support their entire community.  Over the last 100 years of our history and with the massive population growth in our major cities, many of us have become “strangers” to even our closest neighbors.  Being a landlord today requires so much more than in the past.  Gone are the days of knowing most of the people in our communities and getting referrals from those same people of trusted friends or family to fill our properties.  Where before a person’s actions were known town wide, now people can live and move anonymously within our neighborhoods.  How does that affect you as a property owner? And how does that affect your ability to operate as a “successful, lazy landlord,” a concept I teach and live by?  I’ll tell you; it impacts both dramatically. 

A disclaimer before you read too far: I’m not advising you to never rent to any individual with a criminal history.  I am advising you to utilize criminal history checks as just another tool in your landlord “toolbox.” 

Criminal Histories

When it comes to understanding criminal behavior, we have to rely on the criminal statistics to give us a true and accurate look at our current situation.  Recidivism, the tendency of a convicted criminal to reoffend, and the rates of reoffending are a powerful indicator for you as a landlord as you analyze a potential tenant.  The Bureau of Justice recently released the results of a 10-year study of individuals that were released from prison in 2008.  Most alarming is the fact that about 66% of prisoners released across 24 states in 2008 were arrested within 3 years, and 82% were arrested within 10 years.  Think about that, two-thirds of those who had been in prison were arrested within three years of release and 8 out of 10 within ten years. This indicates that the longer a person has been crime-free since their release from prison, the likelihood that they reoffend decreases.  Of those that were arrested within 10 years, 47% were arrested for offenses involving property and another 47% for drug-related offenses.  Consider what type of risk you are willing to take with each of your properties as you analyze criminal histories.

A Country on the Move   

The moving industry reports that over 15 million American households move annually, with an average of 3 people per household: great news for us as housing providers.  That equates to 45 million people a year calling somewhere new “home.”  Of that group, over 3 million of those moves are considered interstate, meaning they are leaving one state for another.  What that means for you as a landlord is that a “current state only” search of any history, criminal or otherwise, for your applicant is likely insufficient.  Specific to criminal, 16% of those who were arrested withing 10 years of release from prison were arrested in a state other than the one they were convicted in. Would you as a landlord be happy with a 1 in 6 chance for anything, but especially for searching an applicant’s criminal history?  One reason individuals with a criminal history move is to get away from their community, especially in a small town.  For better or worse, it’s hard to escape the stigma of being the town drunk when the whole town knows your history.  Also, individuals with criminal history often move to states that have less stringent research and reporting laws, seeking asylum where their history can’t even be reported to you as a landlord, leaving you feeling handcuffed in managing your property.  And finally, 33% of the individuals released from prison could not find active employment withing the first 3 years of their release.  These factors combined with the transient nature of our country indicate that including a nationwide check shouldn’t just be an option, it should be a necessity for successful landlords.   

Applying Consistent Criteria       

What kind of criteria do you have when it come to an applicant’s criminal history?  If you don’t have one, I’d encourage you to visit with your attorney to determine what is fair and legal in your state when it comes to criminal background research and use in housing.  If you do have a criteria, make sure you are applying it fairly and equally across the board for each applicant.  A question I get often is “Is it okay to have property specific criteria?”  Not only is it okay, but I would also encourage you to make this a key part of your practice.  Your portfolio may contain properties of varying locations, values, and restrictions and each of these will impact how you manage the property. For example, you may have a property that qualifies as low-income housing.  Would the criteria you use for a tenant there differ from that you might have in place for a property in an age-restricted community?  Of course it would.  What doesn’t differ is your enforcement of whatever criteria you use for each specific property.  Consistency is king whether you are considering criminal, credit, or eviction history.       

As much as we might like a return to the old days where agreements were sealed with a handshake, our future is much different.  Knowing criminal histories, seeing moving patterns, and using consistent criteria make us better landlords and more profitable investors.  This is why it is so important to include a nationwide criminal history check on every tenant from whom you receive an application.

 

David Pickron is President of Rent Perfect, a private investigator, and fellow landlord who manages several short- and long-term rentals.  Subscribe to his weekly Rent Perfect Podcast (available on YouTube, Spotify, and Apple Podcasts) to stay up to date on the latest industry news and for expert tips on how to manage your properties.

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