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Diving Deep on Applications
13 Plays1 month ago
🎧 Welcome to Thoughts For Rent — the podcast where real estate gets real (and local)!
Hosted by Jenni McKenna, a Las Vegas born and raised seasoned broker, and Owner of McKenna Property Management, this show is your inside look at what’s really happening in the Vegas property management and real estate world. With over 20 years of experience herself - Jenni brings not just knowledge, but heart to the conversation.
Whether we’re talking market trends, property tips, community happenings, or just the everyday quirks of Vegas living, this podcast is all about keeping you in the know.
💬 Real talk. Local stories. Professional insight – provided from a company who has their boots on the ground and hearts in the community.
In this episode, we’re covering in detail our application process and the score sheet we base all our applications on. We dive deep into the qualifications we look for and exactly how we score them.
McKenna Property Management, proudly managing Las Vegas homes since 2005 (and loving every minute of it).
Hit subscribe and comment down below to join the conversation! 💛
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Instagram: @mckennapropertymanagement
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Website: McKennaPropertyManagement.com
Phone: 702-434-HOME (4663)
Owner/Broker: Jenni McKenna B.29819
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Transcript
Hair Color Change Inspired by Jessie
00:00:20
Irelynn Zurflueh
Hi, everybody. Welcome back to Thoughts for Rent, Realtors Keeping It Real. I am Ireland, and with me is... yes Jenny McKenna, the owner-broker of McKenna Property Management. And today is the last day that i officially have blonde hair, so I'm very excited about that. Wait, yeah this is new information? What the heck? I know. I'm going to go in, and I'm going to show a picture to my hairstylist of Jessie from Secret Lives of Mormon Wives, her brown hair, and I'm going say...
00:00:51
Irelynn Zurflueh
make me like jesse yes oh my goodness well that'll be fun because you're about to go to japan so you'll have new hair for japan i know i do try to have new looks for new important moments so i can be like oh that's i had dark hair because i went to japan that year so that's kind of why i'm doing it but i'm very excited very cool i hope it turns out really well. I know. Fingers crossed it doesn't turn out terrible because then all the Japan photos are going to look rough. And then you're going to be all bummed and depressed and I don't want that. So I'm going to be sending up good vibes.
00:01:24
Irelynn Zurflueh
Get a good coloring just like Jessie's. That's what we're going to want.
Demand Letter from Upset Property Owner
00:01:27
Irelynn Zurflueh
So Ireland, something happened the last couple of days. Last 48 hours. True that. And I wanted to kind of bring it up into our podcast because, you know,
00:01:38
Irelynn Zurflueh
what we really are is we're thoughts for rent realtors, keeping it real. And the real part is important to me. I don't want to be a podcast where we candy coat and sugar coat and not really tell everybody what's what's really happening in the property management world. So we're going to talk about something that, uh, is going on here at McKenna property management. And we can talk about it because it hasn't gone to court. It's just a demand letter.
00:02:05
Irelynn Zurflueh
But the demand letter was sent over by an attorney from an owner of ours who is extremely upset because we had to an evict a non-paying tenant.
Signing Agreements and Eviction Process
00:02:20
Irelynn Zurflueh
So they brought on a property management agreement. We signed it. It's our standard property management agreement. We put the property on the market and then at that point did all that we're supposed to do. And we're going to go through that a little bit. Because what I'm hoping for is anyone out there that does property management, whether you are a broker or whether you are self-managing, maybe this system is good for you. And what I'd like to do, Ireland, is kind of plea my case to our listeners.
00:02:53
Irelynn Zurflueh
Okay. As if they're the judge, because I'm wondering if maybe I'm not seeing the other side of it and maybe there would be some good suggestions. Okay. So...
00:03:05
Irelynn Zurflueh
This is what the deal is. Owner believes that he's owed $11,000 from McKenna Property Management. That's the demand. Basically what that is, is the four months of rent that he did not receive.
00:03:19
Irelynn Zurflueh
Because when we started the process of the eviction, it started as a non-payment in November. Yes. But we did not get the resident out of the property until February.
00:03:31
Irelynn Zurflueh
Yes. Okay.
Alleged Screening Negligence
00:03:33
Irelynn Zurflueh
So Ireland, walk us through the moment we got an application on this particular property, which I believe was like in September. Does that sound about right?
00:03:43
Irelynn Zurflueh
Yeah. Okay. Well, and I guess we should also say that the the owner's demand is coming from a place of saying because you didn't do like due diligence in screening the application, that's why they're earned or requesting this money. So although RPMA has a liability section that states that McKenna is not liable for any actions of the tenant. Which includes damages to the property or obviously non-payment of rent.
00:04:19
Irelynn Zurflueh
What this demand letter is saying is that because they were put in, there was some sort of negligence or not enough due diligence to done when putting in the resident.
Importance of Strict Screening Procedures
00:04:31
Irelynn Zurflueh
And so that brought us to what does it look like when McKenna Property Management puts in a resident?
00:04:39
Irelynn Zurflueh
And one of the biggest things that you're kind of taught when you become a realtor, when you're trying to get your PM permit and all of your continuing education classes and all of your education, one of the big things that they say is have a procedure and follow that procedure to a T and Because following the procedure will help keep any biases out of the equation.
00:05:03
Irelynn Zurflueh
So it will help human bias out of the equation. And then it will also just make sure that you are having a really strict system of how you're screening your applicants. Well, and by doing the screening the same for every single applicant, you eliminate the possibility of the discrimination.
00:05:23
Irelynn Zurflueh
Yes. And that can be any discrimination, discrimination against a woman, discrimination against a friend, discrimination against because they're a family member. If there is any difference in the protocol of how you screen an applicant, that could be construed as discrimination. So here at McKenna Property Management, as we're kind of pleading our case, we make everybody fill out an application. yeah Even if it is the cousin that I know so well that I'm going to approve anyways, because the owner's like, Jenny, that's fine. They still go through the application process. Yeah. Anyone over the age of 18 who intends to live there full time as an occupant, get their mail there, take showers there, do their laundry there, whatever, will be submitting an application.
00:06:14
Irelynn Zurflueh
And then once an application is submitted... McKenna Property Management, for ever since I've been here, has had what we call a screening score sheet.
00:06:24
Irelynn Zurflueh
yeah And what the screening score sheet looks like is this. today And just for everybody to know, this screening score sheet, this started getting developed about five years after we developed McKenna Property Management or opened McKenna Property Management. we ended up looking at so many applications that came in that we started to know what you wanted to look for and what the important points were that are um part of looking at a quality resident. And it's not just about a FICA score. And it's not just about a rental verification. It's basically the whole picture. So we have tweaked this throughout the years. And we've been using this one pretty consistently for what, three years as it is?
00:07:09
Irelynn Zurflueh
Yeah, as is. and i will We made it like a slight change like less than three years ago, but it was just a... like a slight modification. So they're pretty much the same blueprint for over five years now. And each category is a category that you want to look at. So if you're self-managing or you're running a property management company, this is 30 years of experience of renting properties and being able to say, these are kind of the topics or the the categories that you want to really look at. If anybody wants to go and grab our ah scoring sheet, you can do so at McKenna Property Management. I think it's just under the renter section, right? Yeah, it's it's available on our website to owners and to applicants because we want the owners to know what we think would deem a good quality resident. And then we also want people to know, hey, before you spend your $75, this is what we're going look for. yeahp No one's trying to take your money. No one's trying to waste your money. So score yourself first so you can see if you even qualify. yeah um So we do keep it pretty accessible. It's on multiple locations on our website. So it's really easy to find. And why why don't
Evaluating Rental History and Income
00:08:22
Irelynn Zurflueh
we tell everybody kind of what those categories are and why we feel like that's important? Yes. So it's broken down into your past rental history, your income, and your credit history.
00:08:37
Irelynn Zurflueh
And those are the three things that we look at. So we're going look at, we ask for your last three years minimum of rental history, but you can give more.
00:08:47
Irelynn Zurflueh
And part of giving that rental history will be the address, who your landlord or your property manager was, how much you were paying, and why you left the unit. So we'll get all that information.
00:09:01
Irelynn Zurflueh
And then we'll also send out for the rental verification from your landlord as well. So we'll get confirmation that you were paying on time, that you left the property in good standing. We'll also confirm the length of time spent there. So all that gets confirmed through that section, which is your previous rental history And then we care that if we we have a scoring system. So if you've been at a property 12 months or less, you get zero points on the score sheet. Yeah. Out of three. So each category is out of three.
00:09:34
Irelynn Zurflueh
And the longer that you stayed at your rental property, the higher you score. Yep. And then also based off of how well you paid on time. So another category that you can receive a zero to three on is...
00:09:49
Irelynn Zurflueh
on-time rent payments. If you never were late, then you receive your max three points. If you were late, um any more than two times you get zero yeah points in category. It's either zero or three at that point yeah on that particular category. And then um the last category that kind of has to do with your past rental history is any landlord disputes. yeah So HOA violations, pet violations, city violations, utility issues, all of that's going to be factored into that category. If you had no landlord disputes, you get a three. If you had
00:10:26
Irelynn Zurflueh
Any kind of landlord dispute, one or higher, you're going score a zero. So those are the three categories that you can rate yourself on with previous rental history. And then we go into income. So income, we base it off of your gross income.
00:10:46
Irelynn Zurflueh
And what we're looking for is that you make 2.5 times the rent amount in your gross income. Now that
Credit Scores and Approval Criteria
00:10:53
Irelynn Zurflueh
changed because we used to do 3%. It used to be three times. sorry It used to be three times. what ah Whatever the rent was is what we would expect you to have for your income. We know that affordability kind of went into a situation these last couple of years. And so what we did is we actually lowered that to two and a half.
00:11:14
Irelynn Zurflueh
times whatever the rent is, because we we look at the exterior factors and we kind of go, okay, well, we understand what's going on in the world. And so we're going to adjust that a little bit. And although this is ah category that we still get each person's individual income, this is the only category where it's a grouped thing. Correct. So if you're applying with more than one person, we're looking at the entirety of everybody living there if their income can be the 2.5 times requirement.
00:11:44
Irelynn Zurflueh
So we have some roommates who have a very similar income and combined they make the 2.5 times. We have a lot of married people where one spouse is bringing in that full 2.5 times income and then you have like a stay-at-home spouse who's not bringing in anything. We have people who...
00:12:04
Irelynn Zurflueh
again, like we have older, well over. yeah Yeah. Like a mom that's moving in with their child, but they only get social security, but we can use that social security with whoever their child is moving in with. And together, as long as it's two and a half times, whatever the rent is, we can approve that yeah or they'll get three points is what they'll get. Yeah. And that is also a, you either get all the points or you get no points. So you receive your full three points. If you make the 2.5 times, And then if you don't make the 2.5 times, then you receive zero points. This is also one of the major categories that if you're not making that 2.5, unfortunately, even if you scored threes on everything else, it would itd be something that we'd really have to look into. Some people will try to apply with like only 1.5 times or maybe two times the rent amount. And they have good scores everywhere else, but the income is really
00:13:01
Irelynn Zurflueh
you either have it or you don't. so that's one of the big categories of And if you're close to the 2.5 and everything else is great on your score sheet, there could be an exception made because it means that you're really living within the means. You're able to pay all your bills.
00:13:16
Irelynn Zurflueh
But I would be very concerned if you were moving from like a $1,300 a month rental to a a month rental And we can't justify that two and a half. But if it's the same rent that you've been able to live with, with that income, and you've been able to make it work because you're coupon cutter and you know how to budget, then we could probably make an exception on that. So why don't we go, we've got one, two, three, four, five, six, seven categories. Out of all those categories, the top is three points, or it can go two, one, or zero on most of them. And then what we have found that if you are 18 or more points in the score sheet, it's an automatic approval because that means everything on the score sheet is above par and you're going to be more than likely a very qualified
00:14:05
Irelynn Zurflueh
good rent resident. yeah And um of course things happen, like you could lose a job or there's a death in the family, but at the time that you're applying, you are going to be approved if you're 18 and above. Now between 15 and 17, what do you do then?
00:14:20
Irelynn Zurflueh
Well, we
Security Deposits and Demand Letter Impact
00:14:22
Irelynn Zurflueh
skipped over a category because Jenny likes to jump to conclusions. But no, the last category is also your credit. So your credit history. A lot of companies will run it off of anything below 600 is an automatic denial, things of that situation. We don't necessarily run off that policy.
00:14:41
Irelynn Zurflueh
We will still factor in lower credit scores because there's three categories on the sheet that have to do with your credit. The first category is your overall credit. And in order to get a three, that's probably the hardest category to get a three in because you have to get a 750 or higher. So even right now, if I were to score myself, I would not be able to receive a three in that category. I would be in the two category. which is between 700 and 749. And then to get one point in that category, it's 620 to 699.
00:15:12
Irelynn Zurflueh
And then anything under 620 is a zero. um and So that is how we grade the credit scores. And then we also dive deeper into what's on your credit history. So we're looking at collections. We're looking at past due balances. We're looking at bankruptcies and those you also are scored on. So we look at any collections that are monthly services, gym memberships, phone bills, utility services, Wi-Fi. If you have any kind of outstanding collection on that, you will be docked down. You won't be able to receive a three. And then we also look at all of your collections as a whole. So we look at any credit card collections that may not be like a monthly thing or maybe even like an auto loan that might be in collections or past due and you can receive
00:15:56
Irelynn Zurflueh
less points if you have anything outstanding or unpaid. We don't really look at medical expenses. Correct. And we don't really look at bankruptcies after seven years cause they're removed anyway. So if somebody does have a very large medical collection, their son fell out of the tree, broke his elbow, they went to the doctor, they've got $20,000 worth of doctor bills,
00:16:19
Irelynn Zurflueh
that's going to sit in collection. That is going to affect their FICA score big time. So they're going to score low on the FICO, but we will overlook medical. So if that's the only thing that was affecting that score, everything else was being paid on time, then that is an opportunity where you, we will overlook medical because medical is one of those things where if you have insurance, great, but if you don't, most people aren't going to be able to fork out $20,000, $25,000, you know, in their medical. So they let it go to collections. And so that's why anything with 18 or higher is almost always an automatic approval because you're really looking at a perfect sheet right there. You're looking at great rental history. You're looking at great income. And you're looking at someone who has a credit score usually of 700 or higher with like no collection. but It's seven categories, all worth the highest being three. That's still 21. So it's still giving you a little bit of legal. Three points. Exactly. So 18 to 21, you are going to have that wonderful, easy pre-approval, no problem.
00:17:21
Irelynn Zurflueh
And then if you score in between 15 and 17 points, which is the second category, they're usually... It's going to kind of go back onto the owner for final approval. Sometimes they will end up saying no because they just don't like those things that you're scoring low on.
00:17:38
Irelynn Zurflueh
But usually within that category of 15 to 17 points that you score, we suggest approval with additional deposits. um A lot of times we see people score 15 to 17 because they're just getting started in the rental world. They're young, their credit's a little low because they don't have a long history and they don't have they haven't lived anywhere before. Or they were like living at their parents' house and maybe paying a very small stipend a month. So when we see scores like that come in that's usually when we'll tell the owner, you should approve them, but with an increased deposit since they're still getting started and their history might be a little...
00:18:13
Irelynn Zurflueh
And when you say more deposit, I mean, our security deposits usually equal to one month's rent, give or take. What would be more deposit? Like two times, three times? What are we looking at?
00:18:24
Irelynn Zurflueh
Our starting deposits will usually be between $300 and $500. And then they will increase from there based off of what the owner is seeing.
00:18:34
Irelynn Zurflueh
So we will see a lot of owners where when it's a really low credit score, on maybe one or two collections, they'll want to request something double or maybe more than $1,000. But if you're looking at someone who just doesn't have a lot of rental history or is looking to um get started in the rental history world, we'll usually start with either a $300 or $500 security deposit. And to go back to our demand letter that came in,
00:19:02
Irelynn Zurflueh
that individual on our scoring sheet did not and was not required additional security deposit. So they came in with a security deposit that was equal to the one month's rent. Yeah. So they were scored at a point point where they weren't needed for additional deposits.
00:19:21
Irelynn Zurflueh
And then we also base the deposits kind of also off of the rent amount. So sometimes an owner might have, let's say, a $1,300 month one bedroom And then they'll say that they want to collect $1,000 in additional deposits. There's a ratio there as well. So that's why we'll usually say, well, let's start with 300 because that's still 30% of that base rent or 20% of that base rent. So that's still an additional amount.
00:19:48
Irelynn Zurflueh
But then if we have someone who's wanting to say rent out a high rise, that's 4,000, 5,000 a month, and we want additional deposits, then we'll also factor in the ratio of, okay, well,
Tenant Non-Payment Case
00:19:59
Irelynn Zurflueh
how much is the rent? And we might ask for something a little bit higher, like 750 thousand to compensate for that ratio. So I really liked this score sheet. And if anyone's listening out there that you are attempting to do self-management, take our years of experience and use this score sheet. Because it really does help. And doesn't mean it's a perfect system. I mean, in the case where we're asking for, you know, we've got a demand letter for the $11,000, the score sheet came in, she was approved, no additional security deposit. She moved in on September, but then unfortunately, November, she stopped paying rent. Do we know why she stopped paying rent?
00:20:38
Irelynn Zurflueh
No. We know that she tried to get the government to help at a time when we did the eviction that was brought up. Um, but yeah, some things happen. I mean, but at this time she looked like a good dependable resident at the time that, that we, ah you know, she put in her application. What this does
Is a Property Manager Liable for Tenant Non-Payment?
00:20:57
Irelynn Zurflueh
prove is that.
00:20:58
Irelynn Zurflueh
Not every system is perfect. I mean, we've got 1300 properties and this scoring sheet really does a great job, but there is always going to be something or someone that causes the non-payment of rent and yeah you're going to be evicting them or you're going have to be dealing with it if that's the case. So in our defense, we did this just like we do with every single applicant.
00:21:24
Irelynn Zurflueh
We collected the security deposit just like we did with every single applicant. And then two months later, she stopped paying. And that can happen. Now, asking our audience, is the property manager at fault when a resident stops paying rent?
00:21:45
Irelynn Zurflueh
Yeah, that's the question. So if you think that a landlord, or not landlord, but a property manager should be responsible for those costs, let us know in the comments. or if the owner has approved this person and the score sheet was followed and they scored high on the score sheet based off of the credit information that was pulled and the income that was given and the ID that was verified, then is it just the response? Is it just the tenants? It's bad luck, maybe bad luck. And it's just kind of the nature of property, you know, property rentals where you don't always have the control of the person that's living in the property. And in our case with the demand letter, the owner was involved in the score sheet, did know what the score sheet number was, and did say, okay move forward with them.
00:22:37
Irelynn Zurflueh
So it's hard in my world when an owner is given the tools of everything that we know in writing, says, yes, move forward.
00:22:48
Irelynn Zurflueh
But then when it doesn't turn out the way any one of us wanted it to turn out, All of a sudden it becomes now my responsibility to make up the four months of the lost rent. Especially when four months was because of the court system.
00:23:05
Irelynn Zurflueh
that
Eviction Delays and Rent Collection
00:23:06
Irelynn Zurflueh
delay, we served her in November, the very first month that she was late. We didn't say, oh my gosh, we forgot to serve her and then served her in February. Or we didn't listen to her excuses and go, okay, we'll wait 30 more days, bring in the rent. No, we don't do that. We served her...
00:23:22
Irelynn Zurflueh
We filed with the courts and then the courts, we were involved in the court proceedings for over 90 days. yes And went in person to appear before the judge. So we didn't do it by having somebody else go. We actually appeared before the judge. The judge gave us the summary of the summary judgment, which basically gave her 10 days to move out of the property. The judge looks right at her and says, you have 10 days to vacate because you haven't paid.
00:23:50
Irelynn Zurflueh
But then she didn't vacate. And then what happened? And then we went to go perform the final lockout. And before the final lockout could take place, she appealed the original judge's decision of eviction in 10 days. And her appeal was being processed for four weeks later. Before an answer was given, I think almost even close to five or six weeks, it was being appealed. Because there was a holiday in there. Yeah.
00:24:16
Irelynn Zurflueh
Because it happened in December. So you've got your Christmas and you've got your New Year's and courts aren't open the whole time during then. And her appeal after five weeks got denied.
00:24:27
Irelynn Zurflueh
And then that was when we could still proceed with the
Defense Against Owner's Demand
00:24:29
Irelynn Zurflueh
original judgment, which was to remove her from the property. And we did. And we successfully removed her from the property, which is what we get paid to do. If that is something that there's a non-payment resident, our job, at least I look at it this way, our job is to take it all the way through and get possession of the property so that we can give the possession back to the owner if the owner so chooses to no longer rent the property. And I'm not surprised to have received that demand letter when we did get the email, just because even when I was giving our owner updates throughout the appeal process, because we spoke every other day, um
00:25:07
Irelynn Zurflueh
he had, he had insinuated that once this is all said and done, he might sue us. And I, my answer to him, as I said, I, I get it I understand. and And when that bridge, when that time comes, we'll cross that bridge, but I'm also not going to sit here and do anything illegal for you. Yeah. Cause he wanted us to go and change the locks. He wanted us to stop doing the utilities, like to cut off the utilities. There are things that a lot of owners of properties get very frustrated with and want to do knee jerk reaction. But if you do that, you're going actually end up in more trouble. And we advised and said, just let us do it the right way. And we did.
00:25:45
Irelynn Zurflueh
But now the end result is he feels like he was damaged from the non-payment of rent. No, nothing else in the demand letter is saying anything but the loss of rent. And unfortunately, and this is where it's going to be fun for you guys to let us know, Do you think that we are liable for any portion or all of it, none of it, of the rent that was not collected from that particular resident? that resident yeahp I'd be very interested to hear. So like, comment, subscribe. And if we get any responses, we'll definitely let you guys know. And if you're someone who's thinking about establishing a score sheet, I think it's really great. Obviously, there's still going to be some bad eggs, but being able to tell this owner, this is our procedure, this is what we followed, this is the information we were given. i think that that just helps really establish that it wasn't like she came into our office, bought us some flowers or some coffee, and then we said, yeah, move
00:26:43
Irelynn Zurflueh
She just looked really good on paper. Or we didn't just go with the FICO score, or we didn't just go with the rental verification. We do this on every single applicant. And she, on in the writing at the time that she came in, she didn't look like a bad resident. man All right. Well, remember, share this episode with somebody that might find this interesting. And as Ireland said, we would love to find out what you guys thought. We pleaded our case to you. You be the judge. And it'll be fun to find out what people think. Absolutely.
00:27:14
Irelynn Zurflueh
Okay. And we'll see you guys next week. Oh, and Ireland's going to do the shutoff. Bye.