Working for the Agency gave me a healthy paranoia. I’m always watching my back, making sure I’m not being followed and I trust no one. And I’m always taking President Ronald Reagan’s advice, “trust but verify” to heart.
Because if you “verify” everything in this business then you will eliminate the majority of your risks and won’t have to worry about losing money on deals or getting ripped off.
The first way I verify is when I get a call from a motivated seller. I go into the tax records and make sure that the person who called me actually owns the house. During the boom there was a huge scam going around where people were selling houses which they didn’t own. I remember reading stories of homeowners coming to check on their vacant rental properties and finding people living in them.
In fact, this almost happened to me once. I got a call from a seller, and the names didn’t match up on the records. When I asked him about this, he started stuttering on the phone and then hung up on me.
Another way you verify is by running an actual background check and credit check on homeowners when you are doing a lease option. With a lease option you are taking on much more risk since you don’t actually own the property. There are a million and one websites out there which will let you run these checks and they don’t cost much at all.
Obviously, don’t do a lease option deal with a guy who is heavily in debt and who might stop paying his mortgage at any moment.
The next way to verify is by checking driver’s licenses. If you’re signing papers at a kitchen table make sure and check someone’s license before you start signing. Make sure they are who they say they are—and not some cousin of the owner who’s staying at the place for the summer and who’s really a con artist.
You’ll also want to check the driver’s licenses of any potential tenants. Before I even have a tenant fill out a rental application I ask to see their license. Not surprisingly, over the years, I’ve had a couple of people leave my properties when I asked for I.D.
Yes, it’s easy to produce a fake I.D but most people won’t go to the hassle and most fake I.D.’s are so terrible you can tell they are fake in an instant. In addition to the I.D. you’ll also want to run credit and criminal checks on your future tenant. Do BOTH it’s worth it.
Before I run these checks I tell the person that I’m going to do it and that now is the time to come clean to me. I’ve heard everything from “I might be going to jail for manslaughter” to “I have to register as a sex offender.”
Owners and tenants aren’t the only people I check out either. Often, I’ll have an investor want to partner with me or do some type of deal with me and I’ll “run them through the ringer” too. It’s no skin off my back since I have my assistant Lisa take care of it all. And it’s certainly better than losing $50,000 on a deal because the person was a con artist or because you gave a $10,000 deposit to someone on a duplex they didn’t own.
So, starting today, eliminate more of the risks in your real estate business by thoroughly checking out everyone you work with. I don’t care how well they’ve come recommended, or who they say they know. Trust, but verify.