Credit Scores Aren’t Enough: How Landlords Should Really Screen Tenants

Michelle Martinez (00:00)
But maybe they have bad credit. A lot of times we come up across, divorcees. They’re getting a divorce. Hey, what?

Me and my husband were splitting up, we’re getting our own places. I’m a doctor, he’s a lawyer, and now we’re stuck and need to rent a place because now we have to sell our house. Because we ought to split all our assets. And now their credit score is gone because of the divorce, because they’re fighting over who owes what. And I mean, it a lot of times it is a bigger picture. It’s not just about the credit score.

Joseph Crooms (02:03)
Hey everyone. Welcome to Investor Fuel Real Estate Pros Podcast. And I’m your host, Joseph Crooms. Today I’m going to be joined by someone I’ve been looking forward to chatting with. Her name is

Michelle Martinez. And she is in a unique niche in working with real estate people. So I’m going to let her explain that in her own way, form, or fashion. But first of all, hey Michelle, glad to have you here.

Michelle Martinez (02:32)
Hi, Joseph. Thank you for having me.

Joseph Crooms (02:35)
Tell everybody hello.

Michelle Martinez (02:36)
Hi everybody, my name is Michelle.

Joseph Crooms (02:38)
That was good. So I think our listeners are really going to take something away from how you are approaching business. So let’s dive right into it. So first of all, for people who may not be familiar with your niche, give us the short version. What’s your main focus these days?

Michelle Martinez (02:55)
Well it’s pretty simple. We are a tenant and employment background check company. So we do the tenant screening, specifically obviously for the real estate side of things. So

Joseph Crooms (03:07)
And Michelle, what is your role in the company? And what’s the name of your company?

Michelle Martinez (03:11)
BeSafe Tenant/Employment Screening and I am actually one of the business partners.

Joseph Crooms (03:16)
Okay, so how did you get into this?

Michelle Martinez (03:19)
I am actually a well property manager. So actually they we used this company for years. And she offered to sell it to us because we believed in her business, we believed in the company, we knew the original owners, and we understand how it works and the importance of screening your tenants. So that’s how it ended up.

Joseph Crooms (03:43)
Yeah,

how long did when did you purchase it?

Michelle Martinez (03:45)
We purchased it about three years ago.

Joseph Crooms (03:47)
Okay, so you have three years up and running. What have you done to make the business better?

Michelle Martinez (03:53)
Well, we went fully automated. And then we’ve integrated a lot of our systems through the automated system and adding things all the time. So some of the two things that we have recently added is the ID with selfie verification and payroll access and fraud detection forms.

Joseph Crooms (04:13)
May I ask, what is your volume and as far as revenue or volume? What is your portfolio? What is your book of business look like now? Say in the past year.

Michelle Martinez (04:23)
Well basically the gist of our business is the tenant screening. We obviously do the employment background checks for those companies as well, but a majority of them are property management companies and real estate agents and investors, even all the way down to just a single family owner.

Joseph Crooms (04:42)
Is it like a one time you help them and then they they’re off? Or, what is how much are your doings on a monthly basis?

Michelle Martinez (04:50)
It’s not a one-time deal. Well, obviously for people that only have maybe one rental property, whenever it becomes vacant. Right now, because of the market, there seems to be a lot of vacancies out there, a lot of real estate investors now holding property because they’re unable to sell or unable to sell for what they’re wanting. So they’re holding them and now renting them out. So our volume has definitely increased.

Summer is always, we’ve we follow the trend of the real estate market. So it’s starting to slow down a little bit, but with a decrease in sales and a lot more investors now holding on to the properties, we have seen an increase in just volume as far as some of our investors just kind of holding more properties as opposed to

quick flipping.

Joseph Crooms (05:41)
So how much book of business do you have each month that you because the way I’m doing

Michelle Martinez (05:46)
That could be, for the tenant screening side, a thousand to two thousand applications a month.

Joseph Crooms (06:41)
Okay. And ’cause the way I’m hearing it is you’re sort of anchored in with some of the relationships that you built. Is that true? That in other words

Michelle Martinez (06:49)
Yeah,

I mean some of these companies have been with this company that’s been in business for I think we’re on twenty three or twenty six years now. So they’ve been using this company since then. So even when they were, maybe small mom and pop management companies, now they’re huge in California have always used her.

Joseph Crooms (07:08)
Yes. Let me ask you a question. So Michelle, how much is the low end to hire your business? What’s the middle end and what’s the high end of what you gonna do? How much would you charge your customer?

Michelle Martinez (07:19)
The low end really depends on volume, but say you’re just, you have one investment property. You’re probably just going to use this maybe once or twice a year or whenever that property becomes vacant. Our low end is $25. Our high end right now, if you’re getting the full complete package and they’re paying us directly, is right now $58.

Joseph Crooms (07:40)
Okay, so I suppose but you normally have like a thousand people on the books each month. All right, gotcha. So let me ask you this. So tell me, what is the full package? What do you do?

Michelle Martinez (07:53)
So right now our full package is the applicant. We provide your personal application. It’s just a link. So you could put it into your website. You could just text it to them. You can email it to them. They’ll log in, they’ll apply. It’ll ask them from some sort of ID verification, driver’s license, passport, a huge wide array of documents that they can upload. It will take that information, verify.

who they are, the information on that ID, and then ask them to also take a selfie. So it’ll ask for a front view, a left view, and a right view, verify who that person is, the same person that is on that ID. Once that is complete, it will then link them to the application process, which is your regular application, which can also be customized if you have any specific questions or something of that sort.

That you would like to ask up front. We can also add that into our application. And then that asks for we do current and previous rental history and current employment. And then criminal background, evictions, credit check with score, we use TransUnion, and then it also does a Social Security number trace.

Which will give us a clear picture of all of the jurisdictions that they have lived or had some sort of footprint in for because for an eviction check a true eviction check you cannot use a date of birth so you can only match with addresses. And then your credit report will only go back typically two years so the SSN trace goes back to whenever the SSN was

issued, it’ll give us the state of when it was issued and if it’s valid.

Joseph Crooms (09:39)
Thank you. So how do you manage your property management business and this business? Because this business seems like it’s pretty intense. How intense is that? Let’s talk about your property management business for a minute. Are you still actively involved in that?

Michelle Martinez (09:52)
I am, I’m broker on record. So I I’m not as hands-on as I used to be. So I I’ve taken a sidestep. This is actually now my baby. So the property management side is something that we do offer in cases where we do have some investors or properties that they just need a little bit more extra help. So we do offer those services through our sister company, which is the property management side. So

Joseph Crooms (10:17)
So now so we’ll go back on the other side. I got you. So you now you how damaging could this be to people looking for an apartment and need it? And is there what is the borderline? And what what’s do y’all see that they were in trouble and now they’re getting out of trouble? Do y’all share that with the

people as well enough.

Michelle Martinez (10:40)
Well, there are strict laws. So we can only typically go back seven years and then we can only inform you as the end user of any actual convictions. So if there was just an arrest, we that’s unreportable. And like I said, going back seven years. So if it was something that happened prior to that.

You wouldn’t we wouldn’t inform you of that.

Joseph Crooms (11:03)
Okay, so you your footprint is in California, even though you say you do have the capacity of doing nationwide. What is the housing market? What part of California are you concentrating?

Michelle Martinez (11:13)
We are in central and southern California.

Joseph Crooms (11:16)
What are the major cities? Urban cities or

Michelle Martinez (11:19)
You’re looking at Long Beach, North Orange County, South Bay, which is like southwest of Los Angeles, like Torrance, Carson, Manhattan Beach, Hermosa Beach, San Pedro, those areas. If you look on a map, it’s pretty much it goes this way. And then central is basically Kern County, and then mainly the coast and then mainly also.

Fresno County.

Joseph Crooms (11:44)
Are those your clients, you I know you’re trying to get them the best possible, but which one of those cities that you identified are more upscale versus those that are a little more mixed?

Michelle Martinez (11:58)
Definitely Manhattan Beach. Manhattan Beach, El Segundo, the South Bay. It’s kind of a smaller niche commodity community.

Joseph Crooms (12:05)
We’ll see how my picture froze a little bit.

Michelle Martinez (12:08)
Yeah. Mainly Manhattan Beach, El Segundo, Redondo Beach. The South Bay is pretty much it’s off the freeway, so we always kinda say, if you kinda live in the South Bay, you don’t leave the South Bay. So

Joseph Crooms (13:03)
And so your service seems to be very valuable. So what are you thinking about scaling next? What is the next big project for you guys?

Michelle Martinez (13:12)
Really we

more bigger property management companies would be great. I know that a lot of them are using, RentSpree, Buildium, embedded softwares in their property management software, AppFolio, those, but when it comes to the tenant screening process, it they don’t do what we can provide. And I know that because obviously I’m in the industry as well. So especially when it comes to California, is

highly known for not reporting or highly under-reporting to a national database. So counties like LA County, Orange County, Kern County, Fresno County, Ventura County, some of them are underreporting by two years on the national database. So when you’re talking about California specifically, that’s a big gap.

And it’s scary to think especially LA County, which is one of the biggest counties in California, you’re missing that footprint.

Joseph Crooms (14:06)
What’s been the key to keeping your machine running smoothly?

Michelle Martinez (14:09)
Well, we’re very customer-service-oriented. So you will always, get somebody on the phone to either explain the credit check to you, explain what we found, what things mean. That way you can make a more informed decision. I know a lot of people want to base, their applicant just off a credit score, but in the end it’s not

really about the credit score and more

more managers, more investors are understanding that and learning that. Because if they’re 18 and they just got out of college, they probably don’t have a credit score, just a very low credit score. But based off of that credit score, maybe they have great rental history. Maybe they just got an amazing job offer or just, started working and, working that degree that they just got. So it’s not always that we see, especially when you’re talking about

higher end properties where the rent is five thousand dollars a month. I mean, who’s gonna afford that? Probably somebody that is, and if you’re talking two and a half times the rent or three times the rent, they gotta make fifteen thousand dollars a month to be able to at least qualify. But maybe they have bad credit. A lot of times we come up across, divorcees. They’re getting a divorce. Hey, what?

Me and my husband were splitting up, we’re getting our own places. I’m a doctor, he’s a lawyer, and now we’re stuck and need to rent a place because now we have to sell our house. Because we ought to split all our assets. And now their credit score is gone because of the divorce, because they’re fighting over who owes what. And I mean, it a lot of times it is a bigger picture. It’s not just about the credit score. So we like to give everyone the big picture.

At the end of the day, it’s your property, you make the decision, but we’re here to help you make a more informed decision. If that makes sense.

Joseph Crooms (15:59)
Yeah, thank you so much for sharing that, Michelle. Michelle, let me you said you charge fifty-eight dollars per month. Is it fifty-eight dollars per month or just one, you pay me, I’ll pay you fifty-eight dollars and you do the credit check and that’s it. You’re

Michelle Martinez (16:11)
That’s to the applicant. So that’s typically direct pay if we’re working with the end user.

Joseph Crooms (16:17)
Well, when you say the applicant, are you talking about the person applying for an apartment?

Michelle Martinez (16:22)
Yes. If they’re applying through us directly, ours is fifty-eight and it’s the full package. But if we’re working with say a property management company who is using this as a additional income stream, so they’re marking it up, however, and based off of their volume, we will discount those rates and we can customize the package. Right now because the ID verification and the payroll verification is new, so we haven’t officially

launch that to all of our clients yet we’re still kind of testing it out on some of the smaller management companies to see how that goes, if they like it, if they have any questions, and kind of figuring out the bugs on that end. But right now it’s working out fine. I think we fixed all the kinks and yeah, so it really just depends on the management company.

Joseph Crooms (17:09)
Yeah, so say if I had I’m a property manager, I have a whole tenement, a whole block, about 10 buildings, about 15 customers apiece. And but now I have 15 apartments. So I have to pay per apartment.

Michelle Martinez (17:24)
No, per application.

Joseph Crooms (17:25)
So per so for fifteen people that I may need this interview, what if I have more than one?

More than one.

Michelle Martinez (17:32)
That’s up to you on your vetting process and your qualifications and how you handle that. We’re here for information purposes only. So we do not approve or deny. That’s not what we’re here for.

Joseph Crooms (17:44)
I understand. So you’re saying if I have ten people come and look at the apartment and I want background checks, I would have to pay fifty eight dollars per background check that I’m going for that apartment.

Michelle Martinez (17:55)
If the applicant is paying us direct, it would be fifty-eight dollars. If you’re going to pay us and you’re say your application fee is fifty dollars and say based off of your volume, we’re gonna discount you at thirty dollars, you would be making twenty dollars extra per applicant. Does that make sense?

Joseph Crooms (18:11)
Yeah, So you got multiple streams of ways of making money. All right, got you. So Michelle, this has been very good, very interesting. So let me ask you this question. Then we we’re running out of time. I know that every operator has had a moment when things just don’t go right. Maybe a deal that went sideways. Can you share one of those with us?

Michelle Martinez (18:31)
Well, like I said, a lot of these our clients have been with this company for twenty something plus years. The biggest struggle honestly was going automated. And unfortunately, we did lose some clients because of it. They did not like the automation process. They did not want to change anything. And so that was kind of the

biggest struggle. And so with us adding some more services, we are kind of taking a little bit softer approach. We’re not forcing anybody to make the change. They don’t have to make the change. We’re obviously also trying to figure out pricing based on volume. And if they don’t want it, they don’t have to add it onto their package.

Right now the at first that was the biggest challenge was going fully automated and kind of fighting with some of those clients that really push back on it. It made us a better company, it made it easier for us on the back end. And then now that we’re adding more services, it’s a little bit of a struggle to get people to understand what that is. And if because that would mean they would have to increase their costs in order to get the same profit margin, but they would be getting a better.

Package. So that’s kind of the next struggle right now. And again, it it’s we’re not here to fight with anybody over cost or prices, but it’s, we’re just here to provide a service and whether they want it or not.

Joseph Crooms (19:55)
Last question and we and then we’re gonna sh share it to people how they can get in touch with you. How has AI helped your business? Or is that the

Michelle Martinez (20:06)
AI, we don’t really use a lot of AI. It so our integrated service, we’re integrated with other companies. I know for the fraud document detection that company uses AI. So we’re not using it necessarily on our end. It’s already kind of embedded in some of the

integrated systems that we already use.

Joseph Crooms (20:27)
Okay. So what’s been the biggest difference to you in growing your network, building relationships and growing your network? What’s made the biggest difference for you in this company?

Michelle Martinez (20:39)
Really I think, after COVID people have started really wanting that more one-on-one, the customer service, maybe meeting in person. Everything is just so fast-paced right now and emails and calls and texts, which helps obviously to keep us organized. But at the end of the day,

A lot of our business has been referrals. Really. It really hasn’t been, a lot of the marketing techniques that we have done, it has helped us get in the door, maybe and has start those conversations. But at the end of the day, a lot of it has just been referrals.

Joseph Crooms (21:14)
Hey, Michelle, this has been really great. You can’t fake these things. I can really feel your sincerity. I I know that you’re a tremendous business person. You did really well. So before we wrap things up, if someone wanted to reach out to you, connect with you, collaborate or learn more about what you’re doing, what’s the best way to reach you?

Michelle Martinez (21:34)
Email is great or text me. [email protected] or you can text me at (562) 721-7482. I know we have a eight hundred number. Unfortunately I don’t have that memorized. Pretty much we bought it for my cell phone.

Joseph Crooms (21:50)
All right, give it to him one more time, Michelle.

Michelle Martinez (21:52)
(562) 721-7482.

Joseph Crooms (21:55)
All right, guys, you got that. So we’ve heard from Michelle Martinez. Perfect. Well, Michelle, thank you. I appreciate your time, your story, your perspective, your philosophy in approaching business, and we need more people in the space who are doing it the right way. Thank you again for being here.

Michelle Martinez (22:13)
Joseph, thank you so much.

Joseph Crooms (22:15)
And for those of you tuning in, I

Michelle Martinez (22:16)
Bye.

Joseph Crooms (22:17)
Know you got some value from this discussion that we had with Michelle Martinez today. Make sure you subscribe to our channel. We got more conversations coming from operators just like Michelle, who are out there doing building real businesses, helping communities and helping people. I love the story she told about how they get the full picture of a person sort of a person’s life. That’s really

positive. Good thing. I’m so glad to hear that. So we’re going to see you at on our next episode. But Michelle, tell everybody you’ll see them soon.

Michelle Martinez (22:47)
See you soon.

Joseph Crooms (22:48)
All right. So we’ll see you on our next episode of Investor Fuel Real Estate Pros Podcast.