10 Ways to Catch Fraudulent Applications

10 Ways to Catch Fraudulent Applications

By Robert L. Cain, Copyright 2020 Cain Publications, Inc.

One in three rental applications contain some kind of fraud, reports snappt.com. in 2020, the company surveyed property managers and came up with that figure and others just as telling revealing the carefully generated fake documents landlords see on rental applications.  It’s usually income, but it can be far more devious than that. Of those who admit it, says the snappt.com report, two of every three property managers have been fooled at some time by phony documents.

It’s easy to create a phony document, one that will fool many people, including landlords anxious to get a unit rented.  Time was when tenants had to work harder to come up with doctored documents to prove their rent-worthiness.  Now all it takes is a visit to a website.

I checked out a few of those websites.  Fakepaystubs.net, pay-stubs.com, and thepaystubs.com all promise quick and easy documents to prove whatever you want proved. Fakepaystubs.com, for example, provides instruction and services for

“How to edit my paycheck stub
How to get my check stub online
Create a pay stub
How to edit a scanned document
Online PDF Editor
PDF Editor Service for Paystubs
Editing Scanned Documents
The PDF Editor Service
Editing Fake Paystubs Service
Editor of Fake Paystubs Service”

In addition, beside fake paystubs, they will create bank statements, credit reports, utility bills, credit card statements, and tax returns, running the gamut of documents meant to fool the less than diligent landlord.   Of course, they insist that they are just for fun and should never be used in real life; “Services provided here are only for Novelty, Education and Entertainment purposes.”  Another site even offers two people pretending to be employers and previous landlords to answer calls from anyone checking the application.

All of this has become epidemic recently because of how easy it is to create documents online.  With due diligence, you can easily flush out fraudulent documents and applications. The most important point is: BELIEVE NOTHING ON A RENTAL APPLICATION UNTIL YOU HAVE VERIFIED IT.

Find out after they have completed their fraud and moved in, and you most certainly have the right to evict these tenants, assuming you can actually still evict where your property is.  The average eviction though, reported the Snappt.com survey, costs $7,685.  And that’s just for the cost of the actual eviction.  It doesn’t include the lost rent and property damage done by a bad tenant. Never allowing them move to in to begin with provides the best protection for your investment.

Here are 10 things to do to ferret out a fraudulent application and keep from renting to a lying tenant.

  1. Make sure the application is completely filled out, no exceptions.  If your applicant has a bad attitude about your insisting it’s completely filled out, simply reject the application.
  2. How do the documents your applicant submits look? Are the numbers, account numbers, phone numbers, income figures, everything  the same across all documents?  Look at formatting to see if it is consistent in documents from the same source.  For example, does a bank statement look like the actual bank statement from that bank? Check spelling and grammar. Spelling and grammar errors are a sure sign of fraudulent documents.
  3. Call the telephone numbers on the application and documents to make sure they are working numbers.  Then compare the phone numbers on the application with the phone number of the current and previous employers, the ones you find on the employers’ websites or in the phone book.  No website? Be extremely careful.
  4. Verify start and end dates with employers and landlords to make sure they match what’s on the application.  If they don’t, ask your applicant about missing periods of time. The answer had better be good. Check with the current and previous employers to verify income.  Don’t rely on possibly phony paystubs submitted by the applicant.
  5. Look at Facebook and LinkedIn pages and online databases such as opencorporation.com and sba.gov to make sure the applicant’s employer is real.
  6. Check the applicant’s credit report to see if the dates and addresses match up with what’s on the application.  Don’t rely on a credit report an applicant provides; pull the report yourself. 
  7. Do a Social Search to see if the Social Security information is the same as what’s on the rental application.  People using a phony Social Security Number will show up with different names, addresses and dates than those claimed on the application or not show up at all.
  8. Call previous landlords for references. Check to be sure the phone number you are calling actually belongs to the landlord or manager and not a friend posing as a property owner.  One suggestion I saw recommends calling the numbers of previous landlords and asking if they have a two-bedroom unit for rent.  If they answer that you have the wrong number, that waves a huge, spotlighted red flag. Check county tax records online to see if the name of the property owner is the same as the landlord’s listed on the rental application.
  9. If you still haven’t rejected an applicant after finding inconsistencies, ask the applicant to provide hard copies of the documents or to print out the documents in your office.
  10. Spend the time to do a proper screening job.  The Snappt.com survey reports that property managers spend between four and ten hours on each application. Whatever time spent will be worth it if you find a fraudulent application and spare yourself a bad tenant and an eviction.

You don’t have to check every application if you screen in the order the application is received.  The first acceptable one, the one that meets your strict rental standards and passes muster can be the one you accept. Just be sure to make your rental standards are so meticulous that anyone who meets them will be an acceptable tenant.

Bad tenants, tenants who have a spotty or horrible rental history, are not going to start being good little boys and girls.  They’ll keep up their tricks as long as the tricks work and will learn new ones when the old ones wear out.  They’ve worn out their welcomes everywhere they’ve lived.  Don’t let them add your property to the list.

Written for Zip Reports where they provide applicant screening services.

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The New Normal After Coronavirus

By Robert L. Cain, Copyright 2020 Cain Publications, Inc.

The country will reopen sooner or later, and it will look far different when we become the “new normal.” More and more small businesses won’t be able to make a profit. Dominos will fall as the effects tumble into commercial real estate, residential real estate, schools, child care, and government. 

Restaurants

As restaurants reopen in Georgia, the governor says they will have to meet 39 guidelines. For some, those guidelines will mean they lose money every hour they are open.  Look for those requirements to be modeled for restaurants around the country. Some of the most profit-threatening Georgia requirements include allowing only 10 patrons per 500 square feet, limiting parties to no more than six people per table, encouraging reservation only, and not allowing people to congregate in waiting areas. 

Restaurants need a minimum patron per square foot to make a profit.  Cut the number of tables in half, and they simply can’t make enough money to stay in business. The larger chains may be “safe,” but smaller restaurants operate on a knife’s edge of profitability even in the best of times.  Cut their maximum patronage in half, and it slices their ability to stay open in half.

And there’s more. It can cost upwards of $10,000 to restock the refrigerators and bulk bins  before they serve their first meal. If the restaurant has already had to cut its possible patronage in half, it could mean just locking their doors forever.

Commercial landlords

As restaurants close, vacant storefronts will result.  Those storefronts will be difficult to rent because they just add to other small businesses that bit the dust during the pandemic.  Look for lower rents and rent concessions, but also look for foreclosures.  Shopping centers, which were hurting before all of this came about, will lose more tenants and the mall anchors will suffer because the shoppers who come to the smaller shops often end up at Macy’s, Dillard’s, Nordstrom, and others.  And with former giants Penney’s and Sears teetering, the vision of the vacant shopping mall looms large.

24-Hour Fitness is threatening to file Chapter 11 bankruptcy and Gold’s Gym has already filed Chapter 11 even though CEO Adam Zeisiff says they are “not going out of business.” These could be the biggest fitness center companies to fall, but there are lots more sitting on the same knife edge as the restaurants.  Fitness centers depend on lots of people signing up on a year’s contract and never being seen again.  Planet Fitness, for example, reports that half of its members never do more than drive by their gyms, possibly feeling guilty and thinking “when I have time. . .,” but never stopping in. It’s a good thing, too, because their average gym holds about 300 people but they may sign up 6,000 on year-long contracts.  

Because of the coronavirus people hesitate to go out in crowds, so fitness centers will have trouble signing anyone up.  Watch them begin to shut their doors.  According to activewellness.com “6,000 square feet. . . is the bare minimum for a quality fitness center.” But larger chains have considerably larger footprints. Gold’s Gym can take up 35,000 square feet, 24-Hour fitness up to 42,000 square feet, Planet Fitness 20,000 square feet. The average small business in a mall or storefront  is between 800 and 2800 square feet, only 13 percent to 46 percent of the square footage of the minimum fitness center size. But for the 42,000uare feet a 24-Hour Fitness takes up, a small business is only 2 percent to 7 percent as big. A fitness center closing can be a profit-killing hit to a commercial landlord.

Commercial landlords will also suffer in office rentals.  Why that is in a minute.

Residential landlords

Look for unemployment and fewer hours to be a problem even after the economy begins to come back.  The PPP grants from the government require businesses to use at least 75 percent of the money for hiring back employees, but they don’t have to be the same employees they laid off.  Some business owners will use that as an excuse to hire new help, not only to get rid of the employees they would have liked to have dumped when unemployment was 3.5 percent but also to pay lower wages.

That means rents will be lower many places and vacancies higher.  It will also mean that some  existing tenants won’t be able to pay their rent, and what with some cities prohibiting evictions, there may be no rent being paid at all for some units.  In addition, look for laws prohibiting rent increases.

This will require a rethink of rental requirements  and entirely new and creative marketing to attract qualified applicants. But there’s more.  Expect more draconian laws emanating from some cities adding to requirements for “sanitizing” rental properties.

Office Jobs

Restaurant and retail jobs require physical presence at the business.  But those people who worked from home present a different scenario. A YouGov study paid for by USA Today and LinkedIn reports that productivity increased when people worked from home.  Saving commuting time was a huge factor, 71 percent, along with fewer distractions, 61 percent, and fewer meetings, 39 percent. Those figures may be suspect since YouGov uses a fixed list of paid respondents but probably representative.

Even so, business owners will take notice.  If people can work from home and be more productive than sitting in an office, why does the business need some much office space?  Look for businesses to shrink their square footage, thus making it additionally difficult for commercial landlords.

Schools

Several different options have been presented for reopening schools.  Many will result in child care problems and teacher shortages.  One idea to enable social distancing has cutting the classes in half and students coming every other day. That means child care will be required for kids every other day, assuming that parents go back to work at a physical workplace increasing child-care costs enormously. 

Another proposal breaks the classes in half and opens up cafeterias and gyms for classes.  That will require more teachers and create a problem.  After hurricane Katrina for example, the New Orleans schools closed for four months. When schools reopened in the fall of 2007, only half the teachers returned.  There’s no telling if that will be the case with the schools reopening after the coronavirus, but some older, veteran teachers may decide to stay away until there’s a vaccine or the virus is completely eradicated.  According to the National Center for Education Statistics, 23 percent of teachers are between 50 and 59 years old and 7 percent older than 60.

Government

Tax revenues have fallen because of a slower economy. The Pew Charitable Trust estimates that personal taxes, 38 percent, and sales taxes, 31 percent, account for the bulk of state funding.  If tax revenues continue falling, governments could well be in the position of having to lay off employees including even police and firefighters. 

Then there’s public transportation. According to a USA Today article May 4, “transit ridership demand has dropped 75% compared to normal,” In San Francisco, ridership has dropped 85 percent, in Detroit about 67percent and in Philadelphia 60 percent. The New York subway system is closing every night beginning at 1 AM for train cleaning.

That, of course, means more people who have trouble getting to work, are out of work and out of rent money.

The country will look far different when it reopens with more people out of work or earning less money, vacant storefronts, and businesses just trying to make a go of it before they give up and lock their doors.

Written for Zip Reports where they provide applicant screening services.

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Applicant Screening During the Coronavirus Pandemic

By Robert L. Cain, Copyright 2020 Cain Publications, Inc.

You would think that no one is looking to move right now what with the coronavirus issue, but people are.  A RentCafe study in February (of course before all the “shelter in Place” edicts began) found that 59 percent of the people surveyed said they would move “as soon as I find an apartment.”

Figure that number has decreased, but people may still look for a new place to live. To fill the vacancies we have, we need to think about a couple of things: marketing and screening criteria. To avoid contracting the coronavirus, marketing has to include how prospective tenants see a property online.  After that our screening has to take into consideration not only whether that person will be able to pay the rent now but also in a couple of weeks or a month.

First, we’ll look at here the tremendous opportunity we have to step up our marketing to set us apart from other rental owners and managers. Effective ways to get people’s attention involve presenting the property online not only with photos but with a 360 video walk-through with voice-over descriptions available. Show everything. People want a home office now, so if your unit has facilities for one, say so. They also want to have a place to work out at home, say so if your unit has something appropriate.

It’s important to do a complete showing, not just a couple of rooms (assuming that the unit is more than a couple of rooms).  In addition, post your rental requirements and standards along with the property information sheet you give your prospective tenants.

Unqualified people often will eliminate themselves if your rental standards and information sheet are worded appropriately.  One important item is the requirement that an applicant must have current verifiable income that amounts to at least three times the rent (or whatever your current demographics are), and that income must be in an industry that is not expected to close down and a job that is stable.

It is better to have no tenant than a tenant who can’t pay the rent.  While in many places you can’t evict anyone for non-payment of rent right now, you certainly don’t have to rent to someone whose income is questionable.

People want a home that is clean and “virus-free.”  Be careful here. Yes, you cleaned the place or had it cleaned and probably disinfected, but never even consider claiming that it is completely disinfected.  Should tenants become ill with the coronavirus, they could claim that they were assured that the unit was virus-free before moving in, and they got it from your property. Claiming to be virus-free is just asking to pay huge attorney’s fees.

Any prospective tenant you would be willing to rent to will want to physically see the unit before committing to renting.  We have a couple of options here.  One is to meet the party at the property, open the door, stand back, and let them do their own tour.  The other option is to have a lockbox on the door and you give the prospect the code. In this case, to protect yourself you must have fully pre-qualified the applicant with appropriate picture ID and verification of employment and income. Either way you do it, make sure to leave all the information they need to make an informed decision inside the unit along with an application form, as well as the application form online that they can submit there.

Make it easy to see the unit online and to communicate with you.  If anything becomes a hassle, figure they will go on to the next property even though yours is perfect for them. Just make sure they are perfect for you.  That involves careful screening.

Much of the screening is already done if marketing tells prospective tenants who is acceptable and the condition of the property shows that the landlord is businesslike and values his or her investment.  But there’s still lots to check.

It begins with the Primary Four requirements of every applicant, no exceptions EVER:

  1. Application must be completely filled out
  2. Must be able to verify income
  3. Must be able to verify all information on the application
  4. Must meet and see picture ID from every adult who will live in the property

But there’s more.  What you would normally do may not be enough to qualify an applicant.

What type job does the applicant have?  In this market, some jobs are simply too unstable for a landlord to take a chance on.  Restaurant and retail employees are a prime example.  If they haven’t been laid off already, chances are they soon will be. Yes, you can and should reject on the basis of the type of occupation someone has. 

Mortgage underwriters, for example, always look at the probability of continued income before they approve a loan, so there’s nothing wrong with your being concerned with the same thing. Make your applicant prove job stability in whatever way he or she is able.

What are the occupations that are least likely to be laid off?  Those that involves little interpersonal contact or is considered essential are at the top of the list. Construction workers of all kinds, landscapers, all the trades such as plumbers, electricians, and truck drivers all figure to be stable. First responders and the medical profession most likely have stable jobs, too. Good bets are also people who can work and/or are working from home.  Of course if the company they work for is about to go out of business, that is an important consideration.

But there’s more. Why is your applicant moving? It could be for any number of reasons that won’t affect their ability to pay the rent, that being a primary concern in this market. Of course the usual screening criteria apply, too.  Just verify everything as you normally would.  Why did they leave their previous rentals? Are all the owners names and contact information true?  Check county tax records for owners’ names and addresses. 

People move for reasons that have nothing to do with unstable job situations and incomes. And people move because their jobs are unstable or gone.  It’s just up to us to verify they will be good, rent-paying tenants who accurately and completely fill out the rental application.

Written for Zip Reports where they provide applicant screening services.

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Posted byu/wacgphtndlops15 hours ago

Gold

Notes from UCSF Expert panel – March 10 … no link version

MetaNotes from UCSF Expert panel – March 10

Published on March 12, 2020University of California, San Francisco BioHub Panel on COVID-19Panelists:

Joe DeRisi: UCSF’s top infectious disease researcher. Co-president of ChanZuckerberg BioHub (a JV involving UCSF / Berkeley / Stanford). Co-inventor of the chip used in SARS epidemic.

Emily Crawford: COVID task force director. Focused on diagnostics

Cristina Tato: Rapid Response Director. Immunologist.

Patrick Ayescue: Leading outbreak response and surveillance. Epidemiologist.

Chaz Langelier: UCSF Infectious Disease doc

What’s below are essentially direct quotes from the panelists. I bracketed the few things that are not quotes.Top takeaways:

  • At this point, we are past containment. Containment is basically futile. Our containment efforts won’t reduce the number who get infected in the US.
  • Now we’re just trying to slow the spread, to help healthcare providers deal with the demand peak. In other words, the goal of containment is to “flatten the curve”, to lower the peak of the surge of demand that will hit healthcare providers. And to buy time, in hopes a drug can be developed.

How many in the community already have the virus?

  • No one knows.
  • We are moving from containment to care.
  • We in the US are currently where at where Italy was a week ago.
  • We see nothing to say we will be substantially different.
  • 40-70% of the US population will be infected over the next 12-18 months. After that level you can start to get herd immunity. Unlike flu this is entirely novel to humans, so there is no latent immunity in the global population.

[We used their numbers to work out a guesstimate of deaths— indicating about 1.5 million Americans may die. The panelists did not disagree with our estimate. This compares to seasonal flu’s average of 50K Americans per year. Assume 50% of US population, that’s 160M people infected. With 1% mortality rate that’s 1.6M Americans die over the next 12-18 months.]

  • The fatality rate is in the range of 10X flu.
  • This assumes no drug is found effective and made available.
  • The death rate varies hugely by age. Over age 80 the mortality rate could be 10-15%.
  • Don’t know whether COVID-19 is seasonal but if is and subsides over the summer, it is likely to roar back in fall as the 1918 flu did
  • I can only tell you two things definitively. Definitively it’s going to get worse before it gets better. And we’ll be dealing with this for the next year at least. Our lives are going to look different for the next year.

What should we do now? What are you doing for your family?

  • Appears one can be infectious before being symptomatic.
  • We don’t know how infectious before symptomatic, but know that highest level of virus prevalence coincides with symptoms.
  • We currently think folks are infectious 2 days before through 14 days after onset of symptoms (T-2 to T+14 onset).

How long does the virus last?

  • On surfaces, best guess is 4-20 hours depending on surface type (maybe a few days) but still no consensus on this
  • The virus is very susceptible to common anti-bacterial cleaning agents: bleach, hydrogen peroxide, alcohol-based.
  • Avoid concerts, movies, crowded places.
  • We have cancelled business travel.
  • Do the basic hygiene, eg hand washing and avoiding touching face.
  • Stockpile your critical prescription medications. Many pharma supply chains run through China. Pharma companies usually hold 2-3 months of raw materials, so may run out given the disruption in China’s manufacturing.
  • Pneumonia shot might be helpful. Not preventative of COVID-19, but reduces your chance of being weakened, which makes COVID-19 more dangerous.
  • Get a flu shot next fall. Not preventative of COVID-19, but reduces your chance of being weakened, which makes COVID-19 more dangerous.
  • We would say “Anyone over 60 stay at home unless it’s critical”. CDC toyed with idea of saying anyone over 60 not travel on commercial airlines.
  • We at UCSF are moving our “at-risk” parents back from nursing homes, etc. to their own homes. Then are not letting them out of the house. The other members of the family are washing hands the moment they come in.
  • Three routes of infection: Hand to mouth / face; Aerosol transmission; Fecal oral route.

What if someone is sick?

  • If someone gets sick, have them stay home and socially isolate. There is very little you can do at a hospital that you couldn’t do at home. Most cases are mild. But if they are old or have lung or cardio-vascular problems, read on.
  • If someone gets quite sick who is old (70+) or with lung or cardio-vascular problems, take them to the ER.
  • There is no accepted treatment for COVID-19. The hospital will give supportive care (eg IV fluids, oxygen) to help you stay alive while your body fights the disease. ie to prevent sepsis.
  • If someone gets sick who is high risk (eg is both old and has lung/cardio-vascular problems), you can try to get them enrolled for “compassionate use” of Remdesivir, a drug that is in clinical trial at San Francisco General and UCSF, and in China. Need to find a doc there in order to ask to enroll. Remdesivir is an anti-viral from Gilead that showed effectiveness against MERS in primates and is being tried against COVID-19. If the trials succeed it might be available for next winter as production scales up far faster for drugs than for vaccines. [More I found online.]

Why is the fatality rate much higher for older adults?

  • Your immune system declines past age 50
  • Fatality rate tracks closely with “co-morbidity”, ie the presence of other conditions that compromise the patient’s hearth, especially respiratory or cardio-vascular illness. These conditions are higher in older adults.
  • Risk of pneumonia is higher in older adults.

What about testing to know if someone has COVID-19?

  • Bottom line, there is not enough testing capacity to be broadly useful. Here’s why.
  • Currently, there is no way to determine what a person has other than a PCR test. No other test can yet distinguish “COVID-19 from flu or from the other dozen respiratory bugs that are circulating”.
  • A Polymerase Chain Reaction (PCR) test can detect COVID-19’s RNA. However they still don’t have confidence in the test’s specificity, ie they don’t know the rate of false negatives.
  • The PCR test requires kits with reagents and requires clinical labs to process the kits.
  • While the kits are becoming available, the lab capacity is not growing.
  • The leading clinical lab firms, Quest and Labcore have capacity to process 1000 kits per day. For the nation.
  • Expanding processing capacity takes “time, space, and equipment.” And certification. ie it won’t happen soon.
  • UCSF and UCBerkeley have donated their research labs to process kits. But each has capacity to process only 20-40 kits per day. And are not clinically certified.
  • Novel test methods are on the horizon, but not here now and won’t be at any scale to be useful for the present danger.
  • How well is society preparing for the impact?
  • Local hospitals are adding capacity as we speak. UCSF’s Parnassus campus has erected “triage tents” in a parking lot. They have converted a ward to “negative pressure” which is needed to contain the virus. They are considering re-opening the shuttered Mt Zion facility.
  • If COVID-19 affected children then we would be seeing mass departures of families from cities. But thankfully now we know that kids are not affected.
  • School closures are one the biggest societal impacts. We need to be thoughtful before we close schools, especially elementary schools because of the knock-on effects. If elementary kids are not in school then some hospital staff can’t come to work, which decreases hospital capacity at a time of surging demand for hospital services.
  • Public Health systems are prepared to deal with short-term outbreaks that last for weeks, like an outbreak of meningitis. They do not have the capacity to sustain for outbreaks that last for months. Other solutions will have to be found.
  • What will we do to handle behavior changes that can last for months?
  • Many employees will need to make accommodations for elderly parents and those with underlying conditions and immune-suppressed.
  • Kids home due to school closures
  • [Dr. DeRisi had to leave the meeting for a call with the governor’s office. When he returned we asked what the call covered.] The epidemiological models the state is using to track and trigger action. The state is planning at what point they will take certain actions. ie what will trigger an order to cease any gatherings of over 1000 people.

Where do you find reliable news?

  • The John Hopkins Center for Health Security site. Which posts daily updates. The site says you can sign up to receive a daily newsletter on COVID-19 by email. [I tried and the page times out due to high demand. After three more tries I was successful in registering for the newsletter.]
  • The New York Times is good on scientific accuracy.

Observations on China

  • Unlike during SARS, China’s scientists are publishing openly and accurately on COVID-19.
  • While China’s early reports on incidence were clearly low, that seems to trace to their data management systems being overwhelmed, not to any bad intent.
  • Wuhan has 4.3 beds per thousand while US has 2.8 beds per thousand. Wuhan built 2 additional hospitals in 2 weeks. Even so, most patients were sent to gymnasiums to sleep on cots.
  • Early on no one had info on COVID-19. So China reacted in a way unique modern history, except in wartime.
  • Every few years there seems another: SARS, Ebola, MERS, H1N1, COVID-19. Growing strains of antibiotic resistant bacteria.

Are we in the twilight of a century of medicine’s great triumph over infectious disease?

  • “We’ve been in a back and forth battle against viruses for a million years.”
  • But it would sure help if every country would shut down their wet markets.
  • As with many things, the worst impact of COVID-19 will likely be in the countries with the least resources, eg Africa. See article on Wired magazine on sequencing of virus from Cambodia.

2 comments94% UpvotedLog in or sign up to leave a commentlog insign upSort bylevel 1hkmalhi8 points · 10 hours ago

This should be required reading, especially for health care professionals. Thank you for posting this.level 1GenomeShell5 points · 10 hours ago

I am glad this has been made public. There is an addendum, I believe, as follows. Names removed.

<apologies for not mentioning that the original post was a copy of notes and not official>

  • Infection rates are heavily a function of the social distancing and similar policies that companies and governments adopt.  So any point prediction is not to be relied on at this time.  Here is one description of infection rates and the observation that policy can drive as much as a 10X difference in infection rate.
  • Predictions of fatality rates depend on estimates of the number of cases in the population, which is hard to know when many people have mild or no symptoms at all.  This source describes this problem and how it can cause predictions to be overstated.  These factors undermine the back-of-the-envelope numbers I wrote about yesterday.  Instead,  look to more complete work such as The New England Journal’s frequently updated COVID-19 site…and Scott Gottlieb, the former FDA Commissioner, who writes almost daily.  As well as  John’s Hopkins’ daily updates mentioned before. 
    There’s also good news in testing capacity.  Experts now say the national testing capacity is 10 times higher than I wrote about yesterday. 
    BTW, there are substantial views that the herd immunity gained across the population this spring will prevent COVID-19 from flaring up next fall/winter. 
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Would Open Hiring Work?

  • Published on March 9, 2020

By Robert L. Cain, Copyright 2020

A mini movement is afoot. It’s one step beyond the ban-the-box edict and known as “open hiring.” That means that people with “nontraditional” work histories can get hired, no questions asked, no employment application, no background check, just put your name on the list and wait for the call. Those include ex-convicts, the homeless, drug addicts, alcoholics, refugees, those with immigration issues, and almost every other red flag an employer could run up. After the call, just show up to go to work. Is it effective? Does it actually provide jobs for the “nontraditional” employees? Or is it just a way to get cheap help and a smokescreen made to look like the employer wants to help the unemployable?

 Greyston Bakery is the original company using open hiring and has been since 1982. Recently they have been joined by other companies such as The Body Shop, Ovenly (a New York City bakery), and Hot Chicken Takeover (a Columbus, Ohio, restaurant chain). Some large companies, such as Target, Starbucks, and Walmart don’t do a background check until they have decided they might hire an employee, but that’s a far cry from actual “open hiring.”

 How it works is someone interested in a job shows up and puts his or her name on a list. The company calls when his or her name comes to the top and says “come to work.” At Greyston, they work in the warehouse stacking pallets or other jobs requiring no particular skill level. Mike Brady, CEO of Greyston was quested in a New York Times article as saying, “The candidate may not be so great at making eye contact and smiling. Does that mean he can’t stack brownies onto a pallet?” They are put on the payroll as apprentices for six months and after that time get to work as a regular employee—maybe.

 I read several articles looked at websites for more information, and Greyston in particular left me with unanswered questions. I got in touch with them, but they declined to answer these five questions.

 1.     How many apprentices end up being hired full time?

2.     How do you decide who gets hired full time?

3.     Do you ever learn what your apprentices’ criminal records are? If so, which crimes are the most problematic?

4.     How many apprentices leave before their apprenticeships are up?

5.     How many people who begin as apprentices later move into more responsible positions such as management?

 In fact, just about everything I read about Greyston looked like just PR. They tell heart-warming stories about people who have turned their lives around because they found work at Greyston. But they don’t respond to basic questions about their hiring program. Then there’s obfuscation from Dilara Casey, head of marketing at Hot Chicken Takeover. In evading-the-question style, she said, “Having a clean record doesn’t necessarily indicate that an employee is honest or trustworthy.” No it doesn’t and that’s why almost every employer screens applicants to learn, among other things, if they are honest and trustworthy.

 Screening applicants is essential not just to get the best employees but also to avoid legal problems. An article in Findlaw.com, “An Employer’s Liability for Employee’s Acts,” explains, “Employers, and not the employees themselves, will often be held liable for the conduct of their employees. This is true even if the employer had no intention to cause harm and played no physical role in the harm.” Hire someone who is a danger to the public or other employees and run the risk of a negligent hiring claim.

 Thebalancecareers.com explains, “A negligent hiring claim is made when the filer believes that the employer should have known about the employee’s background of violent behavior. In these claims, the filer attempts to prove that the injurious behavior was to be expected based on past behavior that demonstrated that the employee was dangerous, untrustworthy, a sexual predator, or a thief, to name a few possible claims.”

 Honest, trustworthy, and competent employees can be ensured by careful screening of every applicant by checking former employers, doing criminal background checks, validating college degrees, drug screening, credit checks, explanations for employment gaps, and verifying everything on the application.

 One huge concern employers, and landlords, for that matter, right now is that ban-the-box is just the beginning. In the future, look for new laws restricting our right to make sure the applicant is telling the truth and competent to do the job he or she is applying for. Several states and cities already prohibit asking about criminal records until after an applicant has been otherwise approved. We all need to be aware, though, that there are people who consider ban-the-box just a first step toward restricting employers and landlords from doing any screening so everyone has an “fair chance,” in spite of the of the fact that many people already had their “fair chance” and blew it.

Written for Zip Reports where they provide screening services for employers and landlords. Visit their website.

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New Laws Keep Landlords from Refusing to Rent to Felons

By Robert L. Cain

In Texas, if a landlord rents to a convicted felon, he or she can be sued for negligence.  No, so far it hasn’t happened, but certainly could. Granted the felony has to be one of the Sinister Seven: murder, kidnapping, trafficking in people, sex abuse, sex abuse of a child, promotion of prostitution, or aggravated robbery or burglary. For some reason drug manufacturing isn’t included even though it should be. But now, in the cities of Oakland, California, San Francisco, Seattle, Washington, Portland, Oregon, Chicago, New York, and soon Berkeley, California, you can’t even ask a prospective tenant if he or she has a criminal record, not even one of the Sinister Seven..

Laws that restrict the objective and reasonable qualifications landlords may require make it more difficult to weed out bad tenants and even more perilous for landlords’ good tenants..  The previous perpetrators of any felony are more apt to be bad tenants than a citizen who respects the law and his or her neighbors. They have proved themselves to be no respecters of the law and community.

Landlords can still reject a convicted sex offender or meth cook (drug manufacturer), but only after that applicant the criminal record shows up on a search done after a conditional approval of the application.  At that point, the landlord has to tell them in writing that he or she will be checking the sex offender database and looking for a methamphetamine manufacturing conviction.  In either, the applicant can be rejected. That is much the same as the “ban the box” laws involving employment.

Even so, landlords can use perfectly legal and effective ways to weed out any and all bad tenants.  The first task is to create iron-clad written rental requirements answering such questions as:  What is sufficient income? What is an acceptable credit score?  What is the source of income? What are acceptable references? And you can probably think of more requirements. But be careful of violating the Fair Housing Act.  We’ll look at why in a minute.

In addition, these four requirements are always essential:

  1. You must meet each adult applicant who would be moving in. None of this, “I’ll take it home for my husband to sign.”  Her husband must show up.
  2. You must verify their identity with picture ID.
  3. You must be able to verify all information on the application.  That means previous addresses, employers, income source, previous landlords, and income.
  4. Their income must be sufficient (you decide what percentage goes to rent, not them) and be proved by pay stubs or award letters.

If applicants don’t meet any one of those requirements , reject them out of hand.  None of these has anything to do with felony convictions. Rental owners and managers come across such prospective tenants every day. Suppose you can’t verify the length of time at the last address.  Your applicant might have made up the address or landlord, or may have exaggerated his or her time at that address.  That might have been because prison was the address he or she tried to hide.  That’s grounds to reject immediately for lying on the rental application.  Likewise with time on the job or source of income, no verification, no renting from you.

An easy way to check previous addresses listed on the rental application is the Social Search.  That is a report from the Social Security Administration that lists all previous addresses of that person. Suppose you find that he or she lived at an address not listed on the rental application? The explanation had better be good (an verifiable). What would be most interesting is if one of the previous addresses was the state prison, not listed, of course, on the rental application.

Now suppose all the information is verifiable, income is sufficient, and landlord references are acceptable.  You still have an one more important thing to check: the credit report. You decide what credit is acceptable and, of course, you include that on your written rental standards.  You can use a FICO score or possibly say that the applicant can have had no bankruptcies in the past seven years, or no collections, paid or unpaid.  The requirements will differ by property and the demographics of your current tenants. A felon may have unacceptable credit or no credit at all. That is grounds to reject.

What to be concerned about when renting to an ex-con is, in addition to his or her committing another crime on your property is being sent back to prison. 

Length of time out of prison is a good indicator of how someone may have turned his or her life around, too.  The first three years out of prison are the most treacherous for an ex-con.  The Bureau of Justice Statistics reports that the most common crimes that result in rearrest are property crime (73.8 percent) followed by drug crimes (66.7 percent), public order crimes (62,2 percent), and violent crimes (61.7 percent).  But after seven years the rearrest rate for all crimes drops to 2.3 percent.

Arrest rate is one thing, re-incarceration is another.  Just because someone is arrested doesn’t mean he or she is going back to prison.  CBS News reported, though, “About 43 percent of prisoners who were let out in 2004 were sent back to prison by 2007, either for a new crime or violating the conditions of their release.” 

Even so for that 57 percent, an arrest can be as inconvenient for a landlord as a re-incarceration.  An arrest means the police may keep that person in jail awaiting trial.  In the meantime, he or she can’t go to work and will lose his or her job.  Even if your tenant is out on bail, the company may fire him or her. That means no rent next month and an eviction.

In states where it is permissible to reject for a criminal record, landlords need to be cautious about running afoul of the Fair Housing Act since minorities comprise the majority of felons, The NAACP reports that “Though African Americans and Hispanics make up approximately 32% of the US population, they comprised 56% of all incarcerated people in 2015.” Tthe Fair Housing enforcers will look carefully at who a landlord accepts and rejects with an eye to looking at illegal discrimination.  That’s why completely objective and reasonable rental standards are essential.  What is “reasonable”? That’s the $64,000 question and subject to interpretation by the Fair Housing folks.  Ask your lawyer.

Landlords have a duty to their good tenants to provide a safe and habitable home and a duty to themselves to protect their investments. Careful screening of applicants to weed out bad citizens is essential for both duties.

Written for Zip Reports where they provide applicant screening services for rental owners  and employers. Visit their website.

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Retire? Maybe Not

By Robert L. Cain

A Nationwide Insurance study found that 31 is the average age people begin saving for retirement.  But will they ever be able to retire?  Are most people in a position, or will they ever be in a position, to amass enough savings to retire?  Saving for retirement is not even an option for many people.  There’s little or no money left at the end of the month to sock away anything  for savings. Yes, the statistics we’ll look at are discouraging, but there’s a flip side that is encouraging we’ll look at in a minute. Let’s look at the discouraging statistics first.

One study by LIMRA, a “worldwide research, consulting, and professional development organization”  reports that 61 percent of employees say debt has “negatively affected their retirement savings.”

The average 25-34 year old employee earns about $3500 a month reports the Census Bureau.  That’s before taxes and other deductions.  But just using that gross income figure, let’s look at where the money goes.  Average rent for a two-bedroom apartment is $1207 a month nationwide.  Of course, it’s more or less some places, but that is average, just as is income.  Then there are car payments.  A monthly car payment for a used car averages $391 a month.  Want a new car? Bump that up to $554.  That’s for one person.  A two-person household might add a second car for another $391 a month.  And that’s just the car payment.  Add gas, maintenance, other transportation and it’s another $336.

Then there are the student loans.  Those average $400 a month per person and take around 20 years to pay off.  So if someone finishes college with a bachelor’s degree at 22, the student loan will eat up $400 a month until he or she is about 42.  Grad school loans extend that repayment time and amount, assuming they aren’t paid off early. That’s if the loan isn’t put in forbearance for a time, which would obviously add to the time before it pays off.

And there’s food, and that’s another $1,000 or so.  Right now, we’re at $3334 in expenses, only  $116 before the $3500 is all gone for the month.  But we haven’t touched credit card debt.  The average monthly minimum credit card payment is $58, bringing us to about $3392.

The biggest knock after that is health care.  The “2018 Milliman Medical Index” from May 2018 reports that the cost is just over $6,000 a year for two people, double for a family of four, but even one person will pay $250 a month, and that’s even with the “most common employer-sponsored health plan.”  So now the entire $3500 is wiped out and then some.

Mind you, we haven’t touched child care, lunches, or dinners out.  Child care will eat up $200 a week per child, or $800 a month.  If it’s a couple with a child and two incomes, it’s possible, but another huge expense to deal with.

But won’t that all get better as those 31 year olds get older and they try to sock away some savings when they move up to better-paying jobs?  Not necessarily.  A LinkedIn survey of 1019 working professionals in September 2019 found that “41 percent of millennials—and 30 percent of all adults—found it difficult to move up in their fields because boomers are waiting longer to retire.” Because many baby boomers, those 54 to 74, aren’t retiring, there’s no vacancy for the higher paying jobs.  The Bureau of Labor Statistics reports that 20.6 percent of Americans 65 and older are either working or looking for work, up from 12.4 percent in November 1999, 20 year ago.  In fact, it’s the largest percentage since November 1960.

Why aren’t they retiring?  Transamerica Center for Retirement Studies reports that more than half of all workers in the US plan to keep working past 65 or just forget about retiring entirely.  After all, with their improved health, they won’t be forced into retirement and with their hammered 401(k)s from the Great Recession, their savings may be in non-retirement shape.  According to the Federal Reserve’s Study of Consumer Finances the median retirement account for people 55 to 64 who have a retirement account is $120,000.  If we include those without a retirement account, median savings are just $17,000.  Yes, they have to keep working.

A Moody’s study found that older workers failing to retire has held back wage growth.  The more workers 65 and older in a company, the more slowly wages increased and in fact the lower wages over all.

Those people who begin saving for retirement at 31 still have at least 36 years before they can retire, longer than they have been alive.  Considering their debt, which 2/3 of employees say negatively affects their lifestyle, and with the opportunity to move up in their jobs hindered by older workers not retiring, they could be on the lower rungs of the income ladder for 20 years, in their 40s and early 50s before they earn enough to think about sufficient retirement savings.

That means millennials and even many Gen Xers may be in no position to retire at 67 or even 70.  They simply won’t have accumulated enough savings to live the retired life they imagine. But some people will have the savings because they are careful savers.

Here’s the encouraging part. The Nationwide Insurance study reports that 56 percent of people have less than $100,00 in savings. But that means 44 percent have more than $100,000 in savings. The study further reports that 22 percent of employees say they are unprepared for retirement, but that leaves 78 percent, more than three-quarters, who are prepared. These are people who have found a way to put money away by whatever means.  These are the people who take advantage of matched savings from the companies where they work, either for retirement or other savings. As of 2020, they can contribute up to  $19,500. These are people who budget carefully and believe in paying themselves first. It’s hard to say what techniques they use because every person’s situation is different.  Whatever it is, it works for them and shows them to be responsible money managers.

Close to half of Americans are finding a way to save for retirement, and that is encouraging.  The other half may not be in as good a position to retire even after working 40 years.  Are those who save financially responsible? Probably. Are those who can’t save irresponsible? Not necessarily, they are just trying to get by.

Written for Zip Reports where they provide applicant screening services for rental owners  and employers. Visit their website.

 

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Slower Wage Growth Could Mean Future Problems

By Robert L. Cain

“Wage growth has hit a wall,” economist Joseph Song, wrote in a report for Bank of America.  Analysts had expected 4 percent growth but were taken aback at 3 percent and sometimes lower depending on an employee’s position.  Overall, raises ended up just over 3 percent in August 2018, down from 3.4 percent in February on their way down further.  But manufacturing wages have increased by only 2 percent, more about that and what it means in a minute. Why have wage increases showed?

Economists blame three things among others, the trade war with China, a slowing economy, weak productivity growth, and low inflation.  But two more things are often ignored, surplus workers and high corporate debt.

Surplus workers? But the official unemployment rate is at an historic low 3.6 percent. That’s misleading.  The Bureau of Labor Statistics provides another figure they call U-6 that is rarely reported.  That includes “Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons.” That also includes people who have given up finding work for whatever reason but would work if the opportunity presented itself. The unemployment figure when those people are included is 7 percent.  The official unemployment rate is called U-3 by the Bureau of Labor Statistics, and that includes “Total unemployed, as a percent of the civilian work force.”  Who’s included in the work force?  Only those with any kind of job, part time included, and those actively looking for work.

But there’s more. The labor pool has increased with 63.3 percent of Americans working or looking for work in October, the highest since 2013. That larger multitude of available workers lets businesses be more parsimonious in their wage increases.

The last two times the “official,” U-3, unemployment rate was at 7 percent were in 2008 during the recession, when it was on its way up to 10 percent in 2010 and then in 2012 when it was on its way down from recession highs.

Then,  there’s the pool of 4.4 million just part time workers who would like to be full-time workers. They mean employers don’t need to raise wages much because they are available to be made full-time at maybe current wages.  Add to that the 4.9 million, officially counted or not, who want a job but can’t find one and there is a pool of workers just wanting a full-time job and ready to work for current wages.

Interestingly enough, while all non-supervisory workers’ wages have increased an average of 3.5 percent, supervisors wages slowed considerably to 1.8 percent in October.  The reason for that is that their pay includes bonuses for meeting sales targets, reports Joseph Song.  A “sputtering economy” and lower corporate revenue because of uncertain foreign trade revenue are sometimes the cause. Not selling means lower profits in addition to lower pay.

Add to that lower productivity.  Productivity drives wages up or down.  The tax cuts helped productivity because companies bought new equipment thus increasing the amount workers could do, raising wages.  However, since early 2018, investment in equipment has slowed to a trickle as companies hunker down fearing a slower economy, slowing wage increases.

Factory employment amounts to only 8.4 percent of the workforce, but it has an imposing effect on the pay of all US workers because manufacturing workers tend to earn higher salaries than other workers do, says Joseph LaVorgna of the research firm Natixis. As mentioned at the beginning, their wages are up only 2 percent, thus dampening wage increases across the board.

Inflation drives wage increases, too, but inflation has been mostly absent.  The Consumer Price Index has been falling, or increasing at a slower rate, and stands at 1.8 percent in October.  Supposedly that’s partly due to online shopping, and expectations of lower price increases because of a “globally connected economy,” says Sophia Koropeckyj of Moody’s Analytics. More inflation of course means higher prices and so employers have to compensate workers so they can buy things at higher prices.  But low inflation means there’s little pressure to increase wages.

What does all this mean?  Different economists think different scenarios. But here’s another wrinkle to consider.  Corporate debt has skyrocketed to a never before seen $10 trillion. Even though some of this country’s best-known companies have borrowed considerable amounts, most of the borrowing this year has been by weaker, BBB Bond-rated companies.   They have borrowed money for “financial risk taking,” such as payouts to investors and dealmaking on Wall Street rather than new plants and equipment, reports the International Monetary Fund.  That means the borrowed money won’t produce any income much less profits. And they’re borrowing at rates that only the top companies could get a few years ago because the Federal Reserve lowered interest rates. These borderline companies thought let’s grab some of that with little interest but not use it to make more money and increase profits.  Disturbing thinking.

Emre Tiftik, a debt specialist with the industry association Institute of International Finance is concerned.  He said, “we are sitting on the top of an unexploded bomb, and we really don’t know what will trigger the explosion.”

The economy keeps growing, but not particularly fast, only 2.1 percent annual rate, virtually the same as the average since the end of the recession in 2009.

The unexploded bomb could go off if there’s an unexpected shock such as a breakdown of US-China trade talks, a Persian Gulf military conflict, an oil shortage, or something we just haven’t thought of yet.  Out the window would go economists’ rosy outlooks. Gregory Venizelos, a credit strategist for AXA Investment Managers in London said “You can definitely think of an Armageddon scenario.”  And last year the Federal Reserve warned about the rapid increase in risky corporate debt.

Everything may be all right, but red warning signs and klaxons are there.  Slower wage increases, surplus workers, weak productivity, slower sales and bonuses, and $10 trillion in corporate debt are disturbing.

Written for Zip Reports where they provide applicant screening services for rental owners  and employers. Visit their website.

 

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The Unconscious Tenant

By Robert L. Cain

They don’t mean to, but things just happen to them. They aren’t conniving and deceitful, just unconscious. These are people who go through their lives making one bad decision after another, who have a black cloud that follows them around raining (or worse) on everything they try to do, and who wonder why they “never get a break.”  They simply blunder through life. These folks actually may not even know what they do puts them decisively in the category of “bad tenant.”

An unconscious tenant can be, and often is, exasperating.  We know they mean well and that they don’t intentionally do all those things that make them unacceptable to live in our properties, but they do them just the same. Actions are what count far more than the intent.

What are the characteristics identifying bad tenants?

First, they don’t take care of their homes.  They can be messy, filthy, and generally unkempt, and they break things.

Second, they don’t pay the rent on time or at all.  Of course, they always have an excuse.  They call it a reason, but it is an excuse nonetheless.

Third, their qualities as neighbors come in a variety of colors and tints.  They may have loud parties.  They or their friends may park in other people’s spaces in an apartment complex.  They may get into arguments with neighbors about things other than the parking places.  Their children may run wild through and around the property.  They may leave their possessions in the common areas.  They may smoke right outside people’s windows.

Fourth, they consider property rules only suggestions.  The landlord makes up those rules only because it’s “his way or the highway.”  The idea, then, is to break as many of them as they can get away with.  The response when they are caught is to either apologize and say “I forgot,” or say “I didn’t realize there was a problem with that.”

Those are all characteristics and actions of the bad tenant, but they also are identifying actions of unconscious tenants, but not necessarily the characteristics.  The unconscious tenants’ advantage is that they are that way all the time; they can’t help it.  The professional bad tenant knows how to seem as if he’s a good citizen and especially good tenant, and can fool the less-than-careful landlord.

The advantage for rental owners comes before an unconscious tenant has ever even filled out a rental application and has had checked what pass for references.

Sometimes you get clues about the lack of quality of prospective tenants, both bad and unconscious, without their ever having lied even once. Bad tenants tend to be inconsiderate and rude as do unconscious tenants, albeit for different reasons. These six behaviors that will give you a clue the problems you will have if you rent to these tenants.

First clue: an unconscious prospective tenant walks into the unit smoking. Today, polite and considerate people don’t walk into someone else’s property smoking without asking permission–EVER.

Smoking in someone else’s house used to be permissible and acceptable, but not today. With so many states prohibiting smoking inside any public building and not even within 20 feet of the door, smoking has become anathema.  Plus, many rental properties don’t allow any smoking anywhere on the premises, inside or out.

After you tell them that you don’t allow smoking in your units, if they put the cigarette out on the floor, even if it’s concrete, that’s a sure sign of an inconsiderate boor whom you don’t want to rent to. If they flick the cigarette out the door without ever putting it out, that’s another sure sign of someone you don’t want.

Second clue: they park in front of the driveway, blocking it so cars can’t get in or out. Unbelievable gall. Figure that you would have trouble with these jerks from day one.  Count on their parking in other people’s spots, blocking people in their spots, and always asking if they can have special dispensation to deliver, load or unload something.  It will be a constant stream of complaints and irritations from neighbors about these people’s inconsiderate habits.

Third clue: unconscious people walk into a unit without knocking or saying anything. Can you believe behavior like that? It is not their home. They have not even filled out a rental application yet, much less agreed to pay the rent mostly on time and been given the keys.

What they have done is most likely unconscious behavior.  After all, they saw an open door and that means it’s okay to just walk in.  They may be trying an assumptive close, but not likely and it doesn’t work here. Their cavalier attitude about your property should immediately eliminate them as prospective tenants.

Fourth clue: they bring their or children dog into the unit and let either run wild through the unit. Figure you will have to reject them after you check their rental application. If they won’t even control their dog or children when they’re trying to get to rent from you, how do you think they’ll do after they move in?  Imagine what previous landlords will say about them. Also, figure you will have constant complaints from neighbors about one thing or another having to do with their children or dog.  We can only speculate what those complaints might entail. Older children will result in a different set of complaints than will younger ones, of course.

Just as bad will be as their children run amok through your property, the parents scream at them.  That means the children usually ignore their parents’ instructions and may be just as unconscious as the parents.

Fifth clue: if they are late for their appointment to look at the unit, they will be late with the rent.  Of course, they will have an excuse.  But you’ve heard them all, haven’t you.  If it isn’t the flat tire, it’s kids to the doctor or the all-time undefinable favorite, the “family emergency.”  Whatever the reason, consider that they are trying it out on you to see if it will work after you let them move into your property. And why didn’t they call?

Sixth clue: look at their car if you can. If it is well-maintained (and is actually theirs), you have a clue about how well they take care of the rest of their lives. Look for a missing hubcap. If one is missing, I have heard from several landlords, it is a sign they won’t take care of their homes. This could be your experience, too.

Unfortunately, I had some tenants once, who when they applied to rent the house, showed up in a cute red car in perfect condition, clean and everything.  After I rented to them I never saw that car again.  What they had was a VW bus with writing all over the sides of it.  I don’t remember what all it said except for something about peace and love and a few peace symbols.  At least it wasn’t gang graffiti. Oh, and next to the definition of unconscious tenant in the dictionary was their picture.

Here’s the point to remember when screening and even before screening: how you do anything is how you do everything. Count on any inconsiderate behavior or unconscious behavior to be a precursor of even worse behavior if those people move into your property.  Any one of the six activities above is grounds to think about immediately rejecting a prospective tenant and meticulously double-checking everything and verifying every reference. It will save you time, money, and grief later on.

Written for Zip Reports where they provide applicant screening services for rental owners  and employers. Visit their website.

 

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The Plight of the Innumerate

By Robert L. Cain

They are innumerate. That means exactly what you think it does; it’s like illiterate except with math. Give innumerate people a simple math problem such as “Which of the following numbers represents the biggest risk of getting a disease? 1 in 100, 1 in 10,” and chances are they will answer incorrectly or shake their heads and say “I’m no good at math.” Just as disturbing, they can’t tell the answer to “in the BIG BUCKS LOTTERY, the chances of winning a $10,000 prize are 1%. What is your best guess about how many people would win a $10,000 prize if 1,000 people each buy a ticket from BIG BUCKS?” They can’t deal with or calculate interest, or shipping, much less everyday buying decisions.

Many people were raised with and just accept the idea that they aren’t “good at math,” maybe as a multi-generational family tradition. But in fact they may well become good at math with some easy, self-taught education. But more about that in a minute. In the paper “Measuring Risk Literacy” by Edward Cokely, et al, they wrote. “Mathematics skills are among the most influential educational factors contributing to economic prosperity in industrialized countries.” If they don’t have the knowledge or confidence in their ability to use math to make financial decisions, people will rely on “compelling stories and emotional reactions in decisions rather than the hard facts,” wrote Ellen Peters and Brittany Schoots-Reinhard in their paper “How math skills plus confidence equals (sic) better judgment on health, money.” “They tend to make worse decisions for themselves when numbers are involved.”

Just as important is confidence. Ellen Peters wrote that even if people are competent at math, numerate, if they lack confidence in their ability, knowledge of math won’t help much. In order to find out the importance of confidence in math ability, Peters et al “measured 13 self-reported good financial outcomes among 4,572 Americans—things such as not having high credit card debt or a payday loan,” and found those with both confidence and good decision-making were much superior to those who were competent but less confident. When ability and confidence matched, 82 percent had good financial outcomes as opposed to the 18 percent who experienced bad outcomes up to and including bankruptcy filing.

Compare that to the those who had both low ability and low confidence who reported “fewer good outcomes,” just 78 percent. That doesn’t seem like much of a difference, but is, according to Peters, very much like “the difference you’d see between people who make $50,000 and $144,000, a $94,000 salary difference.”

The result can be financial decisions that will land them in difficulties for possibly their entire adult lives. Kailey Hagen wrote for the Motley Fool that “Annual fees, late fees and APRs are also important, especially for those who have credit card debt or have been known to fall behind on their payments.” The article continued that many millennials admitted they had no idea what APR means. As a result they “underestimate the expense of carrying a balance.”

Of course, that reflects on their credit scores, their ability to get car loans, better credit rates, and rent apartments, and even get a job when an employer checks credit. In many jobs, simple math calculations come into play, possibly even in warehouse jobs where figuring how much stock is left and how long it will take to deplete are essential.

Bad decisions will continue because they will rely on “compelling stories and emotional reactions” and too-good-to-be true offers for their purchases as opposed to calculating the best way to spend money. They are easy prey to less-than-ethical salespeople who will tell some compelling stories in their sales pitches, who will tell how other customers have “benefited” so much from using their products or services, who will sell them a car with a payment that uses up 30 percent or more of their income so they can “be proud driving it down the street to their house” while the math-challenged customer can’t calculate the actual cost.

Financial problems proliferate with missed payments, worse credit scores, and even financial disaster that affect their entire existence.

Some adults seem to believe that poor math skills are genetic, because after all, their parents and grandparents were no good at math. But in fact math is something that is relatively easy to learn. Starting with “Math Facts,” someone should be able to answer a basic math question in under two seconds, such as what is six times 12, or what is 10 percent of 72?  How does someone get those skills?

Readily available resources such as phone apps, flash cards, websites, allow people to practice a few minutes a day and make remarkable progress, gaining both ability and confidence in math.

How can you know your own degree of numeracy? One test cited by those who know as the gold standard over and over is the Berlin Numeracy Test. It takes less than five minutes to complete and requires pencil and paper. You can take it yourself by going to riskliteracy.org.

The essential point here is that poor math skills can and do condemn people to a life of financial misery simply because they can’t figure out if something is a bad deal. So much information comes at everyone daily that the important numerical information gets overshadowed by the “compelling stories,” “emotional reactions,” and too-good-to-be true offers concealing easy math calculations.

Written for Zip Reports where they provide applicant screening services. Visit their website.

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