Having a consistent and thorough screening system is one of the most essential aspects of being a successful landlord. Being able to properly screen a potential renter can help reduce many risks involved in property rental.
Any prospective tenant can act like they are the best tenant in the world at first. However, those who want to ensure that they are getting the best type of renter will screen every potential tenant before allowing them to sign the lease agreement.
Here are some tips that can help property managers find the right renters for their assets.
1. Request an Application
One of the first steps to take is to have prospective tenants complete an application. Make sure that the application covers everything important about the tenant.
For the best results, select an application that encompasses personal, financial, and employment information. Ensure that it plainly states if a criminal history report, background check, or credit check are necessary and that the potential tenant grants authorization for them.
Consider including the following information on your tenant application:
- Current income level: Can the income of the tenant cover the rent, including normal living expenses?
- Current and previous employers: How long has the tenant been employed at their current job? Have they switched jobs multiple times in the past few years?
- Landlord references: Contact information from previous landlords, listed with previous addresses, reasons for leaving, and amounts paid in rent. Look for gaps in rental history or missing contact details from any of their past landlords.
- Financial details: This can include information for a credit check and information about credit cards and bank accounts. This should include minimum monthly payments and balances. Having this information ready helps provide a financial picture for potential tenants while providing insights into their ability to pay rent regularly.
- Lifestyle details: Ask for details such as the number of occupants and size of pets. Find out if the tenants are smoking or non-smoking.
- Personal references: The application should also include personal references with names, phone numbers, and length of acquaintance.
Tell a prospective tenant to complete the application form and send it back. Ensure that the form has been reviewed before starting the screening to ensure that the prospect has not excluded any essential details. Missing information could be a sign that they are hiding something.
2. Perform a Credit Check
Some states have laws that allow landlords to charge a potential tenant for the cost of ordering a background or credit check. Other states require landlords to cover the expenses.
Whichever the case, it is a good idea to obtain the credit history of a tenant. A credit check allows landlords to view the details of a tenant’s credit history, which can go back seven to ten years.
Consider these when reviewing a credit report:
- Credit history: Identify any history of late payments, charged off credit card accounts, collection accounts, or major problems such as bankruptcy. While a couple of late payments does not immediately imply a bad tenant, landlords may want to reconsider accepting someone with major delinquencies.
- Current debt: Tenants who have maxed out their credit cards, have several unpaid balances, or carried hefty loans may have a hard time keeping up in paying rent.
3. Do a Background Check
Background checks provide property owners with an in-depth report concerning the past of a potential tenant. Some companies provide investigative services for a fee. They can also provide information regarding criminal history, eviction history, credit history, and other public records. Usually, these reports can be ordered through the social security number of a tenant.
Consider the following to properly screen a potential renter:
- Criminal records: Although a youthful indiscretion can be overlooked, landlords may want to pass up on tenants who have serious or lengthy criminal records. Allowing a known criminal in a property could put other tenants in danger.
- Evictions: If a potential renter has been recently evicted, a landlord may want to reconsider having them rent their property. Alternatively, it is possible to ask for more details concerning the eviction.
- Public records: Tenants who have been sued in the past or involved in a legal battle will have this information show up in their background check. Prospective tenants who have been sued for unpaid child support, unpaid rent, or other serious financial matters are not ideal. These things could be an indication of a pattern of nonpayment.
4. Talk To Previous Landlords
Usually, when current landlords call former ones, they only ask if the tenant has paid all due rent and if they were aware that their tenant was moving out. Landlords need to dig deeper than this to get a real sense of a possible tenant.
Although the goal is not to invade privacy, asking some of the basic questions concerning tenant lifestyle is important.
Here are the questions to ask:
- Does the tenant owe any outstanding debt?
- Do they have a history of late payments?
- Have they caused any major damage to the rental property?
- Have they disrupted the neighbors or caused any problems while living there?
- Did they qualify to receive their security deposit when moving out?
- Would you let the tenant rent in one of your properties again in the future?
5. Contact the Employer of the Tenant
It is vital to verify that the tenant has a reliable and steady source of income before allowing them to sign a rental agreement. There are two ways of ensuring this. The first is to ask the tenant to provide a copy of a recent pay stub. The second is to contact the employer directly to learn more about them.
Do note that not all employers would readily provide salary history details and other private information about a tenant. However, the employer can inform whether the tenant is a current employee or not.
6. Interview the Tenant
Once all of the background details of a tenant seem good, the next step is to do a quick phone interview with them. Usually, when showing a rental property to a new tenant, landlords often focus on the property instead of the potential renter.
Giving these prospective tenants a call makes it possible to learn more about them, including their lifestyle. It is important to remember that the Fair Housing Act states that landlords cannot discriminate based on disability, family status, color, race, religion, sex, or national origin.
Here are some questions to ask a tenant during the phone call:
- Do you have any pets, and if so, how old are they, and have they been housebroken?
- Do you plan on adding a roommate in the future?
- What is your normal workday like? Do you work odd hours or night shifts?
- Do you smoke, and if so, do you do it indoors or outdoors?
- Do you have relatives or friends who may spend the night frequently?
Turning away a qualified candidate based on criteria that is illegal or asking inappropriate questions can be grounds for a possible lawsuit. It is good practice to apply the same questions to every potential renter.
7. Accept or Reject the Potential Tenant After Screening
Once you have covered all your bases, it is time to make a decision. The sum of such compiled data is going to point towards whether accepting or declining them is the right choice.
Acceptance criteria for tenants may include:
- Stable work history with solid time spent on the current job
- An income that meets or exceeds the rent requirements
- Income that has been verified based on the current employer and/or tax returns
- A positive credit history
- A clean criminal background with no misdemeanors or felonies
- Favorable landlord histories and prior residence
In most cases, it can be difficult to find an ideal candidate. However, landlords can scrutinize the whole package of these characteristics. If one area is a little less ideal than expected, yet the others look good, the candidate may have the potential to be a good renter.
Sometimes, landlords may be inclined to rely on their gut when screening an applicant that may look bad on paper but appears to be a nice person. Many property managers have suffered from giving a tenant a chance when the verifiable details informed them otherwise.
Look at the whole package and not just the personality of the applicant.
Landlords need to screen their potential tenants since there are many risks if they fail to do so. After all, it is no pleasant experience to go through the processing of having to evict a tenant.
Yet this does not mean that landlords have to become a private investigator every time someone sends a new application.
It is important to get a feel of the tenant and back these instincts with the hard facts concerning their background information and credit report. Try not to overstep boundaries, as these can put any landlord at risk of breaking privacy laws.
When landlords have a system to properly screen a potential renter, they can pre-qualify tenants and improve their chances of identifying the best candidates.