As the owner of a rental property, it is essential that your buildings remain in a state of good repair, that your tenants pay their rent on time and in full, and that empty units do not remain vacant for over one month between tenants.
Given that every month a unit sits empty costs you money, many landlords rush to fill the vacancies without taking time to properly screen tenants. This is a huge mistake that can end up costing far more than an apartment that sits idle.
If you’ve experienced problems with your rental units and are looking for a simple, quick method to screen tenants, you’re in the right place.
What is tenant screening?
Tenant screening is an essential part of the rental process for landlords, property managers and other real estate professionals. It involves verifying the identity and background of potential tenants before signing a lease agreement. The purpose of tenant screening is to ensure that you are renting your property to responsible, trustworthy tenants who are likely to maintain their rental payments and take care of the property.
Tenant screening involves a variety of methodologies such as credit and criminal background checks, income and employment verification, rental and eviction history verifications, references from past landlords, and even physical visits to the rental property.
Why it’s important to screen tenants
It’s important for landlords and property managers to thoroughly screen potential tenants before signing a lease. This helps ensure that only qualified renters who meet the landlord’s requirements are allowed to live on the property. Screening tenants can also help prevent costly legal issues and protect the landlord from bad tenants.
Screening tenants is especially important in competitive rental markets, where it’s common for multiple applicants to apply for the same unit. By carefully screening each applicant, you can ensure that only the most qualified renters move into your rental property.
How to Screen Prospective Tenants
It’s essential to have a thorough and detailed screening process that can help you identify and select reliable, responsible tenants who will pay rent on time and take good care of your property. Here are our top five tips for successfully screening prospective tenants:
1. Make Applications Mandatory
Never rent to a tenant without a completed application. You can purchase prewritten applications online or you can create your own. Be sure that any application you use complies with local, state, and federal laws regarding fair rental practices.
This form should include consent for you to conduct background and criminal checks. With their consent, you can then proceed to conduct a comprehensive search. Consider engaging the services of a reputable screening company or utilizing online screening services to ensure accuracy and legality.
2. Get to Know Your Prospective Tenants
When it comes to renting out your property, one of the most important steps is to thoroughly screen your prospective tenants.
This process involves gathering information and evaluating each applicant to ensure they are reliable and responsible. Screening tenants allows you to assess if they will pay rent on time, take care of your property, and abide by all lease rules.
To effectively screen tenants, you need to get to know them and evaluate their creditworthiness, rental history, employment status, and criminal background. By following a thorough screening process, you can protect your investment and find the best tenants for your rental property.
Holding tenant interviews is a great way to gauge whether a prospective tenant will fit with your rental property. By asking the right questions during tenant interviews, you can make an informed decision about who to select as your new tenant. Taking the time to conduct thorough interviews is an investment in finding reliable and responsible tenants for your rental property.
Preparing a tailored list of interview questions ensures that you cover all the necessary areas and makes it easier to compare prospective tenants later on. Remember to comply with fair housing laws and avoid questions that pertain to familial status, national origin, sexual orientation, or any other protected categories.
3. Check Credit Scores and Reports
One important step in the tenant screening process is to check the credit scores and reports of prospective tenants.
Credit scores and reports provide valuable insights into a person’s financial history and their ability to manage their debts and obligations. By checking credit scores and reports, landlords and property managers can determine if a tenant has a history of late payments, outstanding debts, or evictions.
This information helps landlords make informed decisions about potential tenants and assess their risk of non-payment or property damage.
There are several ways to check credit scores and reports, including utilizing credit reporting agencies or screening services that provide comprehensive tenant screening reports. Landlords can also request that applicants provide proof of income and authorize credit checks as part of the rental application process. By examining credit scores and reports, landlords can ensure that they are selecting tenants who have a good financial standing and are likely to pay rent on time.
How to Pull a Credit Report on Prospective Tenants
To obtain a credit report, landlords can use a credit reporting agency or screening services. These services compile information from various sources, such as previous landlords, to create a comprehensive report that assesses an applicant’s financial reliability. Landlords can request reports that include details like credit scores, credit history, and outstanding debts.
By reviewing a credit report, landlords can determine if an applicant has a history of timely rent payments, sound financial management, and a satisfactory credit score. This information helps landlords make informed decisions about potential tenants, reducing the risk of renting to individuals who may have a history of unpaid rent or financial instability.
Understand How Credit Score Impacts Screening Process
Though the credit score is a key factor that impacts the tenant screening process, it is crucial to remember that the credit score is just one of many factors to consider when evaluating prospective tenants.
When conducting a credit check, it is imperative to obtain the applicant’s permission and Social Security number, as this information is required by credit reporting agencies. Landlords must follow legal protocols and adhere to fair housing laws to ensure they handle tenant information responsibly.
While the credit score provides insight into an individual’s creditworthiness, it is essential to look beyond this number. Evaluating the applicant’s overall credit history provides a more comprehensive view of their financial past, including late payments, outstanding debts, or a history of evictions. Additionally, considering factors such as employment history, income verification, and rental history can give the landlord a more accurate picture of the prospective tenant’s ability to pay rent on time and be a reliable renter.
4. Review Employment History and Income Verification
Reviewing a tenant’s employment history and verifying their income is another essential step in the tenant screening process. This helps landlords and property managers ensure that potential tenants have a stable and consistent source of income to afford the monthly rent.
By reviewing employment history, landlords can gain insights into the stability of the tenant’s work record and ascertain if they have a reliable job or a frequent job-hopper. Verification of income helps landlords determine if the tenant’s monthly income is enough to cover the rent and meet other financial obligations.
This can be done by requesting copies of the tenant’s pay stubs, employment contract, or by contacting their employer directly. By thoroughly reviewing employment history and verifying income, landlords can make informed decisions and choose tenants who are likely to pay rent on time and maintain a good financial standing.
Remember, it is essential to avoid relying solely on the contact details provided in the rental application for employment verification purposes. Instead, landlords should independently verify the employer’s contact details. By doing so, they can ensure they are speaking to a legitimate representative or supervisor who can provide an accurate employment verification.
5. Perform Criminal Records Searches
Performing a criminal history check is one of the most important steps in successfully screening future tenants. Doing a thorough criminal background check can provide landlords with critical information to make informed decisions concerning potential tenants. With access to public records, online databases, and other sources, landlords are able to find out whether an applicant has a criminal record or not. A landlord should never base their decision solely on the results of the criminal background check; it is important to weigh all factors, such as employment history and references.
It’s also vital you ensure you comply with fair housing laws by maintaining a consistent process for all potential tenants, regardless of their familial status, national origin, sexual orientation, or any other protected characteristic.
Understand Fair Housing Laws Regarding Background Checks
Understanding fair housing laws regarding background checks is crucial for any landlord or property manager conducting tenant screening. It is essential to navigate this aspect of tenant screening carefully to avoid discrimination claims. Federal fair housing laws, such as the Fair Housing Act, prohibit discrimination based on certain protected classes, including race, color, religion, sex, national origin, familial status, and disability.
In addition to these federal protections, some states and local jurisdictions offer additional protections, such as sexual orientation, gender identity, and source of income. When conducting background checks, it is important to be aware of these protected classes and ensure that the screening process is fair and unbiased.
To stay in compliance with fair housing laws, landlords should establish consistent screening criteria and apply them uniformly to all prospective tenants. These criteria might include credit score, rental history, employment history, and income verification. Landlords should also document these criteria and the reasons for accepting or rejecting applicants to demonstrate the non-discriminatory nature of their screening process.
By understanding and adhering to fair housing laws, landlords can effectively screen tenants while preventing discrimination and promoting a fair housing environment for all.
6. Check Eviction History
One of the most important steps in successfully screening potential tenants is to check their eviction history. By running a thorough background check, you can find out if a tenant has been evicted in the past and get an idea of how they handle rental agreements.
The prospective tenant’s credit score will show any past debt collection, which may include judgments for unpaid rent. If the tenant has an eviction judgment, you can then contact their former landlord to get more information about their rental history.
It is also important to check public records for any evictions filed against the tenant. This should include state and local court records.
While this won’t always tell you the whole story, prospective tenants who have previous evictions are more likely to have issues paying the rent or maintaining their units.
7. Limit the Number of Tenants
You can stipulate how many people may live in the unit. This may already be determined by fire codes in your area, but a good rule is no more than two people per bedroom.
8. Require a Security Deposit
Requesting a deposit in addition to the first month’s rent will give you a good idea of their financial situation. The security deposit should be equal to one month’s rent, and can help protect the landlord in case the tenant fails to pay rent or causes damage to the property. It is important for landlords to understand that security deposits are not additional income, but rather a safeguard which they may draw upon if needed.
Landlords who properly screen tenants can eliminate many problems they faced in the past.
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Need more tips for navigating the rental market? Check out our other articles, like ‘Multi-Family Lending: Ins and Outs of Hard Money Loans‘, ‘How to Get Your Multifamily Property Ready for Winter‘ and ‘The Pros and Cons of Investing in Real Estate‘.