Landlording & Rental Properties

10 Not-So-Obvious Ways to Thoroughly Screen Potential Tenants

Expertise: Landlording & Rental Properties, Real Estate Investing Basics, Personal Development, Business Management
33 Articles Written
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As a property manager and landlord, I have learned that screening can be the most important element in owning a rental property. Picking the right tenant on paper and in character sets the tone for the next 12-24 months for your investment. This means if you have a great tenant with a smooth system in place, you will have an easier relationship with your property manager, easier time self-managing, and/or you will stay motivated to continue to invest in more passive income generating properties.

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In realizing how big the leasing/screening step is, we maximize our marketing efforts to make sure we have the exposure to reach the top tier tenants we want to attract. Once we get them through our units and they love our homes, we then swoop in with our screening process that sniffs out red flags and brings truths to the service to eliminate junk applicants fast.

Below is 10 key components to our screening process that we complete with every applicant.

10 Not-So-Obvious Ways to Thoroughly Screen Potential Tenants

1. Request cleared past rent checks.

Since applicants can put anyone down under their previous landlords contact, we came up with the idea to request the most recent three cleared rent checks, front and back. This is assuming they are currently renting.  These cleared check copies tells us the following:

  • Who they are writing their checks to.
  • If the amount matches what they say they are paying and if the amount is the same each month.
  • What day the checks are clearing in the bank. If they are clearing by the 5-8th each month, it is safe to say they paying on or close to the first.

In this day and age with paying through online tenant portals, we request an online payment history and the matching bank statements to line up.

When a tenant says they pay cash, that is a red flag and we request the bank statements that reflect the withdraws, which is usually the end of that applicant.

Related: The True Cost of a Bad Tenant: Why You CAN’T Afford Not to Screen

2. Check the tax records.

You can check the tax records to verify the records of landlord provided by the tenant. But if the tenant says that they have been writing checks, it should raise red flags.

screen-tenant

3. Obtain an eviction report.

This is the best thing that has happened to landlords in the last decade when it comes to screening. With the help of most of the screening companies or online through the county you live in, it is now easy to see if an applicant has ever been filed on for eviction. You can find judgements on credit reports with this, but most landlords never take it that far, so that applicant’s next three landlords would not realize they were less than perfect tenants until it was too late.

4. Get pictures of pets.

Request recent, clear picture of all pets. This will prevent the 35 lb lab mix from becoming the 80 lb pit bull at move in. Pets are not always a bad thing, so seeing a picture of a pet can make you as the screener put your pet guard down a little and treat the deal fairly.

5. Obtain a copy of their driver’s license.

Requesting a clear, color copy of the applicant’s driver’s license will allow you to verify the address to check whether it matches all other documents from the application or not. It shows when the DL was issued and verifies the date of birth. It also allows you to match up the applicant online with social networking sites, such as Facebook, LinkedIn and Twitter, to learn more about them if necessary. The picture will help you make sure you have the right guy.

6. Perform online research.

The Internet has done wonders for screening, and in the world we live in today, we can learn so much just from Facebook and LinkedIn. Facebook offers a huge insight, and LinkedIn can sometimes show you people you might have in common with the applicant. This allows you to reach out the common connection as another insight to the applicant’s character and verify they work where they say they do.

7. Collect application fees.

We take application fees ($50 per person over 18) not as a profit generator, but as a means to cover the costs associated with screening reports. More importantly, the fees serve as a level of commitment to the property.

I spent the first 6 years not taking an application fee, and multiple times per year an applicant would go through the 24-48 hour process, we would approve them, and they would be gone.  Maybe they found another rental or they just realized they didn’t like our unit. An application fee makes applicants think hard before they submit the application, and if they do pay the application fees and then back out, at least your costs are covered.

On the other hand, it is important not to treat it as a revenue stream because you don’t want to build a reputation of taking application fees and not accepting time and time over. We will often refund applicants’ fees if they are not selected, to be fair. We will keep them if they lie on their application or if they back out.

8. Aim for a quick turnaround.

Moving is stressful whether you are 21, 44 or 66. It is a lot of pressure to take everything you own and move it somewhere else — sometimes far, far away. In this renters’ market, it is also stressful as an applicant going up against sometimes 5 or 6 other applicants on the same property. When a tenant submits an application, make sure you inform them of your expectations of how long your underwriting will take. Try to get your questions back to the tenant within the first 24 hours and demand a quick turnaround from them as well.

tenant-screening

9. Understand their reasons for moving.

It is important to understand why they are moving. Are they moving because their place is too small or their work is too far from where they are now? As a screener, it is important to make sure your unit is larger and considerably closer to their work. Otherwise, they will be out looking in 11 months again because they didn’t realize they were making the same mistake again.

Related: The Ultimate Comprehensive List of Tenant Red Flags

10. Provide verification of terms.

It is important that the tenant is on the same page with the terms you are expecting. Yes, all those terms will be in the lease, but people don't always read leases, and you may miss something when you prepare the lease, so what we do is send out an email called "Rental Acceptance Term Email." This email is a summary of the terms included, such as rent, deposit, term, who pays what utilities, parking, etc. In this email, we also attach the condo association rules and regulations and our tenant expectation handbook. We make the applicants reply to the email that they agree with the terms and the attachments. Even though it will all be in the lease, this email will prevent issues down the road.

Of course, there are a bunch of additional steps we take, like calling and verifying employment, calling previous landlords and looking up any other historical public records, but the 10 points above are processes that have changed our company and many others who have learned from our experience. The fact of the matter is creating passive income needs work. If you want your rental property to provide a constant cash flow, you will have to screen the tenants diligently or you might end up with a lousy tenant.

[Editor’s Note: We are republishing this article to help out our newer members.]

Landlords: What above-and-beyond steps do you take to thoroughly screen your tenants?

Leave your tips below!

Mark Ainley is an investor, managing broker, and property manager with almost two decades of experience in real estate. Mark found his way into real estate by purchasing and flipping condominiums prior to the great recession, and since, he has built his own portfolio of rentals alongside co-founding GC Realty & Development LLC (GCR&D), a full-service real estate brokerage, property management and investment firm, and GC Realty Investments (GCRI). He has rehabbed and stabilized over 450 properties and currently manages over 900 investment properties throughout the Chicagoland area. Mark was featured on CNBC’s TV show The Deed, which chronicled one of his rehabs. He has also been featured on podcasts like The BiggerPockets Podcast, The Real Estate Mogul Podcast, Joe Fairless, REI Diamonds, and Positive Phil.
    Sylvia B. Rental Property Investor from Douglas County, MO
    Replied almost 3 years ago
    I’d say forget about checking previous landlords’ tax records. (If that’s what #2 really means. It makes no sense as written.) As a landlord, there is no way I’d give someone – especially someone I don’t know – my tax records, just because a former tenant of mine wants to rent from them. “You say you want proof that I’m Joe Blow’s former landlord and need to see my tax records? Yeah, good luck with that.”
    Kimberly H. Residential Real Estate Broker from Chicago Suburbs, Illinois
    Replied over 2 years ago
    That should probably say, check the tax records of the house, and see if the person the tax bill gets mailed to is the person the applicant is claiming to be the landlord.
    Louis Presley from Cresson, Texas
    Replied almost 2 years ago
    I have been a landlord for 35 years and at one time owned nine SFH properties. I ask a lot of questions (quite the gauntlet) from the start and I never even get to the application phase unless they pass this part of the interview. After a while it gets pretty intuitive on how to peel back the layers of the onion. Also, I never meet with anyone to show a property. They call, I ask questions, if they pass I tell them were the key is and they tour the house while on the phone. If they want to rent the house I tell them in which cabinet to find the application. I let them know that they need to fill out the application before we meet and that I will need a picture of their DL and their SS# and that the fee is $50 per applicant (sorry Katie it’s about quality of life, mine). Then they drive to me, a Subway about 1.3 miles from my house. I meet with them and review the application and ask more questions. If I like what I see (their dress, their transportation, general demeanor, etc. etc.) and what I here I also fill out the lease but I don’t sign it. If I am disappointed I just take the application and don’t even collect the application fee. I send the app to tenant screening and if everything checks out I sign the lease and email them a copy. They must reply back acknowledging that they received the lease. Over the years I have been asked if rental property is a “good deal”. My answer is always the same. It’s a great deal and you can build true wealth and financial independence. But, every business has its key elements that are critical for success. For rental property it’s tenant selection. You can have a nice house in a great neighborhood but if you have a bad tenant it’s problematic. Conversely you can have a crappy house in a low end location but if you have a responsible tenant it’s manageable. It’s all about asking questions. Louis Presley Cresson TX
    Katie Rogers from Santa Barbara, California
    Replied almost 2 years ago
    Sorry Louis, but you would fail my landlord screening, (Yes, I screened landlords when I was a tenant–fancy that). In this day of identity theft, nobody should give the Drivers License number or Social Security number out cavalierly. And $50 application fee is ridiculous. There is rent and then there is rent-seeking. In my experience, the worst landlords were the ones who took undue advantage of the power differential of the relationship. A landlord who makes these sorts of demands simply because the relatively weak tenant needs a place to leave right at the beginning of the relationship is likely to prove to be a difficult landlord to get along with. I was a great tenant. I expected mutual respect and appreciation. Tenants should not have to resent every rent check they write or tolerate nonsense simply because they need a place to live. “Tour the house while on the phone?” I use a landline. I don’t really like cell phones, and I like them even less now since companies have been withdrawing support from their older, non-smartphone type models. It seems like you are severely limiting your supply of great tenants—no international students or immigrants, no one without a cell phone, and anyone concerned about protecting their personal information. Maybe you have to be strict because your tenant pool is not as good as it could be.