The Definitive Guide To Tenant Screening
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Tenant screening is one of the most crucial aspects of being a profitable landlord. It is easy to let a renter live in your rental unit. However, if they stop paying rent, run up huge bills, or cause damage, you will have big bills to pay—either a costly eviction, property repair, or offering a cash for keys deal.
When you get a responsible tenant, you might still have the odd problem. However, you’ll probably never have issues with collecting rent on time or property damage.
How can you ensure you rent your properties to the right type of tenant? Tenant screening is an absolute must if you want to avoid a bad tenant.
Of course, you can pay companies to find the right tenants. But it’s not a difficult task to screen tenants yourself. This gives you a much better idea of who will be living in your rental units. There are also some top-class rent collection apps that incorporate tenant screening in their features.
The article aims to guide you through the process of tenant screening.
The Tenant Application
Before the screening begins, your first step is to collect the tenant’s application form. The application form should contain enough information to get a general idea of the prospective tenant. Make sure the application contains employment history and rental history. You also need to collect financial information, such as income and expenses, to ensure they have the resources to pay rent.
You should have contact information for previous landlords and employers so that you can confirm what the tenant has stated. Finally, with regard to the application, watch out for gaps in employment or accommodation history. These could be a red flag, as they may want to keep incriminating information from you.
Now that you have a complete application, you can begin the tenant screening process.
It’s usually best to get the tenant to pay for the screening process. This gives you permission to check their credit history, any previous evictions, and criminal background. However, it’s always best to check with your state’s law on what you can and can’t check.
5 Steps When Screening Potential Tenants
Here are five things you must check during the screening process.
1. A credit check
A credit check gives you a solid idea of whether a tenant consistently pays their obligations on time. You can see their credit history and the level of current debts. Credit scores can range from 300 to 850 (300 being poor and 850 being well above average). Ideally, you want your prospective tenant to have a credit score of around 600-650 or above.
There are a couple of things that can impact a credit score that some landlords choose not to take into consideration. For example, previous homeowners tend to be exceptionally good renters. The reason for this is because they understand the responsibilities of homeownership. This fact can compensate for a late mortgage payment.
Medical bills can also complicate things. If a poor credit score is because of medical bills, you might not want to regard this as quite so significant. Hospital and medical bills can run up into the thousands very quickly and it is common for people not to have this money available straight away.
Different credit bureaus have different scoring systems. You should look for a full credit report that gives you the tenant’s FICO score, as this contains rental payment history.
2. A criminal background
There are different types of criminal reports. But a landlord’s favorite is a nationwide criminal history. This is mainly because it is one of the easiest to get as long as you have the tenant’s correct full name and date of birth. And it is essential that you get this information right because criminal reports are searched for on name and DOB, not social security numbers. The best way to confirm this is by taking a copy of some form of photo ID.
It is also worth comparing any criminal record against the tenant’s address history. This helps to confirm they were living in that state or city at the time of the crime.
Be incredibly careful about what you do with the criminal report you have obtained. In fact, before you even consider a criminal background, you need to check federal, state, and local laws. There might be limits as to what you can do with the information collected and some states won’t even allow you to use criminal records as part of tenant screening.
3. A history of evictions
Evictions are extremely costly—not to mention, time-consuming. So it is crucial to find out if your tenant has been evicted from any other rental properties. If a tenant hasn’t paid their rent and the landlord asked them to move out, as long as they comply, the eviction won’t show up on the report.
When a tenant refuses to move out, landlords need to take legal action, which can take weeks or months to evict a tenant. All this time, you may not be collecting income on this property adding to your losses. You might want to ask the tenant about the circumstances around the eviction. After all, there are more reasons for eviction than not paying rent.
4. Contact references
References give excellent insights on potential tenants because you can ask questions that won’t appear in reports.
For example, previous landlords will be able to tell you how the person left the property, whether there was any damage, or if there were any problems with neighbors.
Employees can confirm that the tenant is employed but they will not be able to give you specifics that you can find on paystubs. Checking references gives you the chance to confirm that what the applicant has stated is true.
5. Tenant interviews
You must be careful about the questions you can and can’t ask a tenant. According to the Fair Housing Act, you cannot discriminate based on race, gender, religion, color, disabilities. However, you can ask about whether the tenant has pets, smokes, their work schedule, or if they are planning to have a roommate at any point.
Rent Collection Apps to Help the Tenant Screening Process
If you are using rent collection apps, or you are thinking about using one, the best apps have more than the ability to just collect payments. Check with all the features the rent collection app must make sure you choose one that has the option to carry out credit and background checks.
There will likely be some fees involved but the same would be said if you obtained them independently. Using an app to carry out your tenant screening helps to streamline the process and keep all your rental data in one place.
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