{"id":20616,"date":"2011-03-31T12:53:52","date_gmt":"2011-03-31T19:53:52","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=20616"},"modified":"2021-03-16T09:49:05","modified_gmt":"2021-03-16T15:49:05","slug":"2011-03-31-screening-tenants-primer","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/2011-03-31-screening-tenants-primer","title":{"rendered":"8 Essential Tips for Screening Tenants"},"content":{"rendered":"

I am sure you have heard this saying regarding real estate deals… “some of my best deals, were the ones I didn’t do”?<\/p>\n

The same can be said for tenants as well.\u00a0 “Some of your best tenants are the ones you didn’t accept.”<\/p>\n

The problem with selecting tenants is that your selection process can’t be arbitrary or emotionally driven.\u00a0 Well, it shouldn’t be unless you want to find yourself at the mercy of a judge\/jury.<\/p>\n

Listen closely. For every landlord, the process of selecting a tenant is the most critical action\u00a0you could take.<\/strong><\/p>\n

It is more important then location, purchase price and probably even rent amounts.<\/p>\n

WHY???<\/strong><\/p>\n

Simple. if you choose the right tenant you will most likely get your rents on time every month, your property will be well maintained, and the neighbors will love you.\u00a0 If you choose the wrong tenant, well, your life will be pure hell and you will end up paying the mortgage until you can get rid of your tenant.<\/p>\n

So… your objective is to find good qualified tenants… but as the saying goes “you have to kiss a lot of frogs to find the prince”?\u00a0 And, that means having to Say No <\/strong>to many more applicants then you accept.\u00a0 In fact, you find yourself accepting most applicants you are either extremely lucky or your market is a landlords utopia.<\/p>\n

The question becomes is this: how do you Say No<\/strong>?<\/p>\n

Well, actually the NO part is easy.\u00a0 It’s all of the reasons and justifications that become the hard part.\u00a0 The reason being is that when selecting a tenant the number of housing laws that come into play can be significant.\u00a0 From a housing prospective almost every tenant is in a protected class… and there are\u00a0activists in every community that will constantly test how landlords go about accepting\/declining tenants.\u00a0 And, if you are not doing things correctly… you will have wished you did.<\/p>\n

There are several key elements that every landlord must adhere to when screening tenants<\/a> and selecting\/declining them.\u00a0 While the list below is by no means the complete list, it should get you started.<\/p>\n

Screening Tenants: 8 Steps for Finding, Checking Backgrounds & Selecting Your Tenants<\/h3>\n

1.\u00a0 You should have a set of written criteria that every applicant must meet to be accepted.<\/strong>\u00a0 These criteria might include verifiable income 3 times the amount of the rent, or a credit score of 6oo or above, or never been evicted or been in rent court.\u00a0 You get to determine your criteria (within the bounds of local\/state\/federal laws) and once you have them apply them consistently.<\/p>\n

2.\u00a0 You need a formal application process that includes an application that is completed by the prospective tenant.<\/strong>\u00a0 Important information to include: personal information (name, current address, SSN), to name a few) for everyone over 18 years old who will be living in your property.\u00a0 Current and\u00a0last two landlords.\u00a0 Current and last two employers.\u00a0 Next of kin, vehicle (make, model, license number)., etc.<\/p>\n

3.\u00a0 Charge an application fee.\u00a0<\/strong> Be sure to know what your\u00a0local laws are regarding application fees.\u00a0 Some location allow them as long as they are reasonable and most will allow you keep these fees if the tenant is turned down.\u00a0 The\u00a0application and the fee to submit an application is the first hurdle a tenant must\u00a0get over… if they don’t make that first hurdle they have taken themselves out of the running.\u00a0 Also, our application specifically states\u00a0that the application must be completed in its entirety and if it isn’t the prospective tenant will not be considered.<\/p>\n

4.\u00a0 Get permission via a separate document to pull a credit report… and then do it\u00a0every time.<\/strong>\u00a0 The importance of a credit report cannot be overstated.\u00a0 The obvious purpose of a credit report is to determine the credit worthiness of prospective tenants.\u00a0 However, in today’s climate with so many new renters coming into the market due to\u00a0foreclosures, the chances of them having high\u00a0credit scores\u00a0are slim.\u00a0 But, the two things a credit report will quickly help you to assess is… do the SSNs and street addresses match and are there utility judgments against the prospective tenant.\u00a0 The SSN and street address mis-match is a great way to catch someone trying to hide something and of course\u00a0if there are utility judgments you should be concerned whose name will the utilities be in once the tenant moves in.<\/p>\n

5.\u00a0 Get permission to contact current and past landlords… and do it.\u00a0<\/strong> You would be surprised at the number of tenants looking for a new place to live… right now, that haven’t notified their current landlord of their intent to move.\u00a0 Do you think they will treat you any differently once you become their landlord?\u00a0 Don’t count on it!<\/p>\n

6.\u00a0 Get permission to contact current employer(s).\u00a0<\/strong> You will find that\u00a0both current landlords and employers\u00a0don’t want to answer open ended questions.\u00a0 It is best to develop a form that can be provided to these parties that ask direct questions that when answered will provide you with the information needed to make\u00a0informed selection decisions.<\/p>\n

7.\u00a0 Visit prospective tenants in their current home.<\/strong>\u00a0 While I know this could be a logistic nightmare… whenever we did this and we selected the tenant based on this visit and of course the other criteria, we always had a very profitable outcome.\u00a0 Just consider… you show up at the prospective tenants current home with one last piece of paper to sign and you walk into a full-blown over-the-top party in progress.\u00a0 It that the kind of tenant you want in your property?\u00a0<\/p>\n

8.\u00a0 When you finally get around to saying NO… always do it in writing.<\/strong>\u00a0 Make sure that you provide the reasons for declining this tenant, whether it was income, your site visit, landlord input, etc.\u00a0 If the reason had anything to do with the information on their credit report you must identify what agencies you used.\u00a0 The key to the tenant selection process and in making the determination to say no… is that you must be consistent.\u00a0 You cannot let your emotions factor into you decisions… and if you develop and consistently use robust criteria you will never have to deal with tenants who become your worst nightmare.<\/p>\n

Remember that if\u00a0 you are doing your job correctly you will be declining many more tenants then selecting… so do it right!<\/p>\n

Best of luck!<\/p>\n

Advertisement:<\/b>
\n Screen Your Tenants Fast & Easy with BiggerPockets SmartMove<\/a> – No Approval Process. No Applications. No Minimums. For independent landlords. Begin screening in minutes. Credit, criminal, fraud checks.<\/i><\/font><\/p>\n","protected":false},"excerpt":{"rendered":"

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