4 Tips for Screening Tenants for Your New Rental Property
As a real estate investor, your role as property manager requires you to understand the importance of screening tenants to the future of your returns on an investment is as significant as the property’s location.
Just as you must perform due diligence before investing, you must perform thorough tenant screenings to protect your income stream, the property, and other tenants. So read on as we reveal four great tips for screening tenants for your new rental property.
The first filter in screening tenants for your new rental property is the application you use for potential tenants. You’ll want to ask for proof of identification, pay stubs, or bank statements to prove income, their social security number, and signed permission to run credit and background checks. You’ll also want to ask for references from prior landlords. Many landlords charge an application fee to offset the costs associated with the application process.
There are several federal, state, and local laws governing the landlord-tenant relationship, including the process of screening tenants for your new rental property. While there are exemptions, from the advertising you place to market the property, to limits on application fees, to fair housing laws, you must understand these guidelines to avoid facing severe penalties. Therefore, it’s always advisable to seek the guidance of experienced professionals in the real estate industry as a further guard against making expensive mistakes.
It is well worth taking the time to conduct a personal interview when you are screening tenants for your new rental property. However, it’s best to have a script to follow which remains within legal guidelines to protect yourself from asking the wrong questions. It is not possible for everything that adds up to excellent tenant placement to be on paper. Your real estate investments are your business; the difference, the applicants you approve will pay your current income, help you build your wealth, and provide you with the foundation for a secure income in retirement. Because the placement of the wrong tenant can be costly, you must get a good feel for the tenant before doing so.
Background and References
Once you’ve received the application and conducted the interview, there is one step remaining in screening tenants for your new rental property. You must follow through with thorough background and reference checks. Regrettably, landlords often understand the importance of this step when faced with the consequences of their failure to act. Not only could you have lost income from missed payments, there are turnover costs, legal fees, and the hassle of evictions to deal with, but they could also cause property damage or even cause other tenants to leave the premises.