How to Hone Your Screening Process to Ensure Better Tenants

by | BiggerPockets.com

Over the course of my real estate investing career, I’ve had some great tenants. One of my best tenants is a woman who has lived in one of my properties for almost 20 years. She gets along great with my property management team, and I rarely hear from her.

Unfortunately, I’ve also experienced my share of tenant horror stories. This includes everything from a tenant burning the basement steps and floorboards as firewood to a DEA drug bust and even a tenant shooting a police officer. In that last case, a SWAT team came in and destroyed the unit with teargas canisters and battering rams.

Although some of these tenants may have already been in the property when I purchased it or lived in properties I managed for other investors, you should know that these situations are less common and in many cases can be avoided.

Screening or vetting potential tenants can help prevent tenant horror stories, reduce the frequency of landlord headaches, and minimize the cost of fixing any damage. Plus, through building relationships, you can attract more and better applicants.

So, where do you start? Let’s take a look at the screening process.

Tips for Screening Applicants

Even if you’ve tasked your property management company with screening your potential tenants, the final decision can still be made by you, the owner, if that’s your arrangement. After all, it’s going to cost you much more than it will the property management company if the wrong tenant is placed in your property.

Personally, in order for a candidate to even be considered, I require him/her to complete an application and provide photo ID, as well as proof of finances (whether that would be proof of employment or a copy of their Section 8 voucher).

Similar to qualifying someone for a mortgage, when you’re screening an applicant, you’re often looking at their level of financial stability.

For example, you may run a credit report to see if they have judgements against them or bankruptcies on their record. Also, you may run an eviction report or contact their previous landlords in order to verify that they weren’t evicted and paid on-time.

There’s also the criminal background check, which will enable you to verify information the candidate provided on the application, especially his/her answer to the question, “Have you ever been convicted of a felony?”

Now, whether you’re running these reports yourself or your property management company or an outsourced tenant screening service is doing it on your behalf, it’s still cost-effective, especially when you consider the potential cost of getting a bad tenant because you didn’t check them out thoroughly.

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Related: How to Attract and Keep Above-and-Beyond (Not Just Mediocre) Tenants

Also, remember that charging an application fee can minimize these costs.

Besides these reports, landlords also look at things like the number of occupants and whether they have any pets, as this may help predict the level of wear and tear. Plus, some townships adopt building codes that limit the number of safe occupants. Some landlords even do a home visit to see where the applicant is currently living and what condition it’s in.

Even if you use all of these strategies, it doesn’t necessarily mean that you’ll have great candidates to choose from. What if the real problem is that you simply don’t have enough quality applicants?

How to Attract More & Better Applicants

I’ve employed a number of strategies over the years not only to increase demand but also to manage my time more wisely. For example, when I was a property manager, I would schedule all of my appointments at the same time, similar to an open house. This showed the interested parties that there was competition for the lease, and it allowed me to zero in on the more serious candidates.

Eventually, you’ll probably get tired of dealing with tenants and repairs yourself, and when that day comes, don’t forget to build great relationships with your property managers.

I never wanted to be the type of landlord that property management companies hate to work with. You know, the landlord who never, ever wants to fix anything and harasses them about keeping costs low while doing the absolute minimum to maintain the property.

Related: 5 Ways to Deal With a Tenant Owing You More Than Their Deposit Will Cover

Of course, I’m all about saving money, but I’ve also learned over the years that if you set reasonable expectations for your property management company and you are cooperative and responsive, more often than not, they’ll do a good job for you. If you allow them to keep the property in decent shape, they’ll be more inclined to show your property to potential applicants. After all, it’s easier to sell a potential tenant on a well-maintained property.

It’s also important to maintain that quality working relationship with your property management company, as they are your first line of defense when it comes to tenant screening.

Plus, if you’re a good landlord, your current tenants may even refer you to other qualified applicants.

So my advice, whether you’re working with tenants directly or you have a property manager on the front lines, is to screen tenants thoroughly to weed out the unsuitable ones and to keep the properties in above-average condition to attract more and better applicants in the first place. You may not get as lucky as I did with my 20-year tenant, but I guarantee you’ll get fewer SWAT teams blowing up your rentals.

So what do you do to get—and keep—better tenants?

Let me know with a comment!

About Author

Dave Van Horn

Dave Van Horn is President at PPR The Note Co. - an operating entity that manages several funds that buy/sell/hold residential mortgages, both performing and delinquent. Dave has been in the Real Estate business for over 25 years, starting out as a Realtor and contractor and moving onto everything from fix and flips to Raising Private Money.

8 Comments

  1. Jerry W.

    Dave,
    as usual great advice and to the point. I really like reading your posts. I have found that good tenant screening is one of the most important things a landlord can do. The next most important thing is keeping the rent fairly priced and the place kept up for them. It is like any other business, deliver a good product for a good price and you will go far.

  2. That’s a great article Dave. Thanks for posting this. That’s a great tips for landlords for screening tenants. I think criminal background verification of tenants is a must to check these days.

  3. Alex Brookbank

    “For example, when I was a property manager, I would schedule all of my appointments at the same time, similar to an open house. This showed the interested parties that there was competition for the lease, and it allowed me to zero in on the more serious candidates.”

    Thumbs up! This is excellent advice. I call this concept ‘stacking’. It’s creating artificial demand and really generates a huge sense of urgency for any interested tenants. Besides that – this is what I do:

    1. have tenants pay for the application fee (background + credit)
    2. require the security deposit and first month’s rent up front. I’m not a big fan of security deposit, first and last month’s upfront as that is overkill
    3. make sure you receive these funds up front
    4. Never, ever, EVER rent to an individual that needs a place “right away”. I’ve had someone offer me a reference ‘letter’ from “their” landlord. Clearly a fake. Almost every listing I’ve had I receive a call or two how the caller needs to see it now, how they need a new place in 3 days. Please, so you’re telling me you’re being evicted, or something else nefarious is going on, or you have no concept of the basic skills needed to survive in civilization. no thank you

    • Dave Van Horn

      Hi Alex,
      Thanks for commenting!
      I agree with requiring the security deposit and first month’s rent. Although I may charge last month’s rent depending on the location, rent amount, and the tenant base I’m drawing from (i.e. if potential tenants have less than par credit scores or transient rental histories).
      I agree with #4 as well. I avoid renting out a property on the spot. Even if the tenant has cash now, I still think it’s important to look at their income and background to see if they’ll afford the payment later. For example, I once had a tenant who paid me cash for a year, but after he blew through that, I had to evict him.
      Best,
      Dave

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