Leasing to the wrong tenant is every landlord’s worst nightmare. The wrong tenant in your rental property can result in all kinds of trouble; delayed or unpaid rent, damage to the property, messy evictions, problems with other tenants, and energy-draining lawsuits. If you are starting as a property investor, a single wrong tenant can be all it takes to destroy your investment.
But given that bad people often pretend to be honest when you first meet them, how do you know a potential tenant will provide you with problems? This is why landlords screen prospective renters before leasing to them. Tenant screening is more than just setting up Facebook Ads to promote your property. It is a series of steps to verify that a tenant is everything they say they are.
Proper tenant screening will not only help you avoid conflicts but also reduce your costs and help you make money.
1. Define a good tenant
How do you define a good tenant? What qualities should you be looking for in a potential renter?
- A good credit score: Credit scores measure a person’s trustworthiness, as seen in their ability to manage money and diligence in settling financial obligations.
- Stable employment: They should be able to show proof of stable and sufficient income via a job, business, investments, or earned commissions.
- Solid rental history: Their rental history should be devoid of rent delinquency, violations of the lease terms, property damage, and evictions.
- Responsible behavior: They can be relied upon to look after your property and show respect to you and other tenants.
How do you screen a tenant to ensure they meet the above criteria?
2. Set your standards beforehand
Know what you are looking for in a future tenant. Some questions you want to answer before attempting to screen tenants are:
- What do you consider an acceptable credit score? What is the permissible lower limit for a potential renter’s credit score?
- Are you willing to rent to tenants who have pets?
- Will you consider a tenant who has a criminal record?
3. Make a list of pre-screening questions
- When are they looking to move? You don’t want to hold your rental vacant for a renter.
- Do they have any pets?
- Is there anything in their credit history that can keep them from being approved? This gives the tenant a chance to be upfront. The question can also save you time and money.
4. Set up the application process
Create a standard application process that all potential tenants must follow. Applicants should provide these details:
- Copies of government-issued IDs: passports, licenses, or social security cards, as proof of identity.
- Information for conducting a background check. This includes information on criminal history, credit history, and employment history.
- Proof of income: In the form of pay stubs and the names of past/current employers.
- References: Contacts of past landlords or property management companies. Ensure the details are genuine; they don’t belong to the renter’s friends or family.
Only send a prospective tenant your qualifying conditions – what you are looking for regarding income, employment history, rental history, and criminal record – if they successfully answer your pre-screening questions. The qualifying conditions should also contain the application.
5. Run background, credit, and reference checks
This is where you do your due diligence on the tenant. Be sure to complete all of the steps or look for shortcuts. Proper background checks will save you future headaches.
- Run a tenant background check: Several background check services can be used. Make sure to use an approved service that does a nationwide search rather than a state search.
- Do a credit check: You may run a direct check using one of the three credit agencies or an agency specializing in this service. Look for late payments, frozen accounts, bankruptcy, or bad reviews in the tenant’s credit history. Always get a tenant’s permission to run a credit check on them.
- Check their debt-to-income ratio: You want to gauge their ability to pay rent on time by checking whom they owe and how much of their income is left after monthly debt settlements.
- Check employment history: Limit yourself to the last two years. Call employers to verify the tenant’s information.
- Call previous landlords: Make sure they lived there, paid rent on time, and had no lease violations. Check at least two years of rental history.
6. Know what not to ask
Exclude the following from the screening process:
- Questions about race, religion, gender, sexual orientation, and marital and familial status.
- Don’t ask if they have ever been arrested. You may ask if they have a criminal record.
Before screening tenants, please ensure everything in your processes meets the state laws. Having an expert to guide you during the above procedure is recommended. Talking to a professional can save you avoidable trouble with problem tenants and the law.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.