One of the most challenging parts of becoming a landlord is finding responsible tenants to occupy your property. Some tenants can be troublesome and cause you headaches. Some will miss or delay rent payments, while others could damage your property.
If that isn’t enough, evicting bad tenants can be costly and time consuming. This is why it’s essential to put in place a reliable tenant screening process before becoming a landlord.
In 2020 alone the number of fraudulent tenant applications increased by over 30%. Actual cases of fraud incidents rose by 50%.
However, for every bad tenant, there is a multitude of terrific tenants.
14 Tenant Screening Tips
Here are 14 tenant screening tips that will both keep you on the right side of the law and help you attract tremendous tenants.
1. Be Clear on Your Rental Application Requirements
If you’re a rental landlord, you’ll want to attract tenants who can pay the rent and maintain the property in good conditions.
The most important thing about your tenant screening process is to ensure that it is straightforward and non-discriminatory.
The Fair Housing Act is a federal law that protects people from discrimination related to renting or buying a home, acquiring a mortgage, or seeking housing services. It is extremely important to follow this to the letter when screening potential tenants.
The best way to do this is to set clear financial standards—for example, standards around income requirements, length of employment, and a minimum credit score. Let your potential renters know what is required of them from the start.
This way, you can have clear standards that make potential applications a clear “yes” or a clear “no.”
2. Review Social Media Profiles
Many companies are now using social media to review prospective students and employees. According to Career Builder, 70% of employers use social media as a screening tool.
This free-to-use approach is also available to landlords and property management companies for use in the tenant screening processes. In particular, LinkedIn can be useful for verifying employment.
Social media can be a great tenant screening tool if (and only if) you’re clear on your application process. Otherwise, your use of it may seem discriminatory, which is not allowed under fair housing standards.
3. Call the Previous Landlord
Another practice for finding good tenants is to call your applicants’ previous landlords. The previous landlord is often willing to share their history about your renter. Feel free to ask them about payment history, any back due rent, the tenant’s reasons for move-out, and compliance with tenancy rules.
A cunning tenant may provide contacts of their friend or family to mislead your research. For this reason, write down more in-depth questions to ask before making calls.
4. Run a Tenant Background Check
A tenant background check will look at a potential tenant’s recent address history, as well as their criminal history, court history, and even their driving history.
You can use sites like this one to run a background check. Use your discernment for judging criminal offenses—some may be minuscule and probably shouldn’t affect the tenants renting capability.
5. Check Them Against the Sex Offender Database
In many cases, this is included in a standard background check, but if not, then you’ll want to run a separate check.
This procedure can help to keep other tenants safe and aware if you’re renting multiple units. Again, use discernment and dig for more details on a case-by-case basis.
6. Run Their Credit Report
After the other background checks, it’s crucial to credit check your rental applicants. This will tell you how responsible your tenants have been toward their other financial obligations.
Make sure you run the check on every rental applicant to avoid claims of discrimination.
If you want to rent your property to someone with a bad score, then make sure you secure a security deposit. It may also be helpful to give them an opportunity to explain the circumstances.
7. Verify Their Employment/Income
This usually involves calling their employer or asking for a formal letter of employment on a company letterhead.
Employment/income verification is also another great way to assess the tenant’s financial capacity.
Some landlords also require pay stubs.
8. Verify Assets
In some states, you’re also allowed to verify tenant assets, such as bank account balances and investment accounts. This is another good indicator of the potential tenant’s financial status. Assets may also help with boosting trust for tenants applying with lower income.
9. Avoid Online or Third Party Applications
Online applications, third-party apps, and classified ads are a top source of tenant fraud. There are more cases of renters using fake identities such as someone else’s SSN or driving license.
Some renters may use a profile of a non-existent person. Somehow, up to 41% of property managers miss out on these types of tenant misrepresentation.
10. Verify Identity Using Photo IDs
This is one of the fastest and most effective ways to confirm your renter’s identity. All you need to do is ask potential renters to submit their photo ID along with their rental application.
An acceptable photo ID should match your renter’s name and their facial appearance. It should also be current as expected by law.
If you do decide to approve a specific tenant (or set of tenants), they should bring their ID to the lease signing to present it in person.
11. Background Check Each Adult Occupant
Another red flag when finding tenants is when one person tries to apply for two or more people. The reason this is concerning is that a bad tenant will often attempt to hide in the shadows of a roommate or a spouse.
This is why it is critical to screen every adult occupant who will be living at the property. If someone is over the age of 18, then you need to thoroughly vet them.
12. Reject Incomplete Applications
Investing in real estate means your finances and investment are dependent upon tenants. You want someone who’ll pay their rent regularly, as well as protect your property. That means you must be thorough on details ─ one being the application process.
Applicants must fill in every detail about themselves. Otherwise reject their application. An incomplete application is an alarm bell and should raise concerns.
13. Collect Written Documentation
Within your rental application, you should also ask for landlord references, income, employment info, SSN, and rental history. References and recommendations will help you confirm the credibility of your applicant. Having more documents in hand will facilitate a more thorough tenant screening.
A completed application also protects you from potential lawsuits.
Some rental applicants may feel discriminated against if you reject them. Their application then becomes proof that you had valid, non-discriminatory reasons for turning them down.
14. Hire Professional Help
Finding and screening tenants can be a complex task. It needs to be done correctly so that you protect your asset (the real estate) and stay in compliance with the Fair Housing Act.
If you don’t feel qualified to do this process legally and effectively, then you’ll want to hire a property manager to assist you. In exchange for securing a tenant for your property, a property manager will typically charge you the equivalent of one month’s rent.
If you want their ongoing help throughout a tenant’s stay, a property manager will typically charge 8-10% of the monthly rent for single family rentals (and less for multi-family properties).
If you feel you only need an hour or two of training to get yourself up to speed, then you can ask if they offer consulting services. If not, you can always hire a lawyer who is well versed in landlord-tenant law for a quick consult.
Tenant Screening: The Ultimate Landlord Skill
By time you’re placing tenants into a property, you’ve probably got a substantial amount of money into the deal. If you’re looking to get your investment cash-flowing, then you’ve got to act fast to secure a high-quality tenant.
Despite your need for speed, never compromise your standards for rigorous tenant screening.
For more advice on investing in real estate and managing properties, check out the real estate section of the blog.
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