Using a background check service is key to minimizing risks associated with rental properties. With over 10 years of experience in real estate, I've scrutinized numerous applicants using diverse screening methods.
Let me show you practical strategies can help you secure dependable renters and safeguard your investment.
» Short on time? Discover how long different types of background checks take.
Why Is Tenant Screening Important?
As a landlord, you must ensure your property is taken care of while also ensuring other residents' safety and well-being. Conducting a thorough background check on potential renters is one of the most effective ways to achieve this goal. Investigating an applicant's history can give you valuable insights into their reliability, financial stability, and character.
A comprehensive tenant screening typically includes a credit report, criminal record search, and eviction history. This information helps you determine whether a lessee will pay rent on time, which is crucial since financial issues are a leading cause of evictions.
You'll also discover if the individual can maintain the property and coexist peacefully with neighbors.
Using a reputable screening platform can also inform you of common tricks people use to cheat background checks. To protect yourself against these scams, verify all information provided by the applicant and validate references from previous landlords.
How to Do a Tenant Screening
Create a Thorough Rental Application
A well-designed lease application can provide essential information to assess whether an applicant will be a good tenant. It can help you gather key details to evaluate their income, credit history, references, and rental history. Typically required information that you should collect on a rental application includes:
- The full legal name and contact details of the applicant
- Current and previous addresses
- Social Security number to run credit checks
- Employer name, address, and phone number to verify income
- References from previous landlords vouching for timely payment and property care
- Emergency contact information of a third party in case of an urgent situation during the tenant's stay
- Pet information, such as type and weight (if you allow animals on the property)
Conduct an In-Person Interview
Meeting prospects in person allows you to gauge their responsiveness, professionalism, and character. Use the interview to confirm application details, assess the applicant's communication skills and temperament, and discuss rental terms.
This is also an opportunity to show the potential tenant the property and take notes afterward on any impressions or concerns raised during the interview.
» Learn about background check red flags and how to handle them.
Verify Their Income
To ensure prospective tenants can afford the rent, verify their income using these methods:
- Request recent pay stubs to confirm their earnings.
- Contact their employer to validate their job and salary.
- Ask for proof of savings if their income seems insufficient.
As a guideline, a tenant's monthly debt payments and the new rent should generally stay below 30-40% of their pre-tax income. Surpassing this limit could signal a struggle to meet rental and other financial commitments.
Do a Background Check
Conduct a thorough criminal background check when deciding if an applicant will be a reliable tenant. Certain background check services can help you uncover any felonies, misdemeanors, evictions, or sex offender registrations in the applicant's past. These sources scour national and county records to provide a comprehensive report.
Pay close attention to crimes involving violence, theft, or drugs. If you discover these offenses, carefully consider the risks before renting to them. Prioritizing safety and protecting your property is essential for successful realty management and maximizing tenant retention.
Run a Credit Check
Get their credit report to understand an applicant's financial responsibility. This document provides an objective assessment of their money management skills over time. Examine the report closely for warning signs like a low credit score, accounts in collections, bankruptcies, or a high debt-to-income ratio (DTI).
While a credit check is a crucial screening tool, it shouldn't be the only factor in your tenant selection process. Combine credit history insights with other methods like income verification, employment stability, and references to create a well-rounded applicant profile.
Rental History
For a clear understanding of an applicant's rental history, contact their former landlords directly. Focus on key aspects of their tenancy by asking:
- How long did the applicant rent from you?
- Did they consistently pay rent on time?
- Did they ever break any lease rules?
- How well did they maintain the rental unit?
- Why did they decide to move out?
Consider it a red flag if an applicant hesitates to provide their previous landlords' contact details.
Leveraging Technology for Efficient Screening
Modern technology can simplify the tenant screening process and save you time and effort compared to traditional methods. Online rental application portals allow prospective tenants to submit their information electronically, eliminating the need for paper forms.
Once an application is received, AI-powered tools can quickly analyze the data, verify income, and run credit checks. You can also get rapid criminal background checks, which may be more cost-effective than comprehensive screenings.
While these tools can significantly streamline the process, remember they're designed to assist rather than replace your judgment. You can leverage the efficiency of these technologies. Still, you should rely on your expertise when choosing the right tenants for your property.
Outsourcing to a Tenant Screening Company
Consider using a third-party tenant screening service to streamline the process and save time compared to self-screening. These companies employ standardized criteria, reducing the risk of discrimination. You may also benefit from cost savings through their discounted bulk screening packages, especially if you have multiple applicants.
However, keep in mind that outsourcing has its limitations. Third-party companies typically only access essential public records, which could need more in-depth verification, which you could perform manually.
Additionally, the pre-screening costs can accumulate quickly for larger rental portfolios with numerous applicants. Evaluate whether the convenience justifies the expense based on the size of your rental operation.
Some reputable national tenant screening companies include:
- TransUnion SmartMove
- Experian RentBureau
- RentPrep
- Tenant Background Search
- Rental History Reports
Many of these providers offer discounted rates for new landlord customers, so compare your options to find the best fit for your needs and budget.
» Need more info? Here are the searches missing from a basic background check.
Adhere to Fair Housing Laws
To stay on the right side of the law and avoid discrimination, you must use consistent screening standards for every applicant. The Fair Housing Act and other state and local laws prohibit treating potential tenants differently based on protected characteristics like race, faith, sex, or whether they have children. Failing to comply with these regulations could lead to substantial penalties or lawsuits.
Maintain consistent standards for everyone and avoid asking application questions related to protected characteristics. If you reject an applicant, provide an "adverse action notice" outlining the reasons for your decision. Familiarize yourself with local laws, as your area may have additional requirements.
Secure Your Property and Build Strong Tenant Bonds
You can protect your investment and minimize headaches by thoroughly screening potential tenants before deciding. Once you've identified the right candidate, sit down with them to discuss the lease agreement in detail. Communicate your expectations and ensure that both parties understand their rights and responsibilities.
Collect a security deposit and the first month's rent to seal the deal. This upfront payment safeguards your property and demonstrates the tenant's commitment to fulfilling their obligations. Following these steps and trusting your instincts can forge a successful landlord-tenant relationship built on mutual respect.
» Working on a budget? Find out how expensive a criminal background check is.
.20190512142626.png){kind=small}
