Landlords who are looking for a new tenant for their property sometimes pick the first person that applies without taking the time to conduct proper due diligence to determine if the person might be the “right“ candidate. Consequently, such landlords often end up with people who either end up being ‘nightmare’ tenants or are simply less than desirable tenants. Some of the features such people exhibit include things like not paying their rent on time, causing property damage, being noisy, and a disturbance to the neighbors, not following the laid-down rules, among others.
Taking in such tenants usually end up being a costly mistake since you could end up on the losing end of the deal with a lot of money in unpaid rent, expensive property repairs, eviction costs, possible legal costs and more
To reduce the risk of this happening, you can conduct in-depth tenant screening for all applicants for your property. A comprehensive screening of prospective tenants is a crucial exercise that can help landlords reduce the possibility of ending up with a problematic tenant. Of course, there are other things that you can and should do, in addition to in-depth screening. This article will look exclusively at the latter and what a landlord should consider doing when looking for the “perfect tenant”.
What is Tenant Screening?
Tenant screening is the process of evaluating prospective tenants to determine the likelihood of them abiding by the terms of the lease, taking good care of the property, and generally being a good tenant. It not only involves analyzing the information provided by the applicant, but also other publicly available information about them and verifying as much of the information provided as is possible.
Through a proper screening process, you can potentially get a good sense of the kind of tenant the applicant is likely to be and decide whether to approve them, approve them, but with specific conditions, or deny them tenancy altogether.
While there is no way to know with an absolute degree of certainty how an applicant will eventually turn out to be, a good and thorough screening process can help you spot those tenants that have a high possibility of being terrible tenants for your rental unit.
Qualities of a Good Tenant
A good tenant will have the following traits:
They pay rent on time, in full, and consistently
They pose no threat to the peace, health, or security of other residents
They take good care of the property by keeping it clean and in generally good condition
They don’t engage in illegal activities on the property
They are honest and respectful
Now let’s look at the tenant screening process that will help you find a great tenant.
Tenant Screening Process
1. Request for a Tenant Application
The first step in the screening process is to have prospective tenants fill out a detailed application form to gather as much information about them as possible. Apart from the basic identification information like name, date of birth, and social security number, you should ask them other questions to give you a much better picture of who they are.
There are a variety of things you can inquire about depending on your criteria and what you want to know about potential tenants. This will typically include personal, financial, and employment information. However, make sure that you keep local fair housing laws in mind and that you are aware of any applicable laws that prevent you from asking specific questions. You should consult a real estate lawyer if you are not sure of the applicable fair housing laws, as any form of discrimination may put you in legal trouble.
Some of the questions you could ask include:
What is your occupation?
Do you smoke?
Do you have any pets?
How long was your previous tenancy?
How long do you plan on staying here?
Why are you interested in this property?
When are you planning to move in?
How many people will live on the property?
Do you have any references from your previous landlords?
After potential tenants have completed the rental application form, you should review them to make sure that all requested information has been provided. Nevertheless, simply asking possible tenants questions on application forms won’t guarantee that you will get a good tenant. After all, people can lie or provide information that is not accurate. Remember that you cannot judge a book by its cover. For this reason, you should dig deeper into every information that the applicant provided and where necessary and possible, verify them.
2. Run a Credit History Check
Running a credit check is a must in the tenant screening process. It provides a picture of the financial history of a potential tenant, and it shows their ability to meet their various financial obligations. A financial history that shows inconsistencies or lapses in settling accounts as at when due may indicate that the applicant is not very diligent in settling their bills. This is something that could easily translate to their rent-paying.
Similarly, if an applicant is heavily in debt and has chronic late payments, it may indicate that they won’t be able to keep up on rent payments.
3. Run a Background Check
The purpose of running a background check is to get a detailed report of the potential tenant’s past. This may help to weed out potentially problematic prospects.
A background check should include the following reports:
3.1 Criminal History Report
You need a background search on whether the prospective tenant has been convicted of any serious crimes. This includes national, federal, state, and county criminal records. A sex offender search should also be conducted.
Simply having a criminal record should not be reason enough to deny an applicant. It is a well-known fact that many people are often charged and convicted of crimes they did not commit. The type, severity, and recency of the crime are some of the factors that should be taken into consideration in determining the suitability or otherwise of an applicant with a criminal record.
Minor discretions, being arrested or charged but not convicted, and cases that happened in the distant past are examples of situations that should not exclude an applicant from being considered from a rental property.
3.2 Rental and Eviction History Report
No landlord wants to end up having to go through the trouble of evicting a tenant as it is a time-consuming and costly process. There’s also the hassle of finding a new tenant and the possible lag and lost income between tenants. This is why a report of the applicant’s rental history should be an important part of their application. On the flip side of that coin, you will also want to know if the applicant has ever been evicted from a property, or has otherwise had any major complaints about them from a previous landlord.
It, of course, goes without saying that first-time renters will obviously not have a rental history, and this would not be applicable to them. For those who are not, this check is a must, and any landlord would be remiss to not conduct it.
3.3 Employment History Report
It’s also important for a landlord to verify an applicant’s employment status or monthly income from a business to ensure that they will be able to afford the rent. You may ask for copies of their pay stubs, bank statements, or their employer’s contact details. The employer can also give you some insight into the general character of a prospect.
The Bottom Line
If you own an investment or rental property and are looking for new tenants, one of the best risk protection strategies is to conduct a comprehensive and meticulous tenant screening process. An in-depth tenant screening process will prevent you from missing crucial information about an applicant’s background and financial situation so that you don’t end up with the wrong tenant. The more detailed your tenant screening report is, the better. Just make sure that the screening criteria you choose to use are applied in a non-discriminatory manner.
If you are inexperienced as a landlord or simply have limited time, conducting comprehensive tenant screening can be a big hassle. However, you don’t have to do it on your own. There are several tenant screening services for landlords that can provide you with the information you need.
Kanayo Okwuraiwe is a startup founder and a digital marketing professional. He is the founder of Telligent Marketing LLC, a digital marketing agency that provides law firm SEO services to help lawyers grow their law practices.