Renting your properties can involve a variety of different tasks in order to make your investment pay off. It is most likely that none of those tasks is more important than simply taking the time to do screening of potential tenants.
Not performing such duties means that the landlord runs the risk of renting his valuable investment property to someone who will not pay the rent or care for the property. Tenant mix is a daunting task with so many people looking for good housing. Horror stories from landlords who found out they were renting their unit to either a terrorist or sex offender, or someone running a meth lab with additional criminal history, shine a blinding light on the need for tenant screening.
How it is Done
Tenant Screening is done through a credit bureau. The credit bureau aggregates credit and criminal history stored as events for every social security numbered person in the United States. A good tenant screening report will give you a fico credit score, credit history, a recommendation regarding renting to this prospect, felony criminal report by state, screen for sexual predator history, homeland security registry, verify identity and social security number.
Be sure to get an application from and do a tenant screening report for every person who will occupy your property over the age of 18. Also have them list any children who are expected to inhabit the unit. That way you will know who should be present during the lease period and who should not. Guests usually have a one or two week stay privilege. Enforce that term to prevent having more people living in a unit than the unit can support.
In the Past
15 years ago, tenant screening was a hit-or-miss process, since the average landlord didn’t have access to credit and criminal histories, or obtaining it was prohibitively time-consuming and expensive. With the advent of the internet, many of those barriers fell, as companies like Smart Property Systems came online to offer built in tenant screening at a reasonable fee for you to access. https://smartpropertysystems.com
More to this Job than Screening Reports
After getting the screening report, there other are ways to to get an idea of whether your candidate is qualified tenant material for your valuable property. The adage about “first impressions making a huge impact” can be your best ally. Pay attention to appearance. If the prospective tenant arrives looking unkempt or they pay little attention to grooming when you first meet them, the possibility of having someone who will not care for your property rises exponentially. If they casually use foul language or act rudely or appear arrogant during the initial meeting, it might a strong sign that they will have issues with neighbors, and you as a landlord, once they have moved in. I always made a point of walking a prospective tenant to their car to see what condition it was in. If is was full of junk and old food etc. it was never a good sign.
Asking the potential renter to list previous places they have lived as well as current and previous employers, all with contact numbers is highly recommended. Then call those references. Ask them to identify the address and specific information that only they could know to be sure that you have the person you intended to reach. When a tenant knows his past is sketchy he may give you false references, friends of his who will espouse his virtues. This kind of investigation, even though it takes a few minutes, can offer a more objective window into the candidate’s character. You may find out that the person fell behind on his rent and was forced to leave a previous residence. One rule of thumb in tenant screening is that any previous evictions which are discovered in your due diligence search, will result in potential elimination of that prospective tenant as a candidate. If you are willing to take a risk, however, balance your chances of success by getting first and last month’s rent plus a good deposit. If the candidate does not have the funds enough to move in, then go to the next candidate.
As you do your due diligence, you might find out that a prospect has misrepresented their monthly income, hoping that you wouldn’t find out that they’ll have problems paying the full rent. Also, you can find out if their job is considered a steady one. If it’s one of the seasonal variety, you might run into problems during their slack periods. You will also be able to determine if they have a tendency to jump from job to job. Job jumpers may be more likely to be lease jumpers as well. Lease jumpers is a whole different topic which we will cover in a different blog article.
Being able to run a credit check on a candidate can give you clarity about their payment history for other than rent payment types. Credit history should be a main qualifier when you are deciding which candidate to accept.
Do You Allow Smoking?
Also, the issue of smoking can be addressed with a candidate, since more costs are usually incurred by the landlord during and after a tenant who is a smoker or allows smokers into the property, vacates the unit. It is very hard to get the smoke smell out of carpets and draperies, as well as off the walls. Make your smoking rules very clear and have terminology in your lease agreement regarding penalties for smoking by tenants and their guests inside the unit. If you have a no smoking environment be upfront about it when the person applies. It is hard not to allow a smoker housing as it is considered discriminatory. Make your rules plainly known before signing the lease to protect yourself against increased costs at turnover.
What About Pets?
Do you allow pets? This is one of the biggest issues for landlords and property managers today.
Pet owners should register their pets with you at the time of application for rent. You get to decide what breeds and species you will and will not allow. Pet owners are not always the best pet trainers. Some of the pitfalls of allowing pets are barking dogs, garbage dogs, pet owners not cleaning up when walking the dog, dogs who damage the property, dogs who attack non family members. There are cats who spray the walls in your unit, tear up the carpet with claws, damage the window coverings and howl at night. I will not cover birds, snakes, reptiles or aquariums in this blog. But know that each has associated hazards.
The current mainstream thought among landlords and property managers is that allowing pets is more than a pain for management. However, most are pet friendly due to pressure from renters and candidates to rent. Whereas you cannot screen for good pet ownership, you can provide strict guidelines for the privilege of keeping a pet. Be sure that they are clear, and then enforce them. Getting a hefty pet fee (which is non refundable) and pet deposit (which is refundable) is another way to help control the situation created by pets in a unit. Remember that it will be you with the pooper scooper when your tenants deny responsibility for negligence.
The screening process is usually understood by prospective tenants to be a guide by which they will be judged suitable or not for a particular property. It is important to remain business-like in your decision making process. You may even have a “reasons for rejection” list created to give to the prospective tenant before you screen their application details. By using the same process with each candidate, you can clearly show how you were able to come to your conclusion if you decide to reject the candidate(s). Remember that it is illegal to discriminate based on race or creed. It is also recommended that you never give the screening reports to your candidate. They are meant for you in confidence. Most tenant screening reports are returned to you within minutes of the tenant’s submitting the online screening request. You can usually have your decision made with in hours of accepting an application. Make your decision and stick to it.
Tenant screening is a necessary part of risk management in the rental process. However, it serves as an invaluable litmus test for a landlord. In the long run, tenant screening will save you time and money and reduce your stress levels, as you build a quality tenant base for your valuable investment properties. Good tenants beget more good tenants through word of mouth.
Tenant Screening is a great ally for every real estate investor and property manager.