You can’t be a successful landlord unless you find great tenants for your leases.
Without tenants who consistently pay rent on time and respect your property, your property rental business will suffer.
To avoid bad tenants and find the ones your business needs, you must prioritize tenant screening.
Here are the all the components you need in order to conduct proper tenant screening.
Your first tenant screening step is to require a rental application. With an application, you can collect the following crucial information directly from your prospective tenants:
- Contact information – Get their first and last name, email, and phone number for future reach. Refrain from asking for driver’s license or SSN (you don’t need this information for online credit and background checks).
- Residence history – Five years of current and prior residences should be enough to get a feel for someone’s rental habits. You don’t want a tenant who moves around frequently and is prone to breaking leases.
- Employment history – Ask your applicants to provide a short list of current and prior employers as proof of stability.
- References – Landlord and employer references will be able to back up the residence/employment information provided by the tenant, and they can also speak to the applicant’s character.
- Proof of income – Your applicant should provide pay stubs, W-2 forms, 1099 forms, or other relevant documents to prove how much income they bring in. It’s recommended that your tenant bring in at least three times the cost of your rent.
To make things easier for you and your prospective tenants, you should consider accepting your rental application online. If you accept online applications, you’re more likely to receive a higher number of applicants.
The information in a credit report tells you how financially responsible someone is with their credit. Even if your applicant’s income is three times as much as your rent, you need to ensure that they’ll consistently pay the rent on time.
There are several components of a credit report. The credit score is a great place to start, since it gives you a general overview as to how healthy someone’s credit is. With that being said, you don’t want to solely judge someone by their credit score. You especially want to pay attention to your applicant’s late payment history. If someone consistently misses credit card, car loan, or rent payments, they can’t be trusted to pay your rent on time either.
Criminal Records Check
The first component of a background check is a criminal records check. This tells you all about someone’s history with the law.
If an applicant has a criminal history that suggests they pose a danger to you, your property, your neighbors, and other tenants, it’s within your rights as a landlord to deny them. With that said, many states have laws prohibiting landlords from rejecting someone who has committed non-threatening crimes, so be sure to read up on the legislation that affects your area.
An eviction history check will give you case numbers, court records, locations, dates, and reasons for any past evictions someone has had.
Even if someone has only had one eviction, it’s within your rights to deny them. A tenant who has been evicted before is more likely to display eviction-worthy behavior compared to someone with a clean record.
It’s important to note, however, that eviction reports are not fail-safe. It’s a good idea to follow up with prior landlords (as well as the tenant) to get an accurate understanding of the eviction.
Once you’ve collected all the information you need, it’s crucial that you remain objective. You don’t want to risk a discrimination lawsuit for denying someone without backed up reasoning.
The best way to remain objective in your decision is to use a tenant scoring system. A tenant scoring system is a set of criteria you use to evaluate all your tenants. If a tenant meets one of your standards (related to criteria such as income, credit history, eviction history, etc.), you give them a checkmark or point value. If a tenant reaches a certain number of points, then they meet your standards.
Proper tenant screening means using a rental application, requesting proof of income, reviewing a credit report, running a tenant background check, and adhering to a tenant scoring system.
Your business can’t afford bad tenants. The only way to ensure you don’t wind up with them is to practice effective tenant screening techniques.
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