According to statistics, roughly 43.3 million households in the US are now renting. The total market share of the rental market in the US sits at 36.6%.
Reputable landlords unanimously agree that quality tenants are vital to long-term profitability. That’s why checking your tenant’s background, credit, and rental history is essential.
But, be aware of the laws that apply to the tenant screening process. Note that tenants have the right to a formal eviction – you can’t kick them out immediately after they stop paying rent.
You have to go to court, and the judge has to rule in your favor to evict the tenant. Such a process can take a long time and cost you a lot of cash in legal fees.
Keep reading this guide to know more about tenant screening to avoid future complaints.
Set Your Tenant Screening Criteria
Know the kind of tenants you want in your rental apartment. For instance, high-income professional people might love to rent a modern one-bedroom-plus-den apartment.
If so, ensure they establish income-to-rent standards. For instance, if the monthly rent is $2,000, you might set the minimum amount your tenant should make as $6000.
You can also set rental-history standards. But, you might not get tenants with exemplary records, especially if you’re targeting people new to renting, like campus students.
Develop and Document a Qualification Criteria
The law does not require you to use a written rental application. But, always ensure you ask your prospective tenants to complete a written tenant application.
That way, you will protect yourself from future lawsuits filed by potential tenants you reject. For instance, you have about five applicants who want to rent your apartment.
You pick tenant number three since you feel they will pay the rent without delays. But, two weeks later, you receive a call from a lawyer representing one of the other applicants you rejected.
She’s claiming you discriminated against her since she’s African American. You now have to pay $10,000 as a settlement for the matter, or they will sue you in a federal court for $50,000.
The Federal fair housing laws had specific illegal reasons for refusing to rent to a tenant. You need written documentation explaining your screening process.
Otherwise, your insurance carrier will offer to pay the $10,000 to the applicant you rejected.
But, there would be no case if you produced a written application reporting the applicant’s quality.
Maybe you picked them based on their salary and job stability, which was better than the rejected applicant. Your written tenant application form will support your pick.
Evaluate Your Rental Application Fees
Many landlords ask potential tenants to pay a fee when submitting their applications. The application fees cover tenant screening costs.
Most states regulate tenant application fees. That’s to curb unscrupulous landlords who might want to exploit their tenants.
Some states don’t even allow landlords to charge an application fee until you prove the money covers the cost of tenant screening. Check how much cash it will cost you to do checks and run the tenants’ credit scores.
Also, know the time it will take to contact previous landlords. Then, charge your application fee somewhere around the final cost.
Check Their Credit Score
By checking their credit score, you can know if they will likely pay their rent on time. The credit report will show the applicants’ overall credit scores, payment history, and current debts.
A credit score will show the tenant’s reliability. But also look at other factors on their credit report.
Some young tenants might not have much credit or a credit score.
But, those with less than ideal credit scores might take some extra steps to prove they are reliable tenants.
Verify Income Sources
Some decades ago, it was hard to fake pay stubs. But now, with technological advancements, it’s easy to forge or alter a pay stub.
Some online sites allow people who get frequent payments to create their pay stubs. But, some people are generating fraudulent pay stubs for deceit.
An excellent way to avoid scum from a tenant applicant is by asking for a three-month bank statement. You want a tenant who can pay the rent.
Do Background and Eviction Checks
A background check will determine if the applicant received a previous criminal conviction. An eviction check will determine if the applicant received an eviction from a rental property.
Ensure you do background checks on all your tenants. That’s because you will be liable if your tenants commit a crime on your rental property.
But, you must be aware of the set guidelines when screening based on criminal background checks. Some states already have a ban on criminal records during screening.
You can also find out the type of tenant you’re about to rent through their eviction records. Keep in mind the circumstances of their eviction notice, but allow them to explain it to you.
That way, you will know if they will be quality tenants.
Contact Previous Landlords
Though a vital step in the screening process, most landlords skip contacting previous landlords. Check-in with at least two previous landlords and ask a few questions like:
- Did the tenant manage to always pay the rent on time?
- In what shape did they leave your rental property?
- Did you receive many tenant complaints from them?
Maybe the tenant didn’t pay on time, trashed the place, and constantly developed complaints. In such a case, their current landlord might give an excellent reference to get them out of their property.
So, ensure you call their previous landlords to get a less biased reference.
Ask for Their Reasons for Leaving Their Previous Apartment
Another crucial piece of information is asking why the tenant left their previous apartment. It might be an expired lease or the need to relocate to a bigger house.
But, some of the bad reasons to move might include:
- They had an altercation with their landlord
- The tenant received an eviction
- The tenant tends to move on a moment’s notice
You want someone who will stay in your apartment without any drama and won’t move until their lease period is over. By hearing their past reasons for relocating, you will know what to expect when they choose to end their rental agreement.
Review Their Social Media Profiles
Ensure you take your time and search online for any red flags. Look at the applicant’s Facebook, LinkedIn, or Instagram accounts.
The things you should check for are:
- Whether their information matches their residence and employment history
- Are there signs of precious criminal history?
- Are they members of any gang or hate group?
The above are the warning signs to watch out for when screening new tenants. If the applicant happens to have no social life, you can ask them to refer you to one or two work colleagues.
Factor in the tenants’ lifestyle choices. The applicant might own a pet, is a musician, or be a heavy smoker.
Though necessary, not all lifestyle choices should disqualify a potential tenant. For instance, a musician with a complete musical set, including a drum kit, won’t fit well in a thin-walled apartment.
During tenant evaluation, their demeanor will say a lot about them. Their conduct will give clues about what it will be like to deal with them as your tenants.
How do they respond to answers politely or rudely? Are they finding it hard to answer even the simplest of questions? Did they willingly provide references and financial information?
You will likely spot these precarious signs during all stages of the tenant screening process. A good tenant will be respectful, polite, and straightforward.
Use a Property Manager
You will significantly benefit from the services a property manager offers. You won’t have to deal with unqualified applicants as your property manager will provide you with tenant screening services.
A property manager will also know tenant rules and regulations governing housing discrimination. Your property manager will prevent you from posting discriminatory language on ads – you can avoid paying hefty fines and court costs.
Property managers also carry errors and omissions insurance. They protect you from liability due to their mistakes.
Ensure you ask for the property manager’s proof of E&O insurance
Hire the Best Property Manager
Finding the perfect tenant is hard. But, with the right property manager, the tenant screening process will be easy.
They will help you check credit reports and backgrounds and even carry out online rental applications. Want to hire a property manager and don’t know where to start? We can help!
At VerraTerra Real Estate Services, we offer comprehensive property management services. We have a fixed monthly management rate regardless of your rental income.
Contact us now to let us handle the details as you enjoy being a landlord.