Tenant screening is one of the most important tasks you have as a landlord.(applicants)
If you don’t carefully screen all your applicants, you could end up with tenants who don’t pay rent on time, disrupt neighbors, and damage your property. Knowing how to perform thorough tenant screening will help you find the high-quality tenants you want.
Here are six habits all landlords should adopt when conducting tenant screening:
Perform Passive Screening
A majority of tenant screening consists of active screening, which is the process of going through applicants, rejecting bad ones, and accepting good ones. Many landlords forget about the other branch of tenant screening: passive screening.
Passive screening is the process by which you attract the kinds of tenants you want when you market your property. If you perform effective passive screening, you can target applicants who would be a good fit while discouraging other applicants from applying in the first place. For example, by making information such as your pet policy and rent price clear in your property’s listing, you’re more likely to attract applicants who can meet your standards.
Run Background Checks and Credit Reports
Running a tenant background check will allow you to gain information about your applicant’s criminal and eviction history. If someone has been evicted before or has committed violent crimes that pose a risk to your property or neighbors, you have every right to deny them.
By reviewing an applicant’s credit report, you’ll be able to determine how likely they are to consistently pay rent on time. If a credit report shows that your applicant frequently makes late payments or has a large amount of debt, this suggests that they won’t dependably make rent payments on time when they’re renting with you.
Use a Rental Application
While background checks and credit reports are crucial, they don’t offer you all the information you need.
A rental application allows you to ask your applicants information about themselves that you wouldn’t otherwise be able to find. A comprehensive rental application should ask for residence history, employment history, proof of income, references, and any other information that might be relevant (such as pet ownership and smoking habits). With property management software, you can easily create and distribute your rental application online.
As part of your rental application, you should ask for the names and contact information of current/previous employers and landlords.
If an applicant provides you with a list of references, it may be tempting to think that the gesture is enough to consider them trustworthy. However, you should always follow through with contacting these references. They’ll be able to confirm the employment and residence history information that an applicant has provided. If an applicant lied on their rental application, this is an immediate red flag. Talking with previous landlords can also be helpful for getting a feel as to what kind of renter this person is.
Know Fair Housing Laws
The Federal Fair Housing Act prevents housing discrimination against seven protected classes: race, color, s’e’x, disability, religion, national origin, and familial status. The penalties for violating the Fair Housing Act can be severe, costing you up to tens of thousands of dollars in legal charges.
It’s also important to know that local and state laws may prevent discrimination from classes not protected on the federal level. These could include s’exual orientation, age, citizenship, marital status, source of income, and more. You should carefully review your local and state governments’ fair housing laws.
Use a Tenant Scoring System
To protect yourself from a discrimination lawsuit and to help you objectively determine if an applicant is qualified, you should adhere to a tenant scoring system.
A tenant scoring system is a list of criteria that you use to evaluate whether a tenant meets your standards. The criteria should relate to income, credit, eviction status, etc. Just be sure none of the criteria violate fair housing laws.
Most importantly, you need to make sure you evaluate every applicant the same exact way. Always keep records of your tenant scoring evaluations in order to protect yourself if you get accused of discrimination.
If you screen tenants thoroughly, you’ll save yourself time, money, and headaches down the road. Great tenants are perhaps the most important assets in your rental business. By following these six habits, you’ll be well-positioned to get the most out of your tenant screening process.