A Landlord’s Guide to Tenant Screening
Tenant screening is the most important step you can take to running an efficient rental business. Afterall, you’re handing an asset worth tens of thousands, even hundreds of thousands of dollars over to them. A bad tenant can be a nuisance to others, fail to pay rent, and in the worst circumstances, destroy your property. Understanding the ins and outs of an efficient tenant screening process can ensure you rent your properties to only the best tenants. Below, you’ll find a guide to tenant screening best practices.
Establish Rules and Benchmarks
You want your business to be a well-oiled machine and that means consistency and an adherence to process. For that reason alone, it’s important to set screening rules and benchmarks for yourself. For example, you should have a specific credit score all tenants must meet. Likewise, you may have an income multiple (e.g. they need to earn three times the rent amount) they must meet. You may also determine that you follow a first come first served method of determining who to rent your property to (among qualified candidates only of course!).
These are useful for their impact on your business, but they’re also important for the ways they protect you from a potential lawsuit. The Fair Housing Act states unequivocally that landlords cannot discriminate when renting their properties, and that starts with the screening process. Establishing a set of rules and sticking to them makes you relatively impervious to any accusations of discrimination. Even better, write your policy down on paper and share it with applicants as part of the application process. This will save you and your applicants time and will protect you from any negative outcomes.
Use a Tool to Help You Screen
In order to gather credit, criminal, and eviction data on a potential tenant, you must remain in compliance with the Federal Credit Reporting Act (FCRA). This means that either you and your business would need to be registered and vetted (a time-consuming and annoying endeavor) or you can adopt a tool that will do the screening for you.
There are plenty out there, from specialized platforms that offer screening only to full-fledged property management software that offers screening as one of many features. We recommend going with the latter, especially given that there are now free property management software solutions out there. Look for tools that not only allow you to pull credit information but also provide criminal histories, eviction histories, and permit applicants to include custom information like references and emergency contacts.
Confirm the Details
Once you have the reports in hand, your work is not done. Now is when the real screening starts. Credit histories really can’t be fabricated, nor can a criminal report or a credit history. But these only tell part of the story. Be sure to call upon references, former landlords, and employers past and present to get a wholistic picture of your potential renter. Know that these folks may have their own motivation. For example, a current landlord may lie to you in order to get rid of a problematic tenant. Be sure you’re asking for and contacting one landlord back. Employers can tell you a lot about someone’s work ethic and may even reveal their job stability. And references will speak to someone’s character and general behavior.
Use these tools to improve your screening practices and get down to the best possible candidates. In no time, you’ll find you have great renters filling your units. This means less work on your part, less headache, and more money for you and your growing rental business.