Great tenants make a landlord’s job easy; however, new landlords often feel anxious about the tenant screening process.
They worry about asking too many questions and scaring off a potentially good tenant, or they fear that they’ll miss something important and sign a lease with someone unreliable.
In reality, good tenants won’t mind answering your questions and they’ll view thoroughness as a sign of professionalism.
If you'll be renting multiple units within your property, prospective tenants who go through a good screening know that you’ve also screened their neighbors.
An organized, comprehensive screening process increases everyone’s sense of safety and comfort, and can turn up the following signs that you're looking at the elusive "good tenant."
Follow the Money
Your primary goal as a landlord is to make money from your property.
Therefore, you must make sure that prospective tenants have a good financial track record or, at the very least, a reliable income and a cosigner with a good credit score.
When you accept a tenant without running a credit check, you put your rent income in jeopardy.
Before signing a lease with anyone, check out these financial facts:
- Proof of employment. Look over your tenants’ employment histories and call their workplaces to verify both wages and length of employment. If your tenant is self-employed, ask for profit and loss statements from their work or a copy of the prior year’s Schedule C from their income tax paperwork. If your prospective tenant receives Social Security or disability income, ask for a verification letter from the Social Security Administration or from a local department of social services.
- Credit score and credit history. Tenants with high credit scores (scores over 620) and consistent payment histories represent a much lower risk. Even if your tenant has some past credit issues that have lowered his or her score, you might overlook them if you see at least a year’s worth of consistent, on-time payments.
- Collections or defaults. A tenant with a history of not paying bills can become a major headache, so look for medical collections, foreclosures, bankruptcies, or other prior defaults. At the same time, the recent economic crisis in the U.S. has pushed many people into foreclosure -- so evaluate the whole financial picture, including recent payment history and proof of income, before making a decision.
If you’re worried that a tenant might be a credit risk, don’t hesitate to ask for an extra month’s security deposit or require someone with good credit to co-sign the lease.
People deserve a second chance, but you also deserve to protect your income.
Check Into Their Backgrounds
Both you and your tenants deserve to feel safe in your homes, so don’t hesitate to perform a criminal background check of every tenant screening.
In addition to a background check, ask the prospective tenant to provide the names and phone numbers of prior landlords.
Then, call the landlords and make sure that the tenant paid rent on time and treated the property well.
A consistent track record of treating other properties with respect is the very best indicator that they will do the same with yours.
How to Perform Your Tenant Screening
When a tenant applies to live at your property, collect the applicant’s full name, email address, and current physical address.
If needed, collect the applicant’s Social Security number and make a copy of the applicant’s driver’s license.
Those credit and background checks don't come for free; one good way to make your screening costs predictable is to subscribe to a tenant screening service.
Instead of paying for individual credit checks, you pay for a select number of screenings.
You could charge prospective tenants for their credit and background checks or you could ask the tenant to pay half.
Strike a balance between maximizing your budget and not scaring away good prospects.
Finally, add a release of information clause to your rental application and ask the tenant to sign or initial it.
The clause authorizes you to perform the credit and background checks, giving you valuable protection in case a dispute arises later.
It's Your Job
Never apologize for performing thorough tenant screenings; they protect both you and your current tenants.
Collect the information, review the person’s history, and decide whether or not you want to offer a lease.
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