“Essential Tips About Tenant Screening For Property Managers” written by Mike Marko
Are you familiar with tenant screening for rental properties?
There are several challenges with managing rental properties, but probably the most daunting is selecting the right tenant for your rental property. You may have several people applying for a property, but how do you know who to rent to, and who to turn down?
That’s why there is tenant screening.
Good tenant screening is key to making sure your rental business is profitable.
And that’s why today I’m going to spend some time and make sure you know the essential things you should know about tenant screening.
What Is Involved With Tenant Screening
Tenant screening is the process that a property manager or landlord goes through when a unit or location they manage or own becomes vacant for rent. We use tenant screening to determine the most qualified renters for your rental property.
Tenant screening is a process that is legally regulated and must be done correctly to avoid fines or push back from government regulators. In doing Tenant screening, the property manager or landlord can use many processes available that meet Federal, State and Local standards for rental codes.
The first step to Tenant screening is having the potential renter submit a rental application. This rental application needs the proper authorizations signed so you can do your background check and other credit screening processes.
A rental application is designed to find out personal and public information available about the tenant and provides information that will help the tenant screening process. The rental application includes the tenant’s name, social security number, date of birth, address and criminal records. To ensure that the information in the application is true, the tenant’s signature is required.
Additional documents authorizing credit checks, and additional background checks could be required so check with your State and Local rental guidelines on these requirements. All forms need to signed and authorized by the potential renter thus showing that they agree to the terms and condition of the application and other rental contracts.
Tenant Screening Companies
Some landlords and property management firms depend on different tenant screening companies. These companies are normally found online by doing a google search. However make sure that you are using a reputable company to do your tenant screening through reviews and recommendations from Property Management resource sites and other authority sites.
Tenant screening companies, for a cost, will do a tenant screening report which includes details about your rental history, credit, eviction and some can even include criminal record checks. Aside from those, details about your employment, income and immigration status are also included.
In doing tenant screening and the process of processing a rental application, a property manager can charge the applicant a fee to do this process. The fee to do the tenant screening and required background checks normally costs between $35 to $75. When renting a large number of units, it is not cost effective to process a rental applications without receiving the fees for tenant screening up front. If the possible tenant is unwilling to pay for the application fee, they should be disqualified or eliminated from consideration to rent the vacant property. Refusal to pay the fees required to process the application should be an alarm that this renter might refuse to pay additional fees required in the future and could become a problem tenant if you were to rent the property to them.
In processing hundreds of applications over my career, I have had possible tenants attempt to avoid additional charges by submitting credit reports, submitting background checks they previously had run on themselves. However, I would not suggest taking these reports as being truthful as numbers and bad checks could be deleted or altered to show the renter is more qualified than they are. In several of these instances the Credit FICO score was changed by the possible renter and in other instances, parts of the reports were deleted showing bad credit and or criminal convictions.
It is my opinion that each possible renter needs to go through the tenant screening process you establish and pay for the services you require. This way you will be comparing apples to apples and can avoid tenants trying to alter the information you are evaluating.
In establishing a set way to do tenant screening you will be easily able to find the most qualified renters for the properties you will be renting.
Key Aspects Of Tenant Screening
This section will explain why various record and status is needed in every tenant screening. Renting a property should be treated like they are applying for a job. The applicant must provide the required documents and qualifications when applying.
Interview of Tenant
The tenant screening process begins the first time you are contacted by the potential renter. During the initial interview you should ask questions regarding the tenants:
- Living habits
- Past rental history
And anything else that will help you understand the person you could be renting to.
The interview process continues throughout the entire rental process. It ends once you have determined the most qualified person to rent to and have rented the property
Property managers often consider credit the most important aspect in evaluating a possible tenant. It is a sign of how well they pay their debt.
There are several ways to measure the credit of a rental candidate. You can get the credit score from one of the three credit scoring agencies (where scores range from 300 to 850), or by getting a relative score from an agency like Top1Score. The relative score is more like a yes/no decision score.
Employment and Income
Every property manager should also evaluate the tenant’s capability in paying his rent on time. Often the general rule is the rent should at most represent between one-third to one-quarter of the tenant’s gross income.
The tenant should also provide their rental history. Using the references from present and past property managers is an important way to help gage how good they will be a tenant in your property.
There are really only a few important things you need to find out when talking to the past property managers. These can include:
- Did the tenant pay their rent on time?
- Have You received any complaints?
- Did Tenant damage property during Tenancy?
- Would you rent to Tenant again?
Evictions will almost always disqualify the tenant from renting the property.
In many states, there is a difference between a filed eviction and an actual eviction record. A filed eviction means that a motion was made to bring the tenant to court for eviction. Often the tenant and landlord may settle outside of court and the formal eviction doesn’t take place. Some landlords consider this a “warning” to the tenant for being late on rent, etc.
The actual eviction is where the tenant is given judgement in court.
A landlord or property manager can not automatically deny a rental application because of arrest records or criminal convictions according to the Federal fair housing law. However, criminal activities and convictions should be part of the tenant screening process to find the most qualified renters for your property according to the qualifications you have determined.
Legal actions against renters and criminal convictions (depending on the tenant screening process) can almost always disqualify a possible renter from becoming a renter of your property. To avoid any misunderstandings you should let the possible renter know that if tenant screening and background checks find such information that this would immediately disqualify them from renting the property.
Now if during the interview process if a tenant discloses that they have had legal issues you could possibly consider them for rental because they were forthcoming and honest about their possible legal situations.
A tenant with a criminal record could still rent a property as long as the thing they were charged with or convicted of did not harm or put others in harm’s way. A DUI or some other convictions could be explained, but they still are a red flag that the person you would be renting to might have a drinking problem and be a bad tenant in the future. If a landlord denied your rental application because you are arrested, then it’s a violation in fair housing law. A landlord can’t deny the rental application just because the tenant screening report contains a criminal record.
Know the local and federal laws. You may have to consider the facts about the criminal record. If the criminal record will not affect the person’s ability to be a good renter, then you should consider them as a viable candidate.
NOTE: this should not be considered legal advice. Please check with an attorney for legal advice.
Final Words About Tenant Screening
I expect this article will give you insight into what is and how to do tenant screening. It can be daunting, especially the first couple times. If you following this process you’ll increase your chances of finding the best tenant for your rental property.
If you have suggestions that you use to help with your tenant screening, feel free to add them to the comments below.
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