Having a rental property might not always be the stress-free passive income you want. While every landlord knows what they want from their tenants, finding that tenant isn’t always guaranteed. It doesn’t matter whether you are a commercial or residential landlord or property manager. Chances are you had to deal with less than perfect tenants in the past. Having that level of security in this industry is what we all strive for. That is why there are so many rental background check services.
However, we have to understand as human beings that life happens, and it might not always happen as we want it to. People’s circumstances change all the time. Most times, these changes are entirely out of our control. Still, landlords and property managers are affected by these changes as well. It might be that renters miss payments or damage the property. Things can go as far as lawsuits, and legal issues are never a pleasurable experience. Depending on the circumstances, dealing with stuff like this will make even the most empathic person stressed.
So what can landlords and property managers do to make this a smoother process? Renter screening is the evaluation process of potential renters that can assess their risk factors. This is done based on their rental history and other criteria. Without renter screening, landlords and property managers expose themselves to high vacancy allowances, and nobody wants that. So let’s see what steps should a landlord or property manager take while screening potential renters.
Establish a Tenant Criteria for Your Rental
Are you willing to accept pets? How about a parrot? Is noise complaint a potential issue in the building? These are just some of the questions you want to be established in your rental tenant criteria. Knowing as much about your potential renters before signing a lease is essential, but they also have to know what you expect from them. Their rental history will tell you if they have ever been evicted, while their credit score can show whether someone is reliable and trustworthy when it comes to their finances.
So, establish these expectations from the beginning and ask for the information to make an informed decision. Things like broken lease agreements, employment history, criminal records, and bankruptcy discharge should be transparent, so you know who you are dealing with. It’s your choice what these criteria are and how stringent your rental requirements are. The following should be included for a thorough review.
- Smoking and pet policy;
- Renter history – evictions, complaints, lease issues;
- Earning requirements – during the property offers, the percentage of income spent on rent;
- History of employment;
- Credit history – any legal issues, credit score, tax liens;
- Public records – criminal and address records.
Interview Renters by Phone
Managing a rental property in the current housing market is a highly competitive process. The housing prices are climbing, and first-time buyers might be looking into renting for an extra year or two. This translates into more interested parties in rental properties. You can even face dozens of potential renters during the screening process, but that isn’t always time-sensitive. While meeting applicants and looking through applications is necessary, doing that for 50 people isn’t efficient.
The screening process can start sooner through a swift phone interview to help you thin out your applicant pool. Otherwise, you’ll be left with stacks of applications and a lot of wasted time. Establish a 30-minute phone interview with the parties interested in your unit. This will help you save time, gas and determine whether an individual is or isn’t a good fit. While making a script for the phone call with questions you want to be answered is a good idea, also check your state’s legal lines of questioning. Even if you are reading questions off a piece of paper, keep the tone conversational by making it sound less like an interview.
Collect Applications
Consider an application fee if you really want to thin out the application pool because you have too many interested parties. Depending on the realities of the housing market, it can improve the quality of your renter applicants. This practice might not seem fair to everyone, but a fee won’t deter those applicants that are confident about their qualifications. Someone who intends to go through with the move will pay the fee. These fees are generally between $35 and $75 per application, but the area, neighborhood, city, or state can impact it. Know your city’s housing market reality, or work with a real estate agent in your area for more information. Talking with someone knowledgeable in the field throughout the process will be beneficial for everyone involved.
Background Check
Through a rental background check, you can verify the past actions of your prospective renters. Some renters may be unwilling to disclose some information in an application. Whether it’s their credit history or employment history, knowing this information can help mediate the risk you are exposed to. Doing a credit background check won’t only tell you their credit score, but also rental collection/judgment or other reliability issues they faced. To get this information, you can check one of the leading credit bureaus: TransUnion, Equifax, or Experian. In order to do a full rental background check, you might also like to look into address history, public records, employment history, and eviction records.
References Check
Requesting tenant references is another way through which you can find a tenant that fits your property. Once you have them, however, you’re supposed to check them. Taking someone’s word for it can be risky, and profits are made by managing that risk.
When contacting previous landlords, you can ask about the address of the previous property rented by the tenant. Finding out if there were other people listed on the lease can tell you what type of a renter they are. Was the lease agreement respected? Did anyone file a complaint against them? What was the rental cost? All these questions tell you what you can expect from the tenant.
From past employers, you can find out if they told the truth about their employment history. Any employment misconduct can be verified as well as reliability and their salary.
While friends and family might be biased, there are still things you can verify. Questions about the tenant’s character, personality, and activities will help you determine if they are a good fit.
Conclusion
Figuring out a perfect way to find the ideal tenant isn’t entirely impossible. Just like risk management, there are criteria that you need to verify. Renter screening, in many ways, entails risk management. The reason behind it is to help you make an informed decision about the person you decide to rent your property to. The more you know about them, the more you decrease your risk exposure. Not only that, but without these screening processes, your renter might sign up for more than they can afford. Of course, potential tenants should do their own screening when browsing through rentals as well, but implementing screening from both sides limits the chances of lease agreements falling through.
As a landlord or property manager, you are responsible for the property and what happens to it at the end of the day. HOA fees and pet fees are all subjects that need to be covered, as sharing that responsibility implies trust. Knowing that someone is trustworthy goes a long way in establishing a good landlord-tenant relationship. So before you choose the renter with the highest income and most charismatic personality, check their credit history and character. Those will tell you a lot more about a person than their appearance or bank account.
