The Importance of an In-depth Tenant Screening for Your Property Business
If the thought of a vacant rental property scares you, consider asking an experienced landlord how a troublesome tenant feels like. They would tell you otherwise. It is far much worse than a vacant property.
Anyone can behave like the ideal tenant you always want to have while applying for your property. But once you have them in, things go south.
Well, to avoid such unpleasant situations, invest your time and effort in screening your prospective tenants’ background. This is a standard industry practice, do not call out an exception based on their convincing traits. Instead, search for reliable and trustworthy tenants.
Additionally, good tenants are likely to stay longer and maintain your property in good condition thus bringing long-term returns with a short-term input.
Who is the ideal tenant?
- One who abides by the rules.
- Pays rent consistently and on time.
- Respectful and considerate of others.
- Does not conduct illegal activities on the premises.
- Maintains your property in good condition and clean.
However, these traits do not fully guarantee a successful landlord-tenant relationship. But they reduce the chances of renter nightmares such as costly repairs, lawsuits, unpaid rent, and evictions.
While screening your tenants, do not only evaluate the information they have provided but also track their references down, last jobs, as well as in-depth background checks.
Reasons why a meticulous tenant screening process can help you dodge a bad tenant:
- Gives you a clear picture of their credit history
Running a credit check on your potential tenant reveals their current financial situation as well as their credit history over the last several years.
A credit report will show whether they are in debt and if so, what kind of debt, if they have a history of late payment of bills, or they have gone bankrupt before.
This will eventually give you insight into the kind of person they are and consequently help you make a prudent decision as to whether they will be able to keep up with rent payments month after another.
Besides running a credit check, there are certain red flags that should warn you of a financial crisis by your potential tenant such as;
- The tenant asking for a deposit reduction or a payment plan. If they can’t afford the deposit how will they manage the first month’s rent?
- Asking for rent deductions or complaining that the rates are high.
- If the tenant wants to move in as soon as possible, like yesterday. This is a very dubious behavior which you should not ignore.
Also, a brief talk with their current employer can prove worthwhile. Though some might be non-receptive, their presence is a good sign.
- Keeps you, your community, and neighbors safe
Criminal history reports will help you make the right decisions as to whether to allow the prospective tenant to live within your premises.
Though not everyone with a criminal record is troublesome, it is vital to have tenants who neither pose an obvious threat nor make you insecure.
However, one with multiple minor offenses or a lengthy criminal history is definitely a red light you should not ignore.
Also, if the potential tenant has been evicted, consider giving it a pass. You certainly don’t want to get evicted over anything.
Even so, it is best to fetch for details about the eviction, in case they are just minor misdemeanors that can be dealt with.
Remember, holding on to the criminal report and document why you rejected a tenant can come in handy in case of a fair housing dispute.
- Gives you an overview plan of your prospective tenant
Engaging in a face to face interview with your potential tenant gives you firsthand information about their goals and plans.
This can give you an idea of how long they plan on staying on your property.
Now we all want a tenant who’s going to stick around for a while because no landlord enjoys the hustle and bustle of looking for and screening new tenants.
Therefore, feel free to ask questions concerning their lifestyle, preferences, but strictly avoid any queries that may suggest discrimination based on color, religion, family status, or disabilities.
Be keen to act in line with the Fair Housing Act.
- Protection from liability
“Ignorance is no excuse.” Failing to conduct a scrupulous background check may obscure the foreseeable danger of a tenant.
A background check that reveals prior criminal records are indications that the prospective tenant may put those in their surrounding in jeopardy which subsequently exposes the landlord to liability if injury results to another tenant or visitor.
Lawsuits on “negligent selection” have developed over the years. It is, therefore, the duty of the landlord to protect themselves against such lawsuits by conducting in-depth screening processes,
Moreover, creating an LLC prior to leasing can help protect your property in the event of such legal battles.
Having formed an LLC, your assets (cars, rental property, house) cease being subject to attachments to pay business debts, inclusive of lawsuits against the business.
- Helps you uncover previous evictions
Relying only on the application form your potential tenant has filed is hardly enough. You need to perform a thorough countercheck.
Amidst this, make a point of contacting their previous landlords for verification as evictions do not show up on credit reports unless it is due to lack of payment.
If there are any previous evictions, request for an eviction report. This will enable you to discover who they are and their trustworthiness as well as prevent any recurring crisis.
A rental property business is no different from any other type of business in any other industry. In the same way that a lawyer, accountant or IT consultant will engage in various activities to ensure that their business is in a position to survive and thrive. Such activities might include things like buying business insurance, engaging in advertising or marketing activities like carrying out organic or local SEO for lawyer campaigns, among other things.
A real estate or property manager must similarly undertake as many activities as necessary to ensure that their property is occupied by the “right” person. Tenant screening is, therefore, a must-do process that will help you make a prudent decision on who to entrust your property with.