Rental properties can be an excellent investment and provide a steady stream of income, but only if they are well-managed. Nothing can turn a rental dream into a nightmare situation faster than bad tenants. That’s why screening tenants is such a crucial part of the process and should be completed thoroughly and carefully before signing a lease.
There are a handful of things landlords and rental property owners will want to consider when screening tenants. This guide will touch on the basics of what to look for in a tenant, how to go about conducting a background check, and some questions to ask during an interview.
It’s important to remember that each situation is unique, so not every tip may apply to every landlord. The most important thing is to use good judgment, trust your gut, and be as thorough as possible in order to find the best tenants for your rental property.
Advertising to Potential Tenants
Before we dive into the screening process, let’s briefly touch on how to go about finding potential tenants.
The first step is to create a detailed and accurate listing for your rental property. Include as much information as possible, such as square footage, number of bedrooms and bathrooms, monthly rent price, deposit amount, any pet restrictions, and anything else that may be relevant.
Once the listing is completed, it’s time to start spreading the word. There are a number of ways to do this, including online listings (such as on Craigslist or Zillow), placing ads in local newspapers or magazines, or even putting up signs around town.
It is important to remember you are trying to target your ideal tenant, so consider where they are most likely to see your listing. For example, if you’re looking for young professionals, online listings may be the way to go.
Once you start receiving applications from potential tenants, it’s time to move on to the screening process.
Screening Potential Tenants
Now that you have a list of potential tenants, it’s time to start screening them. It is extremely important to do your due diligence when it comes to the screening process as this will help you weed out any bad apples and set yourself up for a successful tenancy.
Carefully Review Application
The first step in screening potential tenants is to carefully review their application forms. This is where you will get your first impression of the applicant and start to get an idea of whether or not they would be a good fit for your rental property.
Be sure to look for any red flags, such as incomplete information, discrepancies between the form and their resume or rental history, or anything else that seems fishy. If you have any doubts about an applicant, it’s always best to err on the side of caution and move on to the next one.
In addition to looking for red flags, you’ll also want to pay attention to things like employment status, rental history, and income. These are all important factors to consider when determining if an applicant is a good fit for your property.
Conduct a Background Check
Once you’ve reviewed the applications and narrowed down your list of potential tenants, the next step is to conduct a background check. A background check will help you verify information from the application form and get a more complete picture of the applicant.
There are a number of ways to go about conducting a background check, but the most common method is to use a third-party screening service. These services will run a credit check, criminal background check, and eviction history check on the applicant.
The information you receive from the background check will be important in making your final decision about whether or not to rent to the applicant.
Follow up with Employers and Previous Landlords
In addition to conducting a background check, you’ll also want to follow up with the applicant’s current and previous employers as well as their previous landlords. This will give you a better idea of their work and rental history, and help you verify the information on their application form. Some questions to ask employers may include:
- How long have they been employed?
- What is their job title?
- Do they have a history of job hopping?
- What is their current salary?
- Are they in good standing with the company?
When speaking with previous landlords, be sure to ask about things like rent payments, length of tenancy, and whether or not there were any problems during the tenancy. Important questions to ask should include:
- How often were rent payments late?
- Did the tenant ever miss a rent payment?
- How was the tenant’s overall behavior?
- Was the tenant ever evicted?
- Would you recommend this tenant to other landlords?
If you have any doubts about an applicant after speaking with their current or previous employers or landlords, it’s best to move on to the next one.
Make Sure to Include all Co-Applicants and Co-Signers
When screening potential tenants, it is important to also be screening any co-signers or co-applicants who appear on the rental application.
It is important to thoroughly check the financial status of the co-signer on a tenant's rental agreement, as they are typically added in circumstances where the applicant does not meet the landlord's minimum credit score or has other financial red flags. The co-signer is legally responsible for the rent if the tenant is unable to make payments, so it’s important to be sure they can afford it.
In some cases, an applicant may have a co-applicant who will also be living in the rental unit. If this is the case, you should treat them just like any other applicant and run a background check, verify their employment and rental history, and so on.
Conduct an Interview
Once you’ve reviewed the applications and run a background check, the next step is to conduct an interview with the potential tenant. This is your chance to get to know the applicant better and ask any questions that you may have.
Be sure to ask questions about their employment, rental history, and income to get a better idea of their financial stability. Since you had previously contacted past landlords and employers, you will be able to verify the information that the applicant provides during the interview.
At this time you can also ask questions about the potential tenant's lifestyle, such as if they have any pets, whether they smoke, or if they have any roommates. You should also ask about their plans for the future and why they are interested in renting your property.
Potential red flags to keep an eye out for during the interview process may be:
- Applicants who are evasive or seem to be hiding something.
- Applicants who have difficulty answering questions or providing information about their rental history.
- Applicants who seem unprepared or uninterested in the interview process.
- Inconsistent information that does not match with previous landlord/employers information
Conduct a Tour of the Rental Property
After you’ve interviewed the potential tenants, the next step is to conduct a tour of the rental property. This will give the applicant a chance to see the property and ask any questions that they may have. It’s also an opportunity for you to get a sense of their overall demeanor and whether or not they would be a good fit for your property.
During the tour, be sure to point out any important features of the property and go over the house rules. You can also use this time to discuss the lease agreement and answer any questions that the applicant may have.
Once you’ve completed the tour, you should have a good idea of whether or not the applicant is a good fit for your rental property. If everything goes well and you’re both on the same page, then it’s time to move on to the next step.
Make Your Final Decision
Once you have completed the process of screening a prospective tenant, it is time to make a decision on whether or not you will be renting your property. If, the process has gone smoothly and no red flags or causes for concern have arisen, you can feel confident in moving forward with the applicant.
On the other hand, if there have been any red flags or you’re simply not sure about the applicant, it is always better to forego renting your property than renting to a bad tenant. While you may feel like you have spent a lot of time sifting through prospective renters, at the end of the day, it is better to be safe than sorry.
Saying "Yes" to a Tenant
If you have decided to rent your property to a prospective tenant, congratulations! You have completed the process of screening potential tenants and are one step closer to having a quality tenant in your rental unit.
Before you get too ahead of yourself, there are still a few steps that need to be completed before the tenancy can begin. First and foremost, you will need to have the tenant sign a lease agreement. This document will outline the terms of the tenancy, such as the length of the lease, the rental amount, and any rules or regulations that apply to the property.
Be sure to go over the lease agreement with the tenant so that they understand all of the terms and conditions, or have them meet with a lawyer to ensure clarity on the contract. Once both parties have signed the lease, you can officially consider the tenancy to be established.
Now that the tenancy has been established, you will want to collect the first and last month's rent, security deposit, and any other associated fees. Once you have received all of the necessary payments, you can give the tenant the keys to the property and they can move in!
Saying "No" to a Tenant
If you have decided not to rent your property to a prospective tenant due to an issue that was uncovered during the screening process, then you are able to deny their application. That being said, you will want to comply with the Fair Credit Reporting Act (FCRA) laws.
As a landlord, you are legally bound by the FCRA and must provide the applicant with a proper response if they are being denied due to their financial status, credit report, or similar factors. A response such as this is known as an "adverse action letter", which as a landlord, you may not be aware of. There are multiple legal reasons for sending an "adverse action letter", including:
- A criminal history that imposes a risk
- Poor credit or credit history
- Poor payment history
- Income isn't able to support the rent amount
- Unverifiable employment or previous employment issues
- Prior rental history confirming unpaid rent, legal issues, or property damage
If sending an "adverse action letter" you will need to be able to provide supporting documentation to the applicant to prove your legal grounds for denial.
Frequently Asked Questions About Tenant Screening
Many landlords find themselves with questions about the process of screening potential tenants. Below are some of the most frequently asked questions when it comes to tenant screening.
How do I go about getting a credit check?
There are a few different ways to go about obtaining a credit check on a prospective tenant. You can contact the three major credit bureaus- Equifax, Experian, and TransUnion- and request a copy of the applicant’s credit report. Alternatively, you can use a tenant screening service, which will run a credit check on the applicant as well as collect other important information, such as criminal background and eviction history.
What is an “eviction history”?
An eviction history is a record of any prior evictions that the applicant may have had. This information can be obtained through a tenant screening service or by contacting the local court system.
What questions can I NOT ask on a rental application?
Federal Fair Housing Laws protect individuals from being discriminated against when renting a property. This means that landlords cannot ask questions or make decisions based on factors such as race, religion, national origin, sex, familial status, or disability.
What do I need to know about the Fair Credit Reporting Act?
The Fair Credit Reporting Act is a federal law that regulates how consumer credit information can be used. When obtaining a copy of an applicant’s credit report, landlords must have the applicant’s permission and must follow specific guidelines set forth by the FCRA. Violating the FCRA can result in hefty fines, so it is important to be familiar with the law before running a credit check on an applicant.
Seeking Professional Assistance
There is a lot to consider when screening potential tenants for your rental property. If you are feeling overwhelmed or are unsure of where to start, you shouldn't hesitate to seek professional assistance. A qualified property management company will have experience in screening tenants and can help take some of the burden off of your shoulders.
Additionally, a property management company can handle other important landlord tasks, such as marketing your rental, collecting rent, and handling maintenance and repair issues. It may be advantageous to consult with a property management company to see if their services would be a good fit for you.
Finding a good tenant can make all the difference between having a successful - and profitable - rental experience and dealing with constant headaches. By taking the time to screen applicants thoroughly, you can increase your chances of finding a tenant who will respect your property and obey the terms of the lease.
While the screening process may seem like a lot of work, it is well worth the effort to find a quality tenant who will take care of your investment. With a little bit of time and effort, you can find the ideal tenant for your rental property.