Savvy property owners know that there’s more to approving a new tenant to live in their rental property than just getting the lease signed.
One of the fundamental mistakes that new multifamily property investors, and even experienced ones make is being over-eager or sloppy when reviewing applicants who are interesting in signing a lease. It can be a costly mistake, too.
Read on to learn what you must do to ensure that you have quality tenants and the consequences of overlooking this important aspect of multifamily property ownership.
Why is it important to screen applicants?
There are three reasons that make careful screening essential:
- You want to lease to people who can pay the rent.
- You want to lease to people who are stable and will fulfill the term of their lease.
- You want to lease to people who will contribute to a safe, attractive environment for all your tenants.
Covering these three bases will enable you to maximize your return on your investment in multifamily rental property. You’ll enjoy a steady cash flow, avoid extraordinary marketing and maintenance costs, and build personal wealth as your property appreciates and benefits from favorable word-of-mouth advertising. As a bonus, you’ll earn a reputation throughout the community as an excellent property owner.
Keep reading to learn the seven steps you must take to properly screen your applicants.
How to verify your applicant’s identity?
Let’s face it – you want to know who is going to be living in your property. This is the first and easiest step.
Always ask your prospective tenant to verify their identity. They should provide documents that match the information on their application, such as:
- Their name.
- Their driver’s license.
- Their date of birth.
- Their address.
If anything doesn’t match, you should move on to another applicant.
How do you verify your applicant’s income?
There are two straightforward ways to make sure that your applicant can afford to pay their rent:
- Check with their employer to make sure that their gross income matches the amount that they indicated on their application.
- Check with their last landlord.
As a rule of thumb, you’ll want your tenant’s income to be at least three times the amount of their monthly rent, or else they may struggle to make their payments.
Your return on investment depends on regular cash flow from rent payments, so slow payments or tenants who simply walk away from their lease before it’s up will harm your overall performance. And if a tenant leaves before the lease is up, you also have extra marketing costs as you search for a new tenant, and extra clean-up costs as you prepare the property for the new tenant.
Is it necessary to run a credit report?
Yes, it is. There are many people who have a less-than-stellar credit report, and so there is some subjectivity to how you choose to approve tenants.
There are two things that you should pay attention to:
- Your tenants should have a credit score of at least 550. If they don’t, you should talk with them to determine if you’re confident that they’ll be good tenants. At the very least, you should consider charging a larger security deposit than you do for tenants with better scores.
- Have they failed to pay rent to a previous landlord? This is a definite knock-out. You don’t want to hold a lease for anyone who has failed to pay rent.
What to look for in a criminal background check?
Many people have minor criminal offenses in their background. You can decide what is acceptable when you evaluate tenants.
There are three red lights that should eliminate any applicant when you find them on their criminal record:
- Felonies involving harm to people.
- Felonies involving damage to property.
- Offenses involving the selling of illegal drugs.
This is common sense.
As a property owner, you want to provide a safe, pleasant environment for your tenants and their loved ones. Consequently, you can’t expose them to people with histories of violently assaulting others.
You also want to see your property value and rents appreciate, experience minimal upkeep costs, and remain attractive to prospective renters. This requires that you avoid renting to individuals with a history of damaging property in any way.
Drug sellers are magnets for other crimes and streams of unsavory visitors. You don’t want them anywhere near your property.
What about an eviction record?
People make mistakes. They go through tough times. People can change. You’ll want to explore the reason for any past eviction, but, if the eviction occurred more than seven years ago, you may not wish to weigh it too heavily when considering an applicant.
If their eviction occurred within that last seven years, it’s a definite red flag and you should consider moving on to the next applicant.
What about employment records?
Assuming that the applicant’s income is at least three times the monthly rent, you only have two things to look for in their employment record:
- Do they work where they say they work? If they make up an employer, it’s a definite knock-out. Move on to the next applicant.
- Are they in good standing with their employer? Sometimes it’s difficult to get this question answered, but you want to ask because while they might be working where they say, they might also be in line to be terminated next week.
What does the last property owner say?
The opinion of the applicant’s previous property owner is invaluable. You must use a little intuition here because sometimes people just don’t like each other, but here’s what you want to learn:
- Did they pay their rent on time?
- Did they take diligent care of the property?
- Were they good neighbors? You’ll want to know if they were noisy, boisterous, or did anything that caused others to complain about them.
These are important considerations when you think about getting a return on investment, maintaining your property, and providing a safe, pleasant residence for your tenants.
How much time to check out your applicants?
Experienced background checkers will devote three to four hours to each applicant. If you don’t have experience, you might have to multiply that several times.
How to facilitate the process of checking backgrounds?
The most effective and efficient way to process background checks is to enlist the services of a professional property management company like getMULTIfamily Property Management.
getMULTIfamily Property Management lists and processes applications for hundreds of properties throughout the Phoenix metropolitan area. They have an experienced team of professionals who know how to get things done quickly, effectively, and inexpensively. Most importantly, they get it right so that you don’t have to worry about being tripped up.
What other advantages with getMULTIfamily Property Management?
There are four extraordinary advantages you’ll enjoy when your property is managed by getMULTIfamily Property Management:
- 12 Month Guarantee. If a tenant that they screen breaks their lease before it terminates, they will find a suitable, screened replacement tenant from their pool of qualified candidates at no charge.
- Eviction Guarantee. In the unlikely event that you must evict a tenant that they screened, they will pick up all the legal costs related to the eviction.
- Pet Protection:
- They profile every pet to make sure it won’t cause problems.
- If a tenant claims that a pet is assistive, they’ll verify that claim through a third party.
- If a pet causes any damage to your property, they’ll cover limited costs over and above the security deposit. See getMULTIfamilyPM.com for details.
- Lockbox Move-In. On move-in day, your tenant will have exclusive access to your property through a secure lockbox.
Conclusion
You can go through the hassle of managing the process of screening applicants for your multifamily rental property on your own. We’ve outlined the seven things that you must do, mentioned the time involved, and discussed some of the costs of failing to do them well.
Your best bet is to rely on the experience and resources of getMULTIfamily Property Management. Their team of seasoned pros will provide you with a comfortable, seamless experience as you find and qualify tenants for your multifamily property.
If you are looking to invest in multifamily property, visit getMULTIfamily.com or click here.
If you want to learn more about having getMULTIfamily Property Management manage your property, visit getMULTIfamilyPM.com or click here.
