If you run a rental business, you have unquestionably come to understand how important it is to screen tenants. Having the right tenant for your property can be the difference between smooth sailing and a huge hassle. Landlords need to take screening tenants very seriously and understand that it is a significant component of a rental business. You would not hire just about anybody to do repairs on your property — taking on tenants should be no different, doing your due diligence will save you future hassles and money.

Good Vs. Bad Tenants

Although there is no sure-fire way to determine whether or not a tenant will be good or bad, there are multiple ways to reduce your chances of high-risk tenants. You should consider each tenant on a case by case basis  — a great tenant will respect your property, have no history of nonpayments or evictions (some instances are understandable) and provide you with all the requirements needed for you to make a sound decision.

Whom would you choose between two prospects,  a financially well-off individual who makes plenty of money but has had a questionable past with previous landlords or a reasonably young professional who is just starting out with no previous signs of delinquency or evictions? The best option, in the long run, would be the latter of the two. 

The importance of screening tenants

As a business operator, you should not leave anything to chance. Ultimately, you set the standards for the individuals that will live on your property. Screening a prospective tenant should be one of your top priorities — every applicant should meet your predetermined rental criteria. Poor situations occur when landlords rely on intuition rather than a sound screening method.

It is better to wait for the right tenant than to fill the unit with the first applicant who puts in their deposit. Taking the time to screen a tenant correctly will save you time and money. It cannot be emphasized enough how important it is not to overlook this process!

Three significant questions to ask yourself when screening tenants:

A word of caution: Legal issues will arise if you are not familiar with the Federal Housing Laws and your States Housing Laws. As a rental business operator, it is imperative that you familiarize yourself with the rules that govern landlords and tenants. Mistakes can easily be made by landlords when they are unaware of what they can and cannot do. It is in your best interest to figure out what laws you are subject to as a landlord.

Remember that housing laws can differ significantly from city to city, so it is recommended to see what your local housing laws are as well. If you feel uncertain, check with an attorney to determine which Federal and State Housing Laws you have to follow when working with rental applicants and tenants.

Are you basing the entirety of your choice in a tenant solely on a credit report?

Yes, the applicant's credit history will show on their credit report. It will include the amount of debt they have at the moment, if and how often they pay bills late, and whether they have any apartment related collections facing them. You should always look at the applicant credit report as it will give you an honest insight into their financial standing. Although a credit report will provide you with a good sense of who the applicant is — it does not adequately paint a detailed enough picture for you, a complete tenant screening should include a background check and an eviction report.

All three documents paint a whole picture of the applicant background and will help determine if they meet your rental requirements. To determine whether a potential tenant is a risk to your property and the community, you should request a criminal report and look for any relevant criminal records. You do not want to be in the same position as a landlord who had to undergo the stresses of eviction; it is recommended to pull an eviction report to determine whether a potential tenant was or has evictions from previous properties. 

Are you checking your applicant's references and employment history?

Always make sure to check your applicant's references and employment history. Just because they look good on paper — does not mean that they are risk-free. To better understand your applicants' behavior, you should speak with their previous landlords. They may have a good credit report and no criminal record but may have received multiple complaints from their past neighbors and landlords. It is always good to check and see what their past relationships were like and why they decided to move, start by asking the previous landlord if they would rent an apartment to them again.

When checking their employment history, you should ask to speak to their current employer to verify employment and request current pay stubs (more up to date than a W-2 or 1099). Always make sure they have a stable source of income. Add an extra step to see if applicants are committed to renting the unit, request to look at bank records for the previous months (do this for all applicants to avoid violating any Fair Housing Laws). Unexpected expenses can occur, and it is best to make sure that your tenant has the financial support to cover the rent if something were to happen. 

Are you screening every individual planning to reside in the unit?

You have a better chance of collecting the rent if all the individuals living in the unit have met your rental requirements. You would not want someone who has not satisfied your rental terms for the background check and eviction report residing on your property. Think twice and screen everyone planning to live in your property. If you plan to check every individual — show consistency by making everyone pass all your rental requirements, this will ultimately help you avoid any issues with the Fair Housing Act.

If you check one applicant's criminal background, check all the individuals planning to live in the unit as well. Increase the security deposit if only one applicant passes your rental requirement or consider declining the entire application altogether. Take the necessary precautions to avoid significant financial loss. 

As a landlord or property owner, it is your job to make sure that you verify every individual planning to live in your property. Taking the time to assess who is right will most certainly save you future headaches and financial stress. We recommend hiring an experienced property management company that will keep your best interest in mind and will follow all laws governing landlords, rental applicants, and tenants. At Aspire Property Management we make sure to adequately screen every applicant and take the time to fill your property with the right tenant. Contact us for your free consultation.