The Definitive Guide To Tenant Screening

It doesn’t matter if you plan on investing in rental properties for the first time, or you’ve owned rentals for years. Tenant screening is one of the keys to success with owning rental properties.

When you properly screen and choose the most qualified tenant, you can have confidence that you’re going to be renting to a tenant that’s going to be responsible, pay their rent on time and value the property that they live in.

5 Steps When Screening Potential Tenants

Here are five things you must check during the screening process.

1. A credit check

credit check gives you a solid idea of whether a tenant consistently pays their obligations on time. You can see their credit history and the level of current debts. Credit scores can range from 300 to 850 (300 being poor and 850 being well above average). Ideally, you want your prospective tenant to have a credit score of around 600-650 or above.

There are a couple of things that can impact a credit score that some landlords choose not to take into consideration. For example, previous homeowners tend to be exceptionally good renters. The reason for this is because they understand the responsibilities of homeownership. This fact can compensate for a late mortgage payment.

Medical bills can also complicate things. If a poor credit score is because of medical bills, you might not want to regard this as quite so significant. Hospital and medical bills can run up into the thousands very quickly and it is common for people not to have this money available straight away.

Different credit bureaus have different scoring systems. You should look for a full credit report that gives you the tenant’s FICO score, as this contains rental payment history.

2. A criminal background

There are different types of criminal reports. But a landlord’s favorite is a nationwide criminal history. This is mainly because it is one of the easiest to get as long as you have the tenant’s correct full name and date of birth. And it is essential that you get this information right because criminal reports are searched for on name and DOB, not social security numbers. The best way to confirm this is by taking a copy of some form of photo ID.

It is also worth comparing any criminal record against the tenant’s address history. This helps to confirm they were living in that state or city at the time of the crime.

Be incredibly careful about what you do with the criminal report you have obtained. In fact, before you even consider a criminal background, you need to check federal, state, and local laws. There might be limits as to what you can do with the information collected and some states won’t even allow you to use criminal records as part of tenant screening.

3. A history of evictions

Evictions are extremely costly—not to mention, time-consuming. So it is crucial to find out if your tenant has been evicted from any other rental properties. If a tenant hasn’t paid their rent and the landlord asked them to move out, as long as they comply, the eviction won’t show up on the report.

When a tenant refuses to move out, landlords need to take legal action, which can take weeks or months to evict a tenant. All this time, you may not be collecting income on this property adding to your losses. You might want to ask the tenant about the circumstances around the eviction. After all, there are more reasons for eviction than not paying rent.

4. Contact references

References give excellent insights on potential tenants because you can ask questions that won’t appear in reports.

For example, previous landlords will be able to tell you how the person left the property, whether there was any damage, or if there were any problems with neighbors.

Employees can confirm that the tenant is employed but they will not be able to give you specifics that you can find on paystubs.  Checking references gives you the chance to confirm that what the applicant has stated is true.

5. Tenant interviews

You must be careful about the questions you can and can’t ask a tenant. According to the Fair Housing Act, you cannot discriminate based on race, gender, religion, color, disabilities. However, you can ask about whether the tenant has pets, smokes, their work schedule, or if they are planning to have a roommate at any point.

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