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The rental market is a complex place to navigate, and the screening process can be daunting. Here are 8 steps for successful tenant selection in your building.
Landlords must be able to screen tenants for their rental properties. To determine if a potential renter would be a decent tenant, they perform credit checks, verify income, confirm employment, do criminal background checks, and verify past landlord and residency histories. Landlords may avoid the typical issue of accepting candidates who turn out to be troublesome by doing the thorough screening.
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1. Conduct a pre-screening of potential tenants
Before a renter fills out a rental application, learn how to screen them. Whether you don’t have pets, inquire if they do. Mention that you do a criminal background check as part of the application process if you don’t accept renters with felony records. Informing prospective renters about your screening procedure can help them decide whether or not to apply.
Examining an applicant’s social media profiles might be a useful supplement to the screening process for rental applicants. An urgent red flag should be raised if the candidate’s boorish conduct is documented on their Facebook or Instagram accounts. LinkedIn may be able to verify some of the information on their resume.
2. Make a list of questions to ask prospective tenants
A landlord should check at least five aspects of a person’s history and background: income, job, criminal history, credit, and past eviction and residency history. When screening renters, it’s critical to ask probing questions. This is your time to learn more about the tenant’s requirements and double-check important details.
You may screen renters yourself as a landlord. However, this entails making many phone calls, which may be ineffective at times, paying for individual credit checks, and perhaps causing compliance concerns. Be consistent with the prescreening questions you ask each renter to comply with Fair Housing requirements. Before providing you with information, certain employers and previous landlords may want the candidate to sign a release form.
Co-applicants and co-signers
Make sure you’re aware of any co-applicants who could be interested. If there will be other persons living in the unit who are of legal age, they should be considered co-applicants and their backgrounds reviewed alongside the main candidate. If the renter lacks sufficient credit or rental history, a co-signer should be required, and the co-signer should be screened, even if they will not be living in the apartment.
3. Conduct a credit check on potential tenants.
You may use a credit report to see whether a potential renter pays their obligations on time. It also enables you to evaluate an applicant’s debt and compare it to their income. Credit reports, in the form of a FICO or equivalent score, should originate from one of the top three credit reporting agencies: TransUnion, Experian, or Equifax. Data from all three providers will be merged in the finest credit reporting.
The Fair Credit Reporting Act applies to anybody attempting to get credit or background information on another person (FCRA). Credit reporting agencies (CRAs) require entities that draw credit data, such as landlords, to be “accredited.” This may include an on-site check of the inquirer’s office to confirm that the company is authentic, that records are safe, and that the organization has a legitimate cause to obtain other people’s credit data.
4. Conduct criminal background investigations
You must check a renter’s history in addition to getting credit reports. To see whether the potential renter has a criminal past, check state and federal criminal records. Criminal background checks often include sex offender registries and terrorist watchlists, which are vital to consider.
Make sure you double-check your reports while doing a criminal background check. You don’t want to turn down a renter because of data or report inaccuracy. To be sure you’re interpreting the information properly, double-check the spelling of names and past residences.
Managing Negative Outcomes
When doing a background check, it’s not uncommon for the findings to be negative. That doesn’t always imply you’ll turn down a rental application. It might, however, indicate that you wish to go through the findings in further depth. You may inquire about the circumstances surrounding the crime and the renter’s age at the time of the offense from the prospective tenant. Find out when they were released and what steps they took toward recovery if they were detained. Request more references from past jobs and landlords. Above all, get confirmation of any mitigating circumstances.
5. Confirm your income and employment.
Verifying the applicant’s income and employment will allow you to evaluate whether they can pay the rent and if their work is secure. The three-times rule is a frequent revenue guideline. If the applicant’s gross monthly income is three times the rent, they are more than likely to be able to pay it.
Verify their employment status, job title, and pay with their present employer. Employer comments on work performance and history will suggest whether or not you will be hired again. Job security is just as crucial as a high income.
6. Look into previous addresses, landlords, and eviction records.
Check one or more of your previous addresses. If the candidate was a tenant, you should look into their previous landlords. You want to know how much rent they paid, whether they paid on time and if the landlord or neighbors had any issues with the applicant while they were there. To be rid of them, a current landlord may tell you they are fantastic renters, therefore it’s vital to verify with multiple former landlords.
Previous landlords should be asked the following questions:
- Was the potential tenant’s rent paid on time?
- Did they take excellent care of the property, with just a little wear and tear at the time of their departure?
- Were there any noise or pet complaints from the neighbors?
- Would you rent to them again if the opportunity arose?
You may examine local housing court records to determine if the prospect has any evictions and even search for verdicts for damages in their court history, in addition to checking with past landlords.
7. Conduct interviews with potential tenants and co-applicants
It’s time to conduct an interview once you’ve collected the application, examined the tenant screening paperwork, and double-checked the renter’s information. It’s a good idea to look through the paperwork with the renter so that they may discuss the results with you and explain anything that’s not right. There may be errors in your results that may be clarified during this interview.
Discrimination based on race, national origin, age, gender, sexual orientation, family status, or disability is prohibited under federal fair housing legislation. Asking incorrect questions or rejecting an otherwise qualified individual based on unlawful criteria may result in a lawsuit. Using the same questions for each candidate is an excellent idea.
Accept or reject the applicant.
You’re ready to make a selection after you’ve gathered all of your credit and background information, as well as confirmed your income and employment. The total of the gathered data will indicate either an acceptance, a rejection, or a tense situation needing a decision.
Criteria for tenant approval may include:
- Income that is equal to or more than the three-times rule
- Work history that is consistent, including time spent at the present position.
- Income from current employer and/or tax returns that can be verified
- Credit that meets or surpasses your requirements, which should be 620 or above.
- There are no felonies or misdemeanors in your criminal record.
- Previous landlord and dwelling histories that were favorable
You won’t always locate a perfect candidate; instead, you’ll look at the “whole package” of attributes. If one thing isn’t quite right but the rest of the package looks decent, you could have a viable contender. You could be tempted to believe your instincts about a candidate who is unappealing on paper but appears to be a good person. Many landlords have suffered as a result of giving an applicant a chance despite solid evidence to the contrary. Consider the whole picture rather than simply a pleasant personality.
After a tenant screening, denying an applicant
It’s better to pass on a candidate than to rent to a lousy one when picking a tenant. You have the right to reject a candidate if there is obvious evidence that they are troublesome. However, make sure you follow the Fair Credit Reporting Act’s (FCRA) requirements regarding unfavorable action.
The FCRA requires landlords and property managers to provide correct replies if an applicant is refused based on their credit record or other considerations. These letters are referred to as “adverse action letters,” and many small landlords and property managers are unaware that they must send them.
Following are some legal grounds to reject an application following a screening:
- Their salary is insufficient to cover the rent.
- Their credit score is too low, or their payment history on many accounts is bad.
- They have a criminal record that suggests they might be dangerous.
- Employment is unreliable, they have insufficient job experience or the employer signals that there is a problem at work.
- Evictions, judgments for property damage, unpaid rent, or issues with neighbors or police enforcement have all been discovered through previous residential inquiries.
When rejecting a potential renter, be prepared with supporting proof and keep within the bounds of the law. Online tenant screening gives you the information you need to avoid making biased judgments or incorrectly dismissing applicants. Some screening tools will automatically create adverse action letters, while others will have templates on hand for customers to utilize.
Tenant Screening Tips for Rental Properties
Tenant screening includes taking a thorough application and doing background, address, and employment checks. Other procedures simplify and expedite the application process for both the renter and the landlord.
Here are four suggestions for screening renters for rental properties.
1. Make Your Tenant Screening Questions Unique
Make your own consistent questions for your rental applications. Knowing whether they have pets, smoke, or have bad credit will help you rapidly weed through applicants. You can follow fair housing regulations by asking the same questions to every applicant.
2. Make the tenant’s screening process as simple as possible.
In the tenant screening procedure, having a completed application is critical. Landlords will profit from adopting online applications to make the process simple and quick for prospective renters. Landlords will receive renters’ applications in a matter of minutes if they apply online. This speeds up the approval and declination processes, allowing you to move ahead or move on more quickly.
3. Promote Your Property on the Internet
When you advertise your rental property on the internet, you have the option of specifying your minimum criteria. You may reveal your application fee, security deposit, and lease conditions, for example. Filtering out renters that won’t satisfy your standards saves both you and the tenant time.
4. Screen Tenants Using Property Management Software
Tenant screening is just one aspect of rental property management. Landlords must also advertise their property to attract tenants, sign and handle lease agreements, take online payments, and manage property maintenance needs. All of this can be done with good property management software, such as Avail, for one cheap monthly fee. You may get started for free with one unit.
Frequently Asked Questions(FAQs)
What are some questions you should never ask a rental applicant?
Questions on race, color, religion, sex, national origin, mental or physical impairment, and family status, including minors under the age of 18 living with parents/custodians and pregnant women, should be avoided. Consider each question carefully. Don’t inquire, “How old is your daughter?” or “Where are you from?” by mistake.
What is the best way to locate tenants for my rental property?
You may offer your rental property on a variety of websites, including Zillow and Rent.com. When you become a member of several property management software providers, you may get free listings.
I’m not sure how I’m going to pick amongst rental candidates.
If you have two or three strong prospects, consider each applicant’s whole application package. An applicant with a high income may relocate every year or two, but an applicant with a lesser income who can afford the unit may have a long-term tenancy history. Determine which is more essential to you: long-term renters or high-earning tenants.
Conclusion
You should perform credit checks, verify income and employment, do criminal and associated background investigations, and examine past landlord and residency history on all possible renters while learning how to screen tenants. Tenant screening software and services may make the process go more smoothly.
