Conducting proper tenant screening is one of your most important jobs as a landlord.
If you fail to screen tenants thoroughly, you can end up with tenants who don’t pay rent on time or damage your property, which can lead to costly evictions.
To help find the great tenants you want, here are some tenant screening basics for landlords:
Passive Screening
The first and often most overlooked step of tenant screening is passive screening. As opposed to active screening, which is the process of evaluating prospective tenants and approving them if they’re qualified or denying them if they aren’t, passive screening is done before you even receive applicants.
Passive screening is the process of attracting the kinds of tenants you want when you market your property. For example, if your listings and advertisements are clear about application fees, price of rent, pet policy, etc., you can attract tenants who know they’d be a good fit while discouraging those who wouldn’t be from applying in the first place. Performing effective passive screening can save you time actively screening tenants who aren’t qualified.
Rental Application
Requiring a rental application is a must in the tenant screening process. A rental application allows you to ask your prospective tenants for important information about themselves that only they would be able to offer you. This information includes:
- Current and previous residences
- Employment history
- Proof of income
- References
- Pet ownership
- Smoking habits
A rental application is a way to weed out tenants before spending time and money on credit reports and background checks. If a tenant doesn’t bring in an income of at least three times the price of your rent, for instance, you probably shouldn’t accept them.
Furthermore, you want to make sure that you follow through with contacting the landlord and employer references provided on the application. These references will be able to confirm the information your applicants have given you.
By using property management software to conduct tenant screening, you can easily create and manage your rental application online.
Credit Report
To determine if a tenant will pay rent on time, you must run a credit report. While a credit score is a good piece of information to start with, your credit analysis shouldn’t end there. Looking at the frequency and severity of late payments, as well as how much someone owes in debts, will allow you to assess if a person will reliably pay rent on time and in full.
A credit report will almost always come from one of three sources: Experian, Equifax, and TransUnion. Property management software provides you with the tools you need to easily run credit reports right from the platform.
Background Check
A tenant background check consists of two reports: criminal records and eviction history.
Criminal records list all the encounters someone has had with law enforcement. As a landlord, it’s your right to deny an applicant who has committed serious crimes that endanger your property, neighbors, or other tenants. With that said, many states have laws prohibiting you from denying housing to someone who has committed less serious crimes. Make sure you read up on what your state’s legislation has to say about criminal histories.
Eviction history checks allow you to see a tenant’s past evictions, if any. You should be wary of renting to someone who has been evicted one or more times. If an applicant’s only red flag is a prior eviction, you should ask them about it, since wrongful or reasonably explained evictions can happen.
Tenant Scoring System
When deciding whether you should accept or reject an applicant, you must adhere to a tenant scoring system. A tenant scoring system is a list of criteria that you use for each applicant to check off which qualities they meet. This will protect you if you get accused of discrimination, and it’ll help you objectively decide whether a tenant meets your standards.
Fair housing laws prohibit discrimination on the following classes: Race, color, religion, familial status, disability, and national origin. State and local laws may extend protection to other classes. It’s crucial that none of your criteria have to do with these categories. Income, credit, eviction history, pet ownership, etc., are examples of appropriate criteria to consider.
Make sure you evaluate every applicant the same exact way, and keep records of your tenant scoring sheets.
Conclusion
Tenant screening allows you to avoid renting to bad tenants and find good ones instead. With several factors to consider, it’s important to know how to properly and thoroughly screen tenants so that you can make the best decision possible on a tenant.
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