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How to Properly Screen Tenants for Your Rental Property

March 18, 2022

As a landlord, screening prospective tenants is crucial since it helps you avoid destructive tenants, high turnover rates, and evictions. 

Although the process may take some time, properly screening your tenants saves you money and minimizes annoyances in the long run. 

Using this guide to screen potential tenants will give you a clear idea of what to expect from them as a renter, so you can find a high-quality tenant to occupy your property.

How to properly screen potential tenants

An ideal tenant screening report is incredibly detailed and should include the applicant’s name, contact information, and details on their finances, credit, rental history, and eviction or bankruptcy cases, to name a few.

Most landlords or property managers will create an application in addition to the screening process. The application gives you a chance to collect additional information from your potential tenant; however, you must be sure your questions are compliant with the Fair Housing laws.

Many applications will ask questions about the applicant’s current living situation, ideal move-in date, pets (if applicable), and habits, such as whether or not they smoke.

You can then use this information to make a well-informed decision regarding accepting or rejecting their application.

Your tenant screening process should include the following:

  1. Pre-screen potential tenants

You can save yourself a lot of time by learning how to pre-screen your potential tenants before they fill out a rental application. 

If you have a set of non-negotiables, such as not allowing pets, it is best to ask them upfront if they have pets.

Similarly, if you do not accept tenants with felony backgrounds, you should let them know upfront you will run a background check.

Informing potential tenants in this way about your screening process could lead to them bowing out before applying, saving you time and money.

To comply with Fair Housing rules, be consistent in your questioning during the pre-screening process.

  1. General verification

The first step in screening a potential tenant is verifying their identity, so be sure to authenticate their ID and verify its validity.

Additionally, compare their address history with their credit report to ensure the information provided is accurate. 

You will also want to do the same for their employment history by contacting their past and present employers to verify their employment and earnings. 

  1. Check their credit

Before considering a tenant, you must pull their full credit report since doing so will give you an idea of how they manage their financial obligations.

On their credit report, you should look for any bankruptcies, collections, overdue balances, late payments, and any other negative remarks, as such information will tell you how likely they are to pay their rent in full and on time.

Likewise, look at their current debts and obligations to determine if they have enough income left over to cover their new rent and utilities.

  1. Run a background check

When running a background check on a potential tenant, widen the scope and cover national and state criminal record databases. 

While conducting a background check, you want to double-check the accuracy of your search to avoid denying or approving a tenant due to an incorrect report or input error.

Occasionally, you will have to deal with a negative result from the background check, but that does not always mean you will deny the applicant. Instead, your discovery may lead to a further discussion about the results to uncover the circumstances of the incident, allowing you to make a well-informed decision.

  1. Remember to screen co-applicants and co-signers

As a property owner, you should be aware of any co-applicants.

A co-applicant is anyone of legal age who plans to live in the unit with the primary applicant. As part of the tenant screening process, these individuals should also undergo a credit and background check.

In the case of a tenant who needs a co-signer, if the tenant’s credit or rental history is not ideal, you should also require the co-signer to go through the screening process, even if they will not live in the unit.

Decide to accept or reject the applicant

Once you complete your screening process, while remaining compliant with the Fair Housing rules, you must decide whether to accept or reject your applicant.

It sometimes can be challenging to make this decision, especially if the information you uncover is not a characteristic of your ideal tenant. Therefore, some general guidelines for an applicant worth accepting include:

  • The applicant meets or exceeds the three-times income rule (the applicant’s gross income is three times the rent amount).
  • The applicant has a stable work history and sufficient time employed at their current job.
  • The applicant’s income is verifiable.
  • Applicant’s credit meets or exceeds your expectations (a 620+ is considered acceptable).
  • The applicant does not have a felonious criminal record.
  • The applicant moved out of their previous landlord’s property favorably. 

If you uncover problematic indicators during the screening process, you are likely within your rights to decline the application.

Fair Credit Reporting Act (FCRA) requires landlords and property managers to send an adverse action letter to the candidate explaining why they declined the application.

You are within your rights to decline an applicant if:

  • Their income is not enough to cover the rent
  • Their credit or payment history is not sufficient
  • Their criminal history implies a potential risk
  • Their employment is unverifiable, or they do not have a substantial work history
  • You uncover eviction reports, previous property damage, unpaid rent, or conflict with neighbors or law enforcement

A tenant with any of these characteristics is undesirable, and therefore you can move on to find a more qualified tenant.

The purpose behind screening tenants is to avoid individuals like these who would be problematic and potentially cost you hundreds or thousands in damaged property.

Using a fair set of standards, you can gauge a potential tenant’s ability to pay rent in a timely manner, respect your property, and be a positive addition to the neighborhood, which will, in turn, make your life as a landlord much simpler.   

 

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