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The Importance of Tenant Screening: A Complete Guide 

The Importance of Tenant Screening: A Complete Guide

Finding tenants in a hot market is easy. Finding good tenants, however, can be a challenge. How do you know when the tenant that you’re considering for your rental property is going to be a good match?

This is where tenant screening comes in. A strong tenant screening process will help you filter out bad tenants and bring in good ones.

We’re here to talk all about the importance of tenant screening and how you can have the best possible tenant screening process. Read on to learn more.

What Is Tenant Screening?

Tenant screening is the process of going through rental applications and analyzing each potential tenant to see if they’d be a good fit for your property. While there are plenty of tenants looking for housing, not all of them will be the best tenants for you. 

Most of the time, screening tenants isn’t complicated. Most tenants who apply for your property will know that they qualify because they read your listing (more on that later). 

The extra tenant screening process allows you to ensure that they actually qualify and that they’ll fit in in your rental properties. 

Why Do Landlords Need Tenant Screening? 

Some small-time landlords might choose not to screen tenants. Even if you don’t have an excessive tenant screening process, it’s important for you to not accept any tenant that applies without a second thought. It will make your life easier. 

Here are a few top reasons that all landlords and property managers should screen potential tenants before they allow them to sign a lease.

Safety of Other Tenants

If you have other tenants living on your property, you have an even bigger reason to screen new tenants. New problematic tenants could be disruptive or even dangerous to current tenants.

When a tenant doesn’t feel safe or comfortable on your property, they’re less likely to stick around. They know that they have other options.

Keep in mind that the vast majority of tenants will be safe, but that doesn’t mean that you shouldn’t double-check before committing to one. 

Safety of Your Property

A bad tenant can leave a nightmare behind when they leave. Between property damage and a filthy environment, you may find yourself spending a lot of money to clean up their mess. Sure, you can keep their security deposit (under the right conditions), but that only goes so far.

Tenants who are prone to destruction will often have a poor rental history. While rental histories aren’t make-or-break when it comes to letting a new tenant rent your property, it’s something to keep in mind. 

This is also true when it comes to allowing tenants with pets. Make sure that your tenants seem like responsible pet owners so they don’t end up causing damage to your property (or to other tenants). 

Reliable Payments

As a landlord, your primary priority is money, right? You want to know that your tenants will be able to pay on time every month (barring unforeseen circumstances). While problems can always arise, a good tenant screening process will lower your risk of late or nonexistent payments. 

Again, your tenants will likely screen themselves in this area. They know how much they’re able to spend on rent and they’re unlikely to pick an apartment or home that’s out of their range.

That said, getting their financial information will give you a good idea of whether or not they’ll be able to continue paying. There may be extenuating circumstances, so make sure to discuss this with your tenant as well. 

A Lower Turnover Rate

Having a vacancy costs you money. Every day that there’s no tenant filling your apartment or home, you’re not able to collect rent. 

When you screen tenants and look at their rental histories, you’ll be able to determine whether or not they’re likely to leave their tenancy early or if they’re likely to renew.

Keep in mind that a tenant that renewed at a previous apartment may not renew at yours. There are always extra circumstances involved, like the tenant’s work, family situation, or even how well they fit into your property.

Peace of Mind

An effective tenant screening process will give you peace of mind. You know that your rental properties are safe and that your new tenants are going to fit right in. Screening tenants gives you one less thing to worry about as a landlord.

How To Have an Effective Tenant Screening Process

So with all of this in mind, how can you make sure that you’re doing the whole “tenant screening” thing the right way. Anyone can ask questions, but true tenant screening takes a bit of time. 

While some quick-moving properties can accept tenants right away by using effective software (click here for more info), there are still a few things that you need to look into before approval.

Here are a few suggestions for effectively screening tenants.

Know What You’re Looking For

Before you even list your rental properties, you should know what you’re looking for. You can’t find the perfect tenants if you don’t have an idea of what those tenants are like.

How much money should the tenant make to afford your apartment? Many property managers want the rent to be 1/3 of the tenant’s income, though there’s often flexibility.

What credit score do you need? Are you accepting pets? What about co-signers? 

These are all things that you need to know before you start screening tenants. 

Start With Pre-Screening

The pre-screening process is effortless on your end once you’ve determined what you’re looking for. This lets tenants screen themselves.

Put all of your “must-haves” in the listing for the apartment. This includes credit score, the rent, a broker’s fee (if applicable), and any restrictions (such as pets). 

This will allow prospective tenants to decide whether or not they’re willing to waste money applying if they’re not sure if they fit the qualifications. Some tenants may apply even if they don’t pass the pre-screen, but they may have something else to offer (such as a cosigner, a great rental history, or the ability to offer more money upfront).

Tenant Background Check

Background checks are essential when it comes to finding good tenants. A background check will look at employment history, criminal history, and more.

Remember that you’re limited when it comes to how you handle a tenant’s criminal background. The Fair Housing Act has some guidelines on how you’re able to apply a criminal background check to your tenant’s ability to rent from you. 

In short, make sure that you’re not breaking any laws when you reject a tenant for their criminal history. Many people with criminal records committed non-violent crimes, so they’re safe for your property.

Financial Information

You want your tenants to be able to pay rent, so this might be the most important part of the tenant screening process. 

Make sure that you get proof of income or other ability to pay. Standard proof of income, like W2 forms or pay stubs, isn’t always ideal in a world where many people are contractors rather than employees. Consider alternative methods, like bank statements or even payment app histories (like Paypal).

If a tenant receives money for alimony, make sure that you factor this money into their ability to pay. 

This is also a good time to ask about your tenant’s credit. You want them to have a reasonable credit history that shows they’re responsible with money. 

Rental History

Knowing a tenant’s rental history will give you some idea of whether or not they’re going to be responsible, renew their lease, and pay on time. 

Many landlords will warn other landlords about problem tenants, even if the tenant doesn’t have an official eviction on their record. The tenant may have caused problems on the property that weren’t eviction-worthy or they may have left of their own volition. 

Remember that not all tenants will have a strong rental history, so we recommend avoiding requesting a specific number of previous landlords. It’s better to have one long tenancy than several short ones. 

Talk to Tenants One-on-One

It’s a good idea to have one-on-one conversations or interviews with your tenants if you have the time to do so. Some tenants may even send in personalized letters or emails to skip this process. Read them carefully. 

Tenants who may not perfectly fit the mold of what you’re looking for will often offer other benefits in exchange for what they’re missing.

For example, a tenant with no rental history (because they’ve always lived in an owned home) may offer a cosigner.

A tenant who doesn’t have proof of consistent high-enough income may offer to pay several months upfront to prove that they’re responsible enough to make payments.

Remember that most tenants want to be good tenants. 

Start Screening Potential Tenants Today

If you want to find the best tenants for your property, tenant screening is your best option. Anyone who’s managing properties needs to know that their tenants are going to treat their homes as if they were their own. 

Good luck finding the best tenants!

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