Are you tired of chasing down monthly rent payments or dealing with unreliable tenants? We get it; it's a hassle that can cost you time, money, and even your peace of mind.
The answer is better tenants. Good tenants pay their rent on time and take care of the property as if it were theirs. This is why screening for reliable tenants is so crucial. It sets the stage for a smooth-running operation and minimizes the chances of running into issues down the line.
Don't worry; we've got your back. We've been in your shoes and have helped countless landlords navigate this challenge. Stick with us, and you'll learn how to screen tenants effectively, ensuring:
- Smoother monthly rent collection,
- better long-term relationships, and
- fair screening and compliance with fair housing laws.
Along the way, you will also find out:
- What are some of the best characteristics of great potential tenants?
- What are some of the red flags to watch for in prospects?
- What real value do you get from the effort to find great tenants?
- How to use online tools for applications and credit checks to make it all easier.
Ready to dive in? Let's go!
Identifying Ideal Tenants: More Than Just Credit Checks
Regarding tenant screening, credit checks are often the go-to method. We recommend credit reports, but seeing a bunch of numbers is not enough. It's about understanding the tenant as a person and recognizing the long-term value they can bring to your rental business.
Good tenants mean:
- easier, on-time rent collection,
- renters who take better care of your property,
- less time and effort dealing with tenant issues,
- better long-term relationships, and
- savings, in time & money, from reduced turnover.
Every landlord and property manager wants these things, but how do you find them? Look beyond credit history. Utilize ways to look beyond the numbers. You also have to look at things like:
- employment history,
- landlord references, and
- personal interactions through the application and showing processes.
Use the application and onboarding processes to note applicant behaviors and look for renters who:
- are responsive and responsible in their communications and payments of fees
- are not overly, or inappropriately, picky or critical, and
- who show appreciation for the property.
Conduct thorough background checks, trust your instincts while staying within fair housing laws, and communicate openly to gauge compatibility and expectations. We discuss all of this below, but remember to look at the renter as a person during the process.
Red Flags in Tenant Prospecting: Spotting the Bad Apples Early
OK, we have some excellent ideas of what we are looking for in our ideal tenant, but recognizing red flags in prospective tenants is also crucial. Spotting warning signs early can save you time, money, and stress.
Check for criminal history, inconsistencies in rental application forms, and signs of financial instability. Talk to previous landlords, watch for inconsistencies, and assess financial stability through credit checks and employment verification.
Recognizing red flags early in the screening process is crucial. Let's look at the details of some of the characteristics mentioned above.
Financial Instability
- Red Flag 1: Frequent job changes can indicate instability.
- Red Flag 2: A low credit score coupled with a high debt-to-income ratio can be a warning sign.
Poor Rental History
- Red Flag 1: Previous evictions are a significant concern.
- Red Flag 2: Negative feedback from former landlords should be taken seriously.
Criminal Background
- Red Flag 1: Violent offenses or property damage are serious concerns.
- Red Flag 2: Multiple offenses over a short period can indicate a pattern of behavior.
Inconsistencies and Lies
- Red Flag 1: If the information on the rental application form doesn't match what you find in background checks, that's a red flag.
- Red Flag 2: Be wary of applicants who avoid answering questions directly or seem to be hiding something.
By understanding these red flags, you can save yourself time, money, and potential legal issues down the line. Each of these red flags can be spotted through:
- thorough background checks,
- detailed application process,
- impromptu interviews during showings, and
- reference checks.
So, please take the screening process seriously; it's your first defense against problematic tenants.
Comprehensive Background Checks: The Cornerstone of Tenant Screening
When it comes to tenant screening, background checks are a cornerstone. They provide a hard, fact-based view of a prospective tenant, helping you make an informed decision.
In background reports, the credit history is the most common and can reveal a lot about a prospective tenant's financial responsibility. Late payments, bankruptcies, and high debt can be red flags. However, remember that a credit report is just one piece of the puzzle in tenant screening reports.
Let's break down the types of background checks you should consider:
Credit Report
A credit report is a snapshot of a person's financial responsibility. In the information, look for:
- late payments,
- bankruptcies, and
- high debt-to-income ratios.
When it comes to credit checks, understanding the credit score levels can provide valuable insights into a prospective tenant's financial responsibility. Generally, a credit score:
- above 700 is considered good and indicates a lower risk for landlords,
- between 600 and 700 are considered fair but may warrant a closer look at other financial indicators like income and employment stability;
- anything below 600 is usually a red flag and should prompt you to dig deeper into their financial history.
However, it's crucial to note that a low score shouldn't be the sole reason for rejecting an application; it should be considered alongside other factors discussed here, and always keep Fair Housing Laws in mind.
Criminal History
A criminal records background check can reveal past offenses for a prospect, which may or may not be relevant to their potential as a tenant. However, it's crucial to consider fair housing laws when considering this information.
When evaluating criminal background checks, you must stay within the guidelines of Fair Housing Laws. This means you cannot implement a blanket policy that automatically disqualifies anyone with a criminal record. Instead, you must consider the nature, severity, and recency of the criminal activity in question. Discriminating against prospective tenants without these considerations could put you at risk of discrimination.
Eviction & Rental History
Some background check agencies also provide rental and eviction history reports. Rental history data is typically generated from many sources to comprehensively profile a tenant's past behavior. Public records play a significant role; eviction proceedings, for instance, are a matter of public record. In addition to this data from legal proceedings, many sites exist where landlords can submit information about a tenant's rent payment history, lease violations, and other relevant details. Some databases also gather information from consumer reporting agencies that collect rental history data.
It's worth noting that the quality and comprehensiveness of the data can vary depending on the database and its sources. Therefore, using this information as part of a broader tenant screening process is advisable rather than relying solely on it.
On top of all these data sources about rental history online, you should take advantage of the most direct way to get background rental history: call prior landlords listed as references. While this is certainly more time-consuming, it can provide valuable insights into the tenant's behavior, payment history, and adherence to lease terms. Previous landlords can offer an unfiltered view of what it's like to have the prospect as a tenant.
Common Practices in Background Checks
It's standard practice in rental applications to pass the cost of these checks onto the applicants, usually as part of an application fee. This not only offsets your costs but also:
- weeds out less serious applicants,
- clearly lets applicants know you are doing these checks and
- weeds out applicants who may have something to hide in their background checks.
Key Details to Focus On
Credit Report: Look for consistent on-time payments and responsible credit use.
Criminal History: Focus on offenses that could pose a risk to the property or community, but always adhere to fair housing laws.
Rental History: Pay attention to eviction history and feedback from previous landlords.
The Application Process: Your First Line of Defense
The application process starts with a well-written listings ad featuring clear minimum requirements. This serves as your first filter in the screening process, ensuring you only deal with qualified applicants. Use a standardized rental application form, adhere to your minimum requirements, and open communication lines. A clear and transparent application process isn't just a formality; It sets the stage for the landlord-tenant relationship and serves as an initial filter to weed out unsuitable applicants. Here's how to make the most of it:
Setting and Enforcing Minimum Requirements
Before you even list your rental property, establish your minimum requirements. These could include a minimum credit score, income level, or rental history.
Clearly state these requirements in your listing to deter applicants who don't meet the criteria from applying in the first place.
Example: If you require a 650 minimum credit score, make this clear in your listing. "Applicants must have a credit score of 650 or above. No exceptions."
Where do you get good ideas for minimum requirements for your area and unit type? Easy, explore rental units/properties in your region that are similar to yours. Look at the ads those landlords have posted, inventory their minimum requirements, and use that as a basis for discovering your own. This gives you insight into the type of renter you could expect and helps ensure you remain competitive with comparable rental units in your area.
The Value of Minimum Requirements as a First Filter
By setting these minimum requirements, you're creating an initial filter. This saves you time and reduces the number of applications you'll need to sift through. It's a win-win; you get more qualified applicants, and those who don't meet the criteria know not to waste their time—or yours.
These same requirements are also a quick way to parse out those candidates that did not read or respect your ads requirements. So, the first thing you do when receiving a full application is check the prospect meets your requirements.
Using the Rental Application Form to Reinforce Minimum Requirements
Your rental application form should be designed to reinforce these minimum requirements. Include fields that directly relate to them and make them mandatory. This ensures you gather all the necessary information to make an informed decision.
Example: If one of your requirements is a minimum income of three times the rent, include a field in the "Monthly Income" application form and specify that proof of income will be required.
Digging Deeper: The Value of the Application Form
The application form is more than just a collection of names and numbers; it's a treasure trove of information about your prospective tenant. Use it to find out about their lifestyle, habits, and reliability. Ask questions that give you insights into who they are as individuals.
Example: Include questions like, "Why are you moving?" or "Do you have pets?" The answers can provide valuable context. Someone moving for a job relocation may be more stable than someone who has moved multiple times in the last year for unspecified reasons.
Pro Tip: Use open-ended questions to encourage applicants to share more. This can give you a fuller picture of the applicant and help you spot any potential red flags.
By giving due attention to each of these aspects, you're not just filling a vacancy but building a community, one tenant at a time. And the more you know about your potential tenants, the better your chances of creating a harmonious living environment for everyone involved.
Getting a better understanding of your potential tenants as people, and not just a set of criteria, is terrific, but when taking this approach, you must be careful. Fair Housing Laws often deal with many of these more personal information topics. Make sure you understand these laws and the type of considerations they forbid. Luckily, this is the topic of our next section.
Making Fair Housing Compliance Second Nature
Fair Housing Laws are more than just legal jargon; they're a commitment to equality, ensuring that housing opportunities are available to all, regardless of race, religion, gender, and other protected categories. So, how can landlords and property managers make sense of it all?
Decoding Fair Housing Laws
Understanding Fair Housing Laws is the first step in ensuring you're not inadvertently discriminating during the tenant screening. Whether it's refusing an application based on familial status or implementing a strict "no pets" policy that indirectly discriminates against those with service animals, the nuances are many.
State and Local Nuances
Federal laws lay the groundwork, but state and local laws often add another layer of complexity. For example, some states extend protections to categories like sexual orientation and marital status. It's crucial to be aware of these additional stipulations in your jurisdiction.
Where to Go to Deep Dive
HUD's Fair Housing and Equal Opportunity Section:
- This specialized area of HUD's website is a treasure trove of information on Fair Housing Laws.
- Website: HUD Fair Housing
National Fair Housing Alliance: Resources for Landlords:
- NFHA offers targeted resources to help landlords navigate Fair Housing Laws effectively.
- Website: NFHA Resources
Your State's Fair Housing Guidelines:
- Each state has its own set of Fair Housing guidelines, often available through the state's housing agency.
- Website: A quick search for "[Your State] Fair Housing Guidelines" should lead you to the right place.
Making Compliance a Habit
The key to successful and ethical tenant screening lies in making compliance with Fair Housing Laws a habit, not just a checkbox. This means continually educating yourself and your team, revisiting your screening criteria, and being mindful of these laws in every interaction with prospective tenants.
Over time, this constant attention and awareness will help you avoid legal pitfalls and also contribute to creating a more inclusive and equitable housing environment. It's not just about adhering to the law; it's about embodying the spirit of fairness and equality that these laws represent.
The Ultimate Tool for Streamlined Tenant Screening
Property management software is more than a convenience for tenant screening; it's a strategic partner. It integrates various tools and practices, creating a cohesive platform tailored to your needs.
A unified platform for all your tenant screening needs brings efficiency, accuracy, and adaptability to your rental business. Choose a software that offers:
- comprehensive background check tools,
- customizable application processes,
- automates rent collection,
- provides excellent communication and
- provides a user-friendly interface for both landlords and tenants.
After diving deep into the complexities of tenant screening, from background checks to Fair Housing Laws, it's clear that the process is multi-faceted and requires keen attention to detail. This is where the power of property management software comes into play. Imagine having a single integrated platform streamlining all these tasks and enhancing efficiency and compliance.
One of the standout features of advanced property management software is its ability to offer customizable applications and onboarding workflows. This means you can tailor the rental application form to include the questions and criteria most relevant to your properties. It's not just a one-size-fits-all solution; it's a tool that adapts to your unique needs.
In essence, property management software is not just a tool but a comprehensive solution that brings together all the elements of effective tenant screening. It's about making your life easier while ensuring you provide equitable and professional service to all prospective tenants. DoorSpot has a full suite of features to simplify and standardize all aspects of tenant screening.
Conclusion: The Future of Tenant Screening
In conclusion, the art and science of tenant screening can be both rewarding and efficient with the right property management software. Embrace these tools and practices to empower your rental business, making tenant screening a seamless part of your professional journey.
So, fellow landlords, are you ready to take your tenant screening to the next level? With these insights, and tools like DoorSpot, you're on your way to building successful and lasting relationships with your tenants.
Happy renting!
