As a landlord, there are certain things you can do to increase your chances for success – and to make your life easier. Thorough tenant screening is one of them. But not just any screening process will do. You need an intentional, well-thought-out strategy that allows you to consistently bring in high-quality tenants while avoiding the ones who make your life difficult.
The Importance of Screening
Owning rental properties is one of the fastest and most lucrative ways to build wealth in 2024. Yet, most people don’t get involved in real estate. Why is that? Because of the perceived headaches. And if you think about the most common headaches – late rent, property damage, unpredictable cash flow, etc. – they’re all directly tied to the quality of your tenants.
In other words, if you want to eliminate the common headaches and enjoy more of the benefits associated with owning rental properties, it starts with getting better tenants in your properties. You do this by taking tenant screening seriously from the very beginning.
Helpful Tenant Screening Tips
There are plenty of different ways to approach tenant screening. However, if you want the best results, you should follow the best practices that other successful landlords and real estate investors use. Here are a few of those tips:
- Set Clear Rental Criteria. Before you start accepting applications, you should set clear, fair criteria for your rental. This might include a minimum credit score, income requirements (often tenants are expected to earn three times the monthly rent), and no history of evictions. Make sure these criteria are consistent with fair housing laws to avoid any form of discrimination.
- Advertise Your Property. Use online platforms, local newspapers, and even community boards to advertise your property to a wide audience. Be clear about what you’re looking for in a tenant in your advertisement. Mention the rental criteria you’ve set. This approach helps ensure that you attract applicants who are likely to meet your standards.
- Use a Detailed Application Form. Have every potential tenant fill out a detailed application form. This form should ask for information such as employment history, current and past addresses, and references from previous landlords. It’s also a good idea to ask permission to run credit and background checks. This detailed information will help you get a clear picture of who the applicant is.
- Conduct Credit and Background Checks. Credit checks are vital as they give you insight into an applicant’s financial history and their ability to manage payments. A background check can alert you to any past criminal activity, which might be crucial depending on the nature of the offense and your property’s location. There are plenty of services available that can run these checks for you. Or, if you’re working with a property management company, they can implement background checks as part of the tenant selection process for you.
- Check References. Always take the time to check the references provided by your applicants. This should include calling past landlords and employers. Ask previous landlords whether the tenant paid rent on time, maintained the property well, and observed the terms of the lease. Employers can confirm details like income and job stability. The little details and anecdotes they give you can be very helpful in the decision-making process.
- Interview Potential Tenants. If possible, meet with potential tenants for an interview. This can be a more casual conversation, but it’s a good opportunity to get a feel for who they are and how they might treat your property. During the interview, you can also clarify the terms of the lease and your expectations as a landlord.
- Be Aware of Fair Housing Laws. Throughout the tenant screening process, it’s crucial to adhere to fair housing laws. These laws prohibit discrimination based on race, color, national origin, religion, sex, familial status, or disability. Make sure that your rental criteria, advertising, and tenant interactions comply with these laws to avoid legal issues.
Give Yourself an Advantage
As a real estate investor or landlord, you can give yourself an immediate advantage – a head start, if you will – by implementing a strategic tenant screening process that allows you to source high-quality tenants. Using some of the tips highlighted above, begin to build out a process that aligns with your goals and mission!