How to Screen for Qualified Tenants
The problem with tenants who not have been properly pre-screened range from broken windows and stained carpets to damaged walls and late rent or worse yet, no rental payment, legal expenses, and the list goes on and on.
Problem tenants are the leading cause of frustration and headache in the rental industry. Hundreds of property managers deal with bad tenants on a regular basis. This is why it is crucial that management companies take the appropriate steps to screen tenants, and when I say appropriate, I mean there are wrong ways to screen tenants as well.
It is VERY IMPORTANT that the property manager truly understands and follows Fair Housing Laws to avoid discriminating and being taken to court. A little time taken out to properly screen tenants could potentially save thousands of dollars of damage to your rental property. Lost income due to a delinquent tenant added to damage done to the property can be devastating to a rental property owner. Some property owners do not recover from these types of situations and end up in bankruptcy. Don't let this happen to you!
The first step is to have the prospective tenant fill out a rental application. The information gathered on a rental application should include the applicants employment history, monthly income, proof of identification (i.e. social security number, copy of driver's license, etc.), and references of previous landlords or employers to get a sense of character.
It is very important to check references. Just because they are on paper, doesn't mean they are legitimate references. Many management companies request references but never check them! With your rental application you should include a written code of conduct. The code of conduct should clearly detail the roles of both the tenant and the management company. This code could protect you in court, so it is very important to include this.
It is also very important to obtain a copy of the applicant's credit report. In order to obtain this information, the manager must first get permission from the applicant. If you do not have permission, do not run the credit report. The following information must also be gathered: Tenant's name, address, and Social Security number. Get their approval to run the credit report right on the application by having them sign a statement authorizing you to do so.
The next step is to find a credit report agency. If the information obtained by the credit report is not to your standards and you decide to decline their application, you must send an adverse action letter. Remember, even if the tenant asks you for a copy of their credit report, it is illegal to give it to them. By sending them the adverse action letter explaining the reason for the rejection, they can obtain a copy of their credit report through the agency from which you obtained it.
Whenever possible, meet your applicants in person. This will give you a better idea of what the person is like and how they might treat your property. Do they try to make a good first impression? Do they come off as well educated? This will also give you the opportunity to start a good tenant relationship right off the bat.
Renting your property to just anyone could cost you some serious time and money. It is not uncommon to see a property rented to bad tenants due to improper background checks or application processes. Follow these steps and you will protect yourself from court, property damages, and the headache of dealing with delinquent tenants.
