May 10, 2024, by Christie Slatcher
When you have someone interested in your rental property, you want to convert them from a prospect to a resident as quickly as possible. The sooner you can get a lease signed and a tenant placed, the sooner you can begin collecting rent.
But, you have to be strategic about who you approve to live at your property. A well-qualified tenant will allow you to enjoy a pleasant and profitable rental experience. A tenant who has not been well-screened can lead to late rent, property damage, and the potential for eviction.
In this blog, we will explore proven tenant screening methods from over 20 years of industry experience, helping you convert prospects into long-term tenants.
Establish Qualifying Rental Criteria
The qualifying rental criteria is where your tenant screening process begins. This is your opportunity to put into writing exactly what you’re looking for in a resident. You can establish your standards for credit scores, minimal income, and rental history. You can state whether you’ll consider anyone with prior evictions or a criminal history.
By having qualifying rental criteria in writing, you can also protect yourself against any potential fair housing discrimination claims. It’s easy to let your objectivity slip when you’re screening tenants without even realizing. Your documented criteria won’t let you do that; it keeps your entire process consistent and fair.
Provide your rental criteria to anyone who expresses an interest in renting your home. They’ll know whether they are likely to qualify for your property before they apply. This will save you time and it will save them an application fee if they’re not likely to get approved.
Collect a Comprehensive Rental Application
Your rental application needs to collect pertinent information that you’ll need to determine whether a tenant is qualified, including personal information such as the tenant’s legal name, date of birth, social security number, and current address. Obtaining this information is essential because it helps you verify the tenant’s identity, run a credit check, and contact references such as former landlords.
A good rental application will collect the following information from a tenant:
- Collect information about the tenant’s current employer, employment history, and income. You can customize the level of detail by requesting their job title, length of employment, and the frequency of their pay, whether it’s weekly, monthly, or on another schedule.
- Rental history and references. Always ask for information about the tenant’s previous rental history and payment history. You’ll want to collect contact information for the previous landlords. Some rental property owners will also ask for personal or professional references who can talk about a tenant’s character and reliability.
- Permission to run a credit check and background screening. You need a signature on the application that indicates your applicant understands that you will be checking their credit and screening their background. Running a credit check and conducting a background screening is a standard procedure in the rental application process. Landlords can use this information to determine if the potential tenant has a history of failing to pay rent or has a record of felony convictions.
Creating a rental application for your property is not something you should do on your own; get a template from a property manager in California or a qualified landlord and tenant attorney. It’s important that your application is both legally compliant and legally enforceable. You must be careful about what you ask because you don’t want to violate any fair housing laws.
Your rental application should seamlessly transition into the screening process. This is where you’ll confirm tenant identities, evaluate their financial stability, and review their rental history, enabling you to identify the most qualified and dependable renters.
Tenant Screening Strategies: What to Check
Now that you’ve provided your standard rental criteria and you’ve collected a completed application, it’s time to use that information to screen your tenants.
Here’s what we’ve noticed about the landlords who do their own screening: Either they don’t go far enough, and they leave too much to chance, or they set extremely high expectations that no tenant is likely to meet. You probably won’t have a lot of applicants with 800 credit scores and salaries that hit the mid-six figures.
Now, let’s explore some other areas you should also keep a very close eye on.
- Verify Employment and Income
You want to make sure your tenants can pay rent on time every month. Ideally, they’re employed. If they’re not employed, you need to make sure that they have enough money to meet the obligations of the lease agreement.
A critical part of your screening process is verifying income. As we discussed, on your application you will have asked your tenant to provide an employer’s name and contact information. You can contact the employer directly to verify that the tenant works there and to ask how much they earn (the tenant must give you permission to do this on the application). Or you can ask for proof of income, which is usually going to be through pay stubs.
You may encounter a tenant who is self-employed or living off retirement income. If this is the case, you can verify their earnings by asking for tax forms or bank statements. Someone who is new to the area and renting a home before they’ve begun a new job can show you an employment contract or an offer letter that includes their salary.
- Conduct a Credit Check and Analyze Credit History
Checking the credit history of your tenant gives you an idea of how reliable they are with their finances.
Establishing a minimum credit score is a good way to decide whether you will continue screening a tenant or not. But, you’ll want more information than the basic credit score. Run a full credit report, and analyze what you find, especially debt. Look for red flags such as unpaid debts or late payments, which can be a sign of financial trouble. It’s especially disconcerting to find money owed to a former landlord or apartment community. This could indicate that your tenant does not take their financial responsibilities for housing seriously. Utility accounts in collections are also problematic.
- Obtain a Rental History
Obtaining the rental history of your prospect will give you a good idea of their past behavior as a resident renting a home. Ask for references from their previous landlords and contact them to find out how they were as tenants. You’ll want to ask former landlords if rent was paid on time, if the property was well-taken care of, and if proper notice was given before they moved out. Always ask if the landlord would rent to the tenant again. This will tell you exactly what you need to know.
Make sure you’re talking to actual landlords or property managers. If a tenant has had a bad experience with a landlord or in a rental property, they might try to prevent you from talking to the people they have rented in the past. You don’t want to collect a reference from a friend or family member. Do a little digging and make sure you’re talking to the legitimate property owner.
- Past Evictions
You can also check court records for any past evictions or judgments. Evictions are a huge problem for landlords. You want to be compassionate, but you also must understand that past experiences often dictate what will happen in the future. A tenant who has been evicted recently is a risk.
Your qualifying rental criteria needs to be specific about what you’ll allow and not allow when it comes to evictions. A prospect who was evicted from a home 20 years ago and has spent the recent years re-establishing a positive rental history is far more attractive than a tenant who has two evictions on their record in the last five years.
In California, evictions will not always show up on a credit report. You’ll have to check the national eviction registry if you want to know for sure that your applicant has a clean rental history. When you do find an eviction in California, you should be worried; evictions don’t show up unless it has gone to court and the tenant has been legally and physically removed from their home.
Screening tenants is an important part of renting out a property, and you need to give it the attention and resources that it deserves. While you should be working quickly to move your prospect into your property, make sure they’re qualified.
The right tenant can bring great value to your property, while the wrong one can be a headache. Selecting tenants is both an art and a science. Employing these best practices – establishing rental criteria, collecting a thorough and signed application, verifying employment and income, checking credit history, and obtaining a rental history will help you select the best tenants for your property.
Conducting a thorough tenant screening can help protect your investment, reduce vacancies, and ultimately make you a successful landlord. If you’re not sure you have the resources or the know-how, make sure you’re working with a local property management company.
We’d be happy to assist with your tenant screening. If you’d like some help or have any questions, please contact us at Jamison Management Company.