Your First Rental Property: Exactly How Should You Screen A Tenant?
People who have never owned a home before tend to wish for home ownership more than any other group of people. Why? Owning a home comes with many responsibilities and potential financial risk. Plumbing might freeze and bust during winter, requiring immediate repair. The refrigerator could stop blowing cold air, causing food to ruin until it’s fixed or replaced with a working model. Every year, Uncle Sam is due property taxes. These three nuisances are just a few of the many reasons why United States citizens are increasingly turning to renting, slowly but surely.
Every landlord must know how to screen for a good tenant, as granting a lease to just one bad apple can result in a crowded list of repairs, potentially costing thousands. Imagine letting someone into your home — they spill alcoholic beverage on carpet and fail to clean it up, stomp mud throughout your house, and clog toilets every other trip to the bathroom. In actuality, that visitor is far less likely to harm your home when you’re around. However, when you rent homes to tenants, you’ve no way to supervise them around-the-clock, birthing the need for rigorous tenant screening.
First, let’s dig into characteristics of good tenants, then touch over *X* steps for how to screen for a good tenant.
While no single set of qualities defines the perfect tenant, you should place these characteristics at the top of your tenant screening list.
- Lengthy rental histories – Not every tenant will have rented elsewhere for years at a time. However, tenants who’ve lived at other places for several years in a row and have positive references from other landlords and property management will likely be angel-like renters.
- Not asking for several particular terms or clauses – Not every lease has terms you perceive as favorable. It’s reasonable to ask for one clause removal or addition, at most, although tenants who ask for entire contractual overhauls aren’t pleased easily.
- Being married – People that are married are statistically less risky than singles.
How You Should Screen a Tenant?
- Require them to fill out applications
Timeliness – Set up an in-person meeting with each of your prospective tenants. If they don’t show up on time, they’re likely bad news.
Having formal record of applications an prove useful in the event of legal issues. Outside of their referential usefulness, tenants that take long periods of time to fill out applications might not be good tenants.
- Request former rent receipts or checks, and landlord references
While it’s possible tenants could forge rent receipts, asking for bank statements with proof of rent-related transactions can help prove validity of applicants’ claims. Also ask for previous landlord’s’ contact information. When contacting the landlord, ask to video chat to prove their identify, or simply ask how they signed the rent receipts. This can help catch prospective tenants who are lying.
- Ask for proof of income
Even if tenants don’t retain pay stubs, they can obtain income verification from their employers. This will help you gauge whether they’re financially capable.
- Commission a credit report
Some landlords look to background checks to evaluate applicants. Criminal history, however, doesn’t represent potential tenants as well as credit reports. Credit reports provide past residences they’ve lived at, helping you vet their claims. They also tell multi-chapter stories of their financial position and likelihood of risk.
- Set up one or more in-person meetings
When you set out to meet people seeking tenancy, you can better gauge who they really are, rather than using phone or text communication. If they’re late, they might pay rent late. Dressed sloppily? Applicants might not be professional or meet income requirements for your property. Messy car? That might yield a messy, potentially-damaged house.
If they pass the in-person test, they’re ready to sign leases. Always make sure to go with your gut, even if these characteristics and steps determine they’re good applicants. Depend on your real estate investing business plan. Good luck!
Note: The author of this article is John Delia. John is a young developer and landlord from East Hills, NY now residing in Columbus, OH. He studied City and Regional Planning at The Ohio State University. Having started his own investment firm at age 21, he now writes and talks about building wealth with passive income through real estate and living life on purpose at Life Liberty n Property. This article originally appeared at Modest Money.
Category: Real Estate
