Best tenant screening practices include just a few, but very important steps. Follow these steps, and you'll provide a pathway to a much more successful landlord tenant relationship, and avoid potentially costly pitfalls down the road.
You've set up your groundwork for letting prospective tenants know you have a rental available, online and with family/friends. Calls and emails will start coming in soon! Now what??? The second of our 7 steps of landlording is probably THE most important! Strict, diligent tenant screening is the key to avoiding potential costly pitfalls.
We recommend providing every prospective tenant with a Tenant Application to fill out. Best tenant screening starts with using a the best tenant application possible, so you can gather all the information you need. It's essential that the application you use asks for all the basics, references, employment, income... but you'll also want to know about other occupants, kids, pets, make/model car, social security number. There are many forms available to use, but make sure the one you choose will give you the information you really need.
In addition to the Tenant Application (aka Rental Property Application Form), best tenant screening practices always involve factoring credit report details and credit scores in. Consider requesting a credit report to be provided to you with the tenant application. Credit reports are free at www.annualcreditreport.com for everyone.
Credit reports give GREAT insight into who your prospective tenants are. You'll get a much better picture of how they pay their bills every month - do they pay their credit card bills late all the time? Or are they super reliable and responsible with their debts? Is there debt amount, and thus, minimum payments out of control and would lead to potential issues affording to pay their rent?
Tenants with credit scores above 750 are often ideal.. because it means they are very responsible, pay their bills on time, and their credit score is important to them. Chances are, they will treat you and your property with care just as they do their life obligations. Do you want someone with a 450 score due to $75k in debt and never pays their bills on time? No. They won't pay their rent on time either, they have nothing to lose. By requiring a recent credit report to be submitted with a tenant application, you'll have much more valuable information to make a sound decision.
Request copies of most recent pay stubs or bank account statement. Look for a take home pay amount to be at least twice, preferably three times the amount of what you are asking in rent. Keep proof of income from tenants is a very important piece of best tenant screening practices. Landlords should keep copies of proof of employment and/or income in a file for the length of the tenancy.
Make sure the application asks if they have pets, and what breed/age they are. Your community may have restrictions. And you may not want to rent to someone with three cats, two dogs and a rabbit. Make sure all prospective tenants understand there are strict pet policies to adhere to.
Consider employment history. Did they have five jobs in the last year, and their current employment has only been for a week? There are many factors involved in determining if a tenant will be worth the risk or not. And make no mistake, ANY tenant is a potential risk. You have to weigh your odds.
Once you have all the information you need, and you do your own pre-screening... consider getting a criminal background check. They range anywhere from $20-50 each and are well worth the expense. They will uncover past instances of criminal activity, fraud, eviction, bad checks, sexual predator, etc depending on which service you choose. YOU CAN CHOOSE TO SET A $50 TENANT APPLICATION FEE THAT WILL COVER THIS BACKGROUND REPORT. Most tenants are used to having to pay a tenant application fee.
If the rental property is in a condo community, they will most likely be conducting the criminal background check on your tenant for a fee. This sometimes causes issues if you charge them, and the condo association also charges them. In these cases, you can do criminal and civil searches yourself through your local clerk of court. You can also require tenants to provide you with a police report ($5 and easily done at most police stations).
The more strict you are with the "application process", the more your tenants will take you seriously as a Landlord, and the lower your risk will be. In addition to the obvious: protect your investment and don't take a tenant out of desperation or frustration. It will NOT be worth it in the long run! *Consider using a rental property management company to provide these services for you. Charges usually range from $75/month to a percentage of rent collected. And this expense is a tax deduction* (always check with your tax preparer).
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