CONGRATULATIONS! You’ve just purchased your first rental property. Now, you need to begin the daunting task of finding your first tenant. But, everyone has heard the horror stories of awful tenants, so how can you keep that from happening to you? It begins with screening and the application. Tenant screening is what landlords and rental companies use to dig a little deeper into a person’s background, to determine the likelihood a perspective tenant will meet the qualifying criteria to rent the property.
The first step you want to take as a rental unit owner is developing your own rental qualifying criteria. This might include a minimum credit score, zero eviction history, no criminal history, no tobacco use, limitations on pets, minimum income, etc. When making your checklist however, ensure you are not discriminating against any protected classes. These include age, race, ethnic background, national origin, religion, sexual orientation, color, pregnancy, familial status, disability, veteran status, or genetic information. Make a checklist for your criteria, and use it for each and every applicant. You will use this criterion to separate a mediocre tenant from an exquisite tenant.
After you have set your minimum standards, you may list your property. You may begin screening potential applicants with the first phone call. Ask open ended questions to get the potential renter talking such as “What can I tell you about the property?” In conversation, you can work in some of the minimum standards you have set for the property and gauge the person’s reaction. For example, you may say, “The apartment does require a complete background and criminal record check to ensure we only rent to upstanding people.” A simple five minute phone call potentially weeds out non-qualifying perspective renters, and also lets them know, you are not a slumlord. If your potential renter is still interested, how you handle the situation next is completely up to you. Some property owners prefer to do the rental application first, others like to show the property and then complete the application. Whichever way suits you, it is recommended to charge an application fee. This also weeds out non-qualifying renters. If someone cannot afford a small rental application fee, most likely (s)he will not be able to afford a security deposit and your first month’s rent.
A quick google search landed dozens of rental applications, or you may draft your own. The important part is it should include some key pieces of information. You want to make sure it has a personal information section; name, date of birth, address, phone number, social security number, driver’s license number, employer, employer address, employer phone number, how long have you worked there, how much do you make, etc. Include current and past rental history for at least 5 years including monthly rent. How many evictions, broken leases, judgments have been brought against you. You may want to include any additional questions such as, if the person is a tobacco user, requested move in date, how many and what kind of animals, reason for moving, number of tenants planning to live there, etc. If you require a background, criminal record, or credit check, have the potential tenant sign those releases on separate forms. This may help you spot any inaccuracies in social security number, address, etc.
When you are showing the property, make sure you are observing the person as well. Take a look at their physical appearance as well as the attitude, language and their punctuality. Try to catch a glimpse of the tidiness of the person’s vehicle. Emphasize again your minimum standards for renting your property, and listen for any context clues the person may give you about his/her character. It may be helpful to screen your potential tenant’s social network sites ahead of time, in case it leads you to any questions you may have.
Follow up with potential tenant’s current employer, as well as former landlords. The person’s employer may not be as forthcoming due to confidentiality restrictions, however the more specific the question is, the more likely they will be able to answer. For example, you may ask, “Jo Jones put on his rental application, he currently makes $28,000 annually at your company, is that correct?” The company is more likely able to answer a yes or no question rather than elaborate on a specific figure. When calling upon a potential renter’s former landlord, I typically ask how he or she knows the potential renter, rather than spitting questions right off the bat. Not only does this open the doors of communication, but it can also help spot potential fraud.
Completing a background and credit check has become a necessary part of investment property ownership in today’s world. As I’ve mentioned before, we’ve all heard those horror stories about those awful tenants. Not every book can be judged by their background check, however most people agree a starting place needs to be established. There are hundreds of sights on the internet that advertise to property owners providing background and credit checks on tenants. One of the most popular is hosted by transunion, called smartmove. Property owners go to www.mysmartmove.com, set up an account, and enter the property address as well as the applicant’s email address. An email is sent to the applicant, they too have to create an account, enter their personal information, pay a small fee, and the landlord receives a credit and criminal report as well as a leasing recommendation.
Denying an application is not as simple as it sounds. You must only deny an applicant if you have a legitimate reason. This is where the rental qualifying criteria comes in handy, and why you must use it for every applicant. To avoid any type of discrimination, each applicant must be screened in the same manner. If you deny one applicant because he smokes, but let your niece rent the apartment, and she smokes, that first applicant may now sue you for discrimination. As mentioned previously, you may not deny a rental application based upon race, color, age, veteran status, genetic information, ethnic background, national origin, religion, sex, sexual orientation, pregnancy, familial status, or disability. You may however, deny a rental application due to credit score, income, pets, history of nonpayment, etc. When you deny an application due to an applicant not meeting the qualifying criteria, you are entitled to keep the application fee for the work you have put in to research the application. However, if you deny an applicant because you have chosen someone else first, you must return the application fee.
Doing these things is not a guarantee you will get a great tenant, but it is a step in the right direction. Sometimes it can be extremely difficult to choose the best tenant. My best advice is to stick with your qualifying rental criteria, and don’t let anyone steer you away from that.
Questions for A Former Landlord
When did the tenant live there?
Did you ever have to serve a legal notice?
Did the tenant always pay on time?
Did you have any trouble or damage?
Did the tenant have pets?
Did the tenant give you proper notice to vacate?
Did the tenant leave the unit clean?
Was the tenant ever asked to leave?
Would you rent to this tenant again?