Landlords, we understand how long it can take to choose your rental location, find your ideal unit, organize the funding and prepare the place so it’s ready for tenants … every step of that process costs you money. We realize your goal is to have someone living in your unit as soon as possible! Of course you want to start immediately receiving rent, so you can start to earn money on your investment.
However, we’re here to warn you to not rush the last step: finding a tenant. Choosing the “wrong” tenant can be a devastating blow to your rental business and can cause enormous damage to your rental property!
Unfortunately, the worst case scenarios – such as non-paying tenants who don’t take care of your property and refuse to leave – do happen! While it is impossible to guarantee you can always avoid this situation, careful and thorough tenant screening can go a long way in helping to find a solid tenant, allowing you to protect your investment, as much as possible.
The only problem is that screening tenants is a legal minefield. Many landlords inadvertently break housing laws and expose themselves to potentially crippling legal action. This blog post has been created to help you navigate the law governing tenant screening so that you can find the right person to live in your rental unit, without breaking the rules. Here are the do’s and don’ts you need to know.
Do Investigate Housing Laws on Rental Limits
Before you begin advertising and screening potential tenants for your rental property, take valuable time to research the specific laws in your state. There may be restrictions on the rent you can charge, the security deposit you can ask for and, certainly, on the screening criteria you can use to decide on the successful tenant to move into your property. To learn the rights of tenants in your state, click on this link.
Do Decide a “Rent to Income” Ratio
When you’re ready to advertise for tenants, decide upfront on your basic requirements. This will ensure you can weed out the majority of callers immediately without investing too much time into the process. A useful first screening determinant is a rent to income ratio. Many landlords decide that their tenants must be earning at least three times the rental amount.
Do Conduct Initial Screening Over the Phone
When you advertise your vacancy, ask interested candidates to call. This will allow you to discuss your basic requirements and conduct an initial screening quickly and efficiently. This way you won’t waste their time and you will also save yourself hassle, too.
Don’t Ask Discriminatory Questions
When screening potential tenants, you must always be aware of questions that may be discriminatory. You may not refuse to rent your property based on any of the following factors: race, color, national origin, religion, sex, familial status or handicap. These are known as the protected classes.
Do Meet the Prospective Tenant
Once you have conducted your initial screening, it’s beneficial to meet with the prospective tenant at the property. This gives them an opportunity to see if the property is suitable for their needs and also gives you an insight into the kind of person they are, too. Be aware of answering questions such as, “Is the area safe?”
Anything you reply here could be considered misleading. In this instance, it would be better to suggest that the individual researches police statistics and visits the location at various times to make their own decision.
Do Request an Application Fee and Permissions
If both the potential tenant and you are satisfied to proceed with the application following the meeting, send an application form, with requests for permission to complete background checks, and also collect an application fee. This will give you everything you need to start the full screening process.
Do Follow a Set Process Every Time
Be sure you stick to the same process every time, for every single potential tenant and keep records of your findings. This keeps the application process fair and consistent. It protects you in the event of legal action brought about by the potential client, and it also helps you to compare results from different individuals.
Do Complete a Credit Check
A credit check will provide you insight into the financial responsibility and spending habits of a potential tenant. You’ll learn their history of late payments as well as any debts they may have.
Do Complete a Criminal Check
You want to keep your property and other tenants safe from harm, so be sure to conduct a search of any convictions over the last seven years.
Do Check Employer References
Employer references are important, as you want to know that your potential tenant is able to pay their rent on time every month. A steady income is a good indication of reliability here. Look for three years employment history and the current wage. It is useful to phone the current employer for this information.
Do Check Landlord References
When it comes to landlord references, be aware of the potential for false details to be given. Try to use specific information from the application form to verify the accuracy. Ask for information about the duration of the lease and whether the payments were made on time each month.
Do Check Personal References
With personal references, there will virtually always be an element of bias, as the prospective tenant will provide the contact information of family and friends. Don’t let this put you off however, we recommend you still follow up and make these calls, as the information can be useful.
Do Use Social Media
Social media can be a very useful tool for landlords to use when screening potential clients. It can be used to verify the general details that have been provided on the application form. It is also a great way to determine if the individual has pets.
Always keep in mind that information shared on social media may not be true, and, above all, be very careful of breaching the potential tenant’s privacy. Any information that you inadvertently discover regarding protected classes may not be used at all in your decision making process.
Don’t Fall for Emotional Stories
When deciding on the right tenant to move into your rental property, make sure that gut instinct or tugs on your heart strings aren’t playing a part. Choosing the best tenant is essential for the smooth running of your business, so it’s imperative you have a sound basis behind your final decisions.
Do Take Full Deposit
When you decide on the right tenant and agree on a date for them to move into the property, don’t be tempted to accept anything less than the full deposit and full first month’s rent before they enter the property.
Don’t Hand Over Keys Until Everything Is in Place
Only once the full process is complete, contracts are signed and money is in your account, should you hand over the keys to the property.
Every landlord wants to secure tenant that will pay their rent on time, every time and respect their property; therefore, it is essential to thoroughly screen each prospective tenant. This can take time, but it’s worthwhile, if you want to avoid potential future legal action and hassles with eviction. At LandlordStation, we offer a quick and easy online tenant screening service saving you a tremendous amount of the hard work. The whole process can be started with just an email address, and we take it from there … it’s that simple.
Your prospective tenant can input their sensitive personal data without you needing to get involved. Once the details have been given, we conduct checks on the following:
- Credit Report With Score
- Criminal Records
- Medical Collections
- Employment History
- Known Aliases
- Past Address History
- Eviction Records
A full report is then sent to you, so you can make a quick informed decision to approve or reject from there. It can be as simple as that to find great tenants, protect your investment and stay within the law!