Transcript: Hello and welcome to another Rentometer Learning Short where we’ll chat about the importance of screening potential tenants before they sign the lease.
And No, this topic doesn’t have much to do with Rentometer or rent comparisons, but it is important to landlords and property managers who frequent our site. It's also happened to be a familiar topic as a few of us here at Rentometer spent many years in the tenant screening software industry helping landlords and property managers across the country implement best tenant screening practices.
Tenant screening is not only a good business practice but a necessary one. And It’s really about protection. There are things when you’re investing in property that you’ll want to protect. First, You want to Protect the profitability of your asset, next, you need to protect the actual physical structure of the property, and lastly, you want to protect the other residents in the building or adjacent property. And Tenant screening will help you do all 3 of these.
So let’s break these down one by one. First, = protecting your profitability. You likely got into the rental real estate to make some money, right?...well you won’t make much if your tenants don’t pay their rent!
So, how can you find out if your tenants will pay their rent? You don’t have a crystal ball right? so here are the two things you should do to best predict future payment behavior.
1.) Look at their payment history. You’ll want to run a credit check to see how they’ve paid other bills over time. You’re trying to look for a pattern of behavior…whether good or bad. It’s especially important to see if the tenant has been evicted in the past.
2.) Verify their income. You need to know how much money they are bringing in every month to get a sense of whether they can cover their rent. If you are questioning their previous payment behavior or income, you may need to ask for a larger security deposit, or possible a guarantor to co-sign the lease to offset any financial risk.
The next reason to screen your potential tenants is so you can protect your property. You want to rent to responsible individuals that will take good care of your investment. Ideally, you’d like to rent to respectful tenants who won’t cause damage that could lead to expensive repairs or maintenance. So We recommend that you obtain at least two landlord references so you can see how the tenants behaved at their last rental. When conducting landlord verifications, try and be efficient and mindful of the landlord’s time that you’re calling by having your questions prepared ahead of time.
And lastly, by screening potential tenants, you’re trying to protect other nearby residents. Depending on the type of property that you own or manage, you’ll want to protect residents in adjacent units or neighbors nearby. You will want to ensure your potential tenant doesn’t have a criminal history by running a criminal background check. Do they have a serious criminal offense or a history of criminal offenses? There are restrictions and requirements for accessing criminal record data and they can change significantly state to state so you do need to check your states criminal background laws and best practices.
To that end, there are many good tenant screening services out there that you can use for credit, criminal and eviction background screening. We happen to like TransUnion’s SmartMove product. These types of companies will have more information on the legal ways to access credit and criminal information on potential tenants.
As always, consider Fair Housing Laws when accepting or rejected potential tenants from your property.
So, that concludes our quick video today. As we mentioned, Tenant screening plays a major role in protecting the profitability of your investment, the actual property, and the people surrounding your property. So please take the time to screen potential tenants before signing a lease.
We hope you found this video helpful. For other great landlord tips and tricks, visit the Rentometer Blog which features fresh takes on rental housing topics, services, and technology.
And when you need to make sure you’re rent is right, always check your rents at rentometer.com