Tenant Screening

A Vacant Unit is Better than the Wrong Tenant

I see this all of the time. Tenant’s not paying their landlords and the landlords having to jump through the hoops of evicting them. Normally, when I get into the conversation with people I find they needed to fill their vacant unit so they lowered their rental standards or they eliminated a credit check all together.

I say this all of the time and people continue to ignore me. I would rather have a unit sitting vacant than to move in an under qualified tenant. Who you move in is one of the most important components of being successful in this business. COVID19 is really showing this. Currently MC Companies is collecting 96% of our rent. Why is this? It is because we were selective in who we moved in. All of our tenants have good credit and no felonies. Most of them are determined to keep their credit in good standing and are working with us on the rent.

Sure there will always be risk, but you can mitigate the risk, and a lot of people don’t because they just want to get their units filled. Below are the six ways you should qualify your tenants before allowing them to rent from you.

 

  1. HEALTHY CREDIT HISTORY

Most landlords’ number one concern about new tenants is non-payment of rent. Many landlords use a rent payment to cover the rental property mortgage. If the tenant doesn’t pay rent on time or at all, this could leave the landlord paying the bill out of their pocket.

If an applicant has no significant warning signs such as apartment related collections, judgments on their credit report, or they have a high credit score, it generally shows they have a history of making payments on time and are likely to continue to do so in the future.

 

  1. CLEAN BACKGROUND CHECK

As a landlord, you should always have the safety of your neighborhood, yourself, and your rental property in mind. In this regard, it’s best to know whether a prospective tenant has any relevant criminal offenses on their record. An applicant with a clean criminal check could be a good indicator that you can trust them with your property and the neighborhood. You’ll want to be sure to perform a criminal check at both the state and national level that includes Most Wanted Databases and the National Sex Offender Public Registry.

 

  1. CLEAN EVICTION HISTORY

Needless to say, a tenant who has been evicted is not a tenant you want to rent to. Although a blank eviction check is a good indicator that the applicant has a positive rental history, you’ll still want to conduct a landlord reference check to make sure the prospective tenant’s behavior at prior residences was up to par because sometimes it takes evictions a few months to post onto a credit report.

 

  1. STABLE EMPLOYMENT HISTORY

To help increase the chances of being paid on time, you’ll want to look for stable employment history. A person who has held the same job for several years and does not have significant gaps in employment could demonstrate that they have a steady job and income. Not only is this a good sign that the tenant will likely pay rent on time, but there’s also a good chance they will renew their lease since they don’t have a history of changing jobs frequently.

 

  1. SUFFICIENT INCOME

While a credit report is an excellent measure of a prospective renter’s financial credit history, it is crucial to verify employment and income for assurance that the prospective tenant has means to pay the rent. A ratio of three times the income to rent is the industry standard, which typically shows that if any unforeseen expenses come up for the applicant, they are more likely to have enough money to pay their rent.

 

  1. POSITIVE LANDLORD REFERENCE CHECKS

A positive landlord reference goes hand-in-hand with your tenant screening reports. Reference checks should verify that the applicant was a good tenant who paid rent on time and left the unit in good condition.

5 Tips to Keep you Eviction Free

Evictions are a factor of owning rental properties that no one wants to deal with,
owners and tenants alike. There are five key ways that you can avoid having to deal
with evictions all together. Implementing things into the process in the beginning will
save you the trouble of having to file an eviction notice down the road. There are a lot of
factors that you should consider but these five points are a good place to start. You can
add on as you learn what works for you and your properties over the years.

Background Checks

Do a criminal and a background check on every single application that you
consider with no room for exceptions. The ideal tenant that you are looking for has good
credit and good rental history as well. Moreover, you also want to make a phone call to
the last place that they lived at because if there were any issues, they may have not yet
hit their credit. Some people will try to get away with claiming past evictions by
attempting to obtain a new lease before the eviction shows up on their credit report. You
can charge them an application fee in order to obtain this information before allowing
them to sign a lease for one of your properties.

Property Appearance

Maintaining your properties appearance is very important. Nice looking properties
will attract the type of tenant that you want. In order to attract the ideal tenant, you must
have the ideal place for them to rent. Take pride in the properties that you own and
maintain them. This includes updating when necessary and also fixing any issues as
they may arise over the years that you own them.

Be a Good Landlord

Also, and this may seem obvious but be a good landlord if you want to have good
tenants. If you are a good landlord, then the right tenant will rent from you for years.
Some ways to do this are to simply have someone available to answer a phone call
when needed, fix things quickly and be lenient when they may be a day late on rent if
this is not a normal occurrence for them. You want to build a positive relationship with
your tenants so that they will continue to rent from you long term.

Credit Reporting

Make sure that you understand how to handle credit reporting. You want to make
sure that your lease states that you report payments to the credit bureaus. This can be
a very positive aspect for the right tenants. You also want to make sure that you have a
lasting relationship with the company as well to handle the reportings. There is a
process to how you have to report and you should be informed on how to do so
beforehand.

Airtight Lease

The most important way to keep yourself eviction free is going to be to have an
airtight lease. This is why it is so important to make sure that your lease is created by a
professional attorney and that you personally go over the lease with your tenant so you
can know for sure that they understand the agreement that they are signing. If there is a
loophole in your lease, when it comes time to evict, you can be sure that your tenant will
find it.

Tenant Screening Tips

There are many tenant screening tips that can be beneficial to you long term in the real estate business. When looking for tenants to rent your properties, you want to be sure that they are individuals that you want to be able to form a professional relationship, often long term. You want to be able to trust many factors, that they will treat your property with respect, pay their rent on time and not cause you any unnecessary issues while they are a tenant in your property.

Key Tips

There are some tips that I can give you when interviewing with new tenants that you may not have previously thought of. One that may not come to mind for everyone is to walk the applicants back out to their car after you speak with them. If they keep an unkept vehicle, they will commonly treat your property the same way. Also, instead of asking them whether or not they have an animal, ask them how many animals that they have. This is a good way to catch them off guard because if they do have animals, they will assume that you already know about them. Do not let them try to assure you that their animal lives elsewhere, this will not be the case. The animal will live on the property that you are leasing and should be tied to the application as such.

Background Checks

Background checks are extremely important when verifying possible tenants for your properties. Always, with no exceptions, do a credit and a background check on any tenant and all adults that will be possibly occupying your properties. Do not accept anyone that has a history of being a felon to rent at any of your properties. They will normally violate your HOA and cause general problems for you and your property. You will also need to be up to date on other laws in your areas concerning things such as service dogs. Service dog laws are generally different state by state. There are only certain animals that will be considered a service animal by the state and they need to have the proper papers in order as well. You subsequently cannot charge them any kind
of additional deposit or pet rent for any service animal.

Conclusion

Understanding these initial key tips for screening possible tenants will help you long term find the best tenants and save you headaches down the road. Paying attention to the small details in the beginning is a good way to make sure that you will have the right tenants moving in in the first place and be able to move forward with a rental agreement with less issues to worry about during their lease period. This may seem like a lot of paperwork in the short term, but there will be even more paperwork in the long term if you do not take these steps from the start of the process. This is also a good reason to look into possibly hiring a solid management company for your properties to handle all of the screening for you.