Broken windows, stained carpets, damaged walls, late or no rental payment, and the list keeps going. Problem tenants are the leading cause of frustration and headache in the rental industry. Hundreds of property managers must deal with the issue of bad tenants on a regular basis. This is why it is crucial that management companies take the appropriate steps to screen tenants, and when I say appropriate, I mean there are wrong ways to screen tenants as well. It is VERY IMPORTANT that the property manager truly understands and follows Fair Housing Law to avoid being taken to court. Taking the time to screen tenants could potentially save your property THOUSANDS of dollars.
The first step is to have the tenant fill out a rental application. The information gathered should include employment history, monthly income, proof of identification (i.e. social security number, copy of driver's license, etc.), and references of previous landlords or employers to get a sense of character. It is very important to follow through with their references. Just because they are on paper, doesn't mean they are legitimate references. Many management companies request references and never check them. Make sure you also include a written code of conduct within your application. The code of conduct should clearly explain in detail the roles of both the tenant and the management company. This code could protect you in court, so it is very important to include.
It is also very important to obtain a copy of the applicant's credit report. In order to obtain this information, the manager must first get permission from the applicant. If you do not have permission, do not run the credit report. The following information must also be gathered: Tenant's name, address, and Social Security number. The next step is to find a credit report agency. If the results are not to your standards and you decide to turn away the applicant, you must send an adverse action letter. This letter needs to explain why the applicant was rejected and the name and number of the agency used to obtain the report.
Meet your applicants in person. This will give you a better idea of what the person is like and how they might treat your property. Do they try to make a good first impression? Do they come off as well educated? This will also give you the opportunity to start a good tenant relationship right off the bat.
Renting your property to just anyone could cost you some serious time and money. It is not uncommon to see a property rented to bad tenants due to improper background checks or application processes. Following these steps will help protect you from court, property damages, and the headache of dealing with delinquent tenants.
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