Screening Tenants to Secure Your Business

By
Real Estate Technology with Innago

Maybe you’ve been there. You’ve gotten a great impression of a potential tenant. They seem trustworthy right off the bat, forthright, prompt and professional in their correspondence with you, and eager to abide by whatever stipulations you set forth. You trust your gut and move forward with the leasing process. Because when has it ever steered you wrong?

Fast forward to months into their lease term, and that perfect tenant was not the renter you thought they’d be. Now comfortably in your space, the ruse of trust and professionalism is gone, and you’re left wondering how you were so easily duped.

The situation described above is not uncommon; however, it is easily avoidable. When seeking out a property, a new job, or even a new partner for that matter, everyone is on their best behavior. But there are some invaluable tools that landlords have at their disposal to call out those who might be putting on an act. This kind of investigative work is your responsibility as a property manager and crucial to the health of your business.

Read on to learn what we consider are 3 key elements of successfully screening potential tenants.

Establish a Defined and Thorough Process

The more well-defined and systematic your process is, the better. It’s valuable to spend the time upfront considering your method and what actions you might take to screen tenants. Detailing this flow ahead of time will allow you to move quickly through potential renters and not waste time second guessing yourself each step of the way.

Based on our work with a wide variety of landlords, the seven points below are essential to a quality and thorough screening process.

1. Passive Screening

This takes place before a tenant is even interested in your property. It’s all about what you are putting out into the public sphere and where and how you are putting it there. For example, you can consider what websites or classifieds you might be advertising in and what kind of audience those pages attract.

You might also think about being up front and transparent with the screening process. If tenants know ahead of time, based on the detail in your listing, that a background check or employment verification is required, and they also know that said checks might render them ineligible for renting, they will likely refrain from submitting an application. This pre-screening technique is super effective in saving you time that would be much better spent deliberating between more clearly qualified candidates.

2. Pre-Screening Conversation

This informal conversation may seem like an afterthought, or something that might just happen naturally as a part of the process, but it can actually serve a more strategic purpose. Not only does the one-on-one chat work as a trust-builder and relationship development for yourself and the potential tenant, but it also allows you the opportunity to address them directly with any questions or concerns you may have up front.

A person’s behavior in terms of how they handle correspondence can tell a lot about their general attitude and disposition. Are they punctual? Do they respond promptly and appropriately? Does it appear that they can handle their affairs timely? There is so much you can learn if you are really paying attention.

Other helpful questions to ask might include...

  • Why are you looking to move?
  • What does your moving timeframe look like?
  • Do you have any children or pets?
  • Would you be comfortable providing employer and landlord references?

And while this is a great opportunity to get information from the candidate, remember to keep it light. If they are truly interested in the place and feel like a viable applicant, you don’t want to scare them away with drilling them interview-style in the first conversation. Think about it ahead of time, know what you want to ask, and then take your time getting to know your client. That building of rapport will go a long way in terms of trust if you do end up selecting them.

3. Formal Rental Application

This might look a little different, depending on where you go, but they all generally cover the same criteria. Creating a clear and effective rental application is crucial to the screening process. This is your primary shot to collect the information you need and to let the candidate know what to expect.

Most applications include the following...

  • Residence history: Including landlord contact information
  • Employment history: Dates of employment, positions, salary, and contact information
  • Other important questions
  • Have you ever been evicted?
  • Do you smoke?
  • Have you ever declared bankruptcy?
  • Have you ever refused to pay rent?

Many property management platforms, including Innago, provide customizable rental applications. This is a great option, especially for first-timers, to ensure that all the most critical bases are covered as well as highlighting those most important to you.

4. Background Checks: Credit, Criminal, and Eviction History

Running background checks is the most surefire way to collect information about an applicant’s past discretions and get an indication of future behavior. Any thorough background check should be able to provide findings on credit, criminal, and eviction history.

When reviewing detail of a credit report, you’ll certainly want to zero in on the candidate’s FICO score, as it is the industry standard for making accurate and fair decisions about creditworthiness. According to global data and analytics company Equifax, credit scores typically range from 300 to 850, with a “good” score being anything 670 and above. In addition to that three-digit number, you’ll also want to check for any significant outstanding debts or obligations. These details can help you make an informed prediction about the tenant’s ability to make good on the rental amount each month.

Criminal reports can be varied based on the jurisdiction, but a comprehensive report will cover all local, state, and national records. And in the event that anything unsavory were to show up, legally you are well within your rights to deny housing to applicants with convictions related to the endangerment of people or disrespect of private property.

Lastly, eviction reports are the most straightforward. For most, there will be no information available at all. However, it’s an important step to ensure you are not unwittingly renting to a repeat evictee.

Again, the best property management platforms out there will have services built in to aide you in the background check process. However, if you do decide to go a la carte, there are plenty of other digital options online. Often landlords who take this added precaution will pass the fee on to the applicants.

5. Employer Reference Review

Anyone can write anything on an application, so it’s important to follow up and verify those claims. In an ideal situation, you’d be able to verify the position, length of employment, and salary. However, oftentimes companies will have policies surrounding what and how much information they can share. Additionally, simply knowing that the employers will be contacted could serve to deter candidates from being dishonest in the info they provide in the first place, saving you additional time and resource.

6. Former Landlord Touchbase

If you’re able to get in touch with one or more previous landlords of the tenant, it could be your best bet in getting a realistic depiction of the applicant’s character. Of course, it’s also quite possible that a landlord, especially one who has experienced disruptions from the tenant in question, could be prone to exaggerating the negative. That’s why it’s always important to take these conversations with a grain of salt.

When speaking with the former landlord, you’ll be looking for information around...

  • Timely payment of rent
  • Care and respect for the unit
  • Cleanliness and maintenance
  • Neighborly interactions and respect

This conversation will help you to gauge what you might be in for if you were to become this tenant’s next landlord.

7. Final Decision

Once you do make a final decision about who you will rent the space to, it’s important to notify all invested parties. This will allow the declined candidates to move on more quickly with their own searches, and for you to begin working through the lease agreement process.

Determine Key Screening Criteria

Once you have all the information from tenants via their application, you can get down to the decision-making process. However, if you have a large number of similar candidates it can be difficult and downright overwhelming to sift through it all and make a confident decision. This is why many landlords employ the use of a tenant scoring system.

A well-defined system to organize and evaluate candidates on a pre-determined set of criteria will allow you to make judgements and weigh applicants impartially. It can also serve as legal protection. According to the Fair Housing Act, you cannot discriminate against a tenant on the basis of race, religion, national origin, sex, or handicap status. As long as you stick to and keep good record of your checklist, you should have no problem proving your case in a court of law.

Most landlords hone in on the following criteria when considering their scoresheets...

  • Credit History
  • Criminal History
  • Rental History
  • Income
  • Employment

Be Fair and Consistent

Trust the process. Remember the scenario from the beginning? Just because you vibe with a candidate does not mean they are the best fit as a renter. You are doing the legwork and putting in this extra effort for a reason. Trust that the data doesn’t lie.

 

Sure, it may seem like the worst-case scenario for someone seemingly “good” to turn out bad. But even try to think of it on the flipside. What about all the perceived “bad” potential tenants you might have turned down off of a gut instinct, who might have actually been good? Not only does this process protect you from falling in with a bad arrangement, but it also levels the playing field for candidates, giving those that are most qualified the most fair and impartial shot at renting.

It can seem like a lot of extra effort on the front end. But, just like doing your homework back in school, as long as you put the time in, this is a test you’re sure to ace!

Comments (2)

John Pusa
Berkshire Hathaway Home Services Crest - Glendale, CA
Your All Time Realtor With Exceptional Service

Hello Sharlene Mulchandani these are very good list of  screening tenants tips for more secure business.

May 25, 2021 01:01 PM
Troy Erickson AZ Realtor (602) 295-6807
Good Company Real Estate - Chandler, AZ
Your Chandler, Ahwatukee, and East Valley Realtor

Screening tenants is critical, and if you can contact former landlords who will give you honest feedback, that is the best resource on how the potential tenant will be.

May 27, 2021 09:55 AM