The Basic Pieces of the Tenant Screening Puzzle
When conducting a tenant screening, using these pieces will help you form a complete picture of your prospective tenants:
- Credit check
- Proof of their current income
- Background and criminal checks
- Previous rental history
As a landlord, staying consistent with each of these reports allows you to assess every applicant on equal grounds. Analyzing this data can be difficult as it represents a person: we all have reasons for not making a payment on time or making a previous landlord angry. However, data is a great place to start an unbiased inquiry while making every effort to avoid any form of discrimination.
A good credit score with payments made on time shows the tenant is consistent with payments, which will potentially include your rent. You’ll want to have a minimum score in mind that you’re able to accept or that your local laws maintain—these laws typically pertain to low income or section 8 housing. A credit report will also often have credit history and a list of debtors your renter must pay, which factors into the debt-to-income ratio.
Obtaining Proof of Income
When screening candidates, you’ll want to have proof that they can pay for their housing. Often, property managers will require the applicant makes at minimum double the amount of the monthly rent—there are even landlords who require triple the income! Ensuring that the potential tenant has the means to pay you every month on time is the second factor in determining the prospective renter’s debt-to-income ratio.
The Golden Debt-To-Income Ratio
The debt-to-income ratio is based on your applicant’s credit report and their income. This ratio shows how much a prospective renter is paying out per month to other bills, which means rent could end up on the back burner! Just because an applicant makes enough to cover your income parameters doesn’t mean they don’t owe as much as they earn. If this is the case, you may want to pass on the candidate; if you do, include the ratio as part of your rejection just as you would with a rejection based on credit score alone.
Be Cautious with Background Checks
A background check can include any filings against the applicant, recent bankruptcy, and criminal charges. This information can create bias whether you realize it or not, especially if the prospective tenant is a convicted felon. It’s always best to review anyone with a criminal record on a case-by-case basis. It is unethical and illegal to discriminate against felons as a blanket rule, so some things to consider are:
- Was the crime non-violent?
- Is there an extensive history leading you to believe your property or neighbors are in danger?
- Was there a weapon involved?
- When and where was the conviction?
- Did the crime involve theft?
These questions cover any worries you may have over persons or property. The candidate understands you’ll have this information and is probably used to being disqualified by numerous landlords, so it’s up to you to treat their information with respect.
Investigating Rental History
If the applicant has previous evictions, you still want to assess on a case by case basis just like a criminal record, especially if the eviction happened a while ago. Always feel free to talk to the prospective renter if you’re feeling unsure about your decision. This allows the candidate to explain their side of the story and gives you a chance to assess their answers. The potential tenant knows that this information will be available to you just like a criminal record and has probably faced discrimination before, so keep this in mind and review their information and their answers thoroughly.
The FHA (Fair Housing Act) doesn’t allow for applicants to be discriminated against due to race, religion, preferences, or disabilities. You also can’t have a rule against all convicts, even though you’re allowed to conduct a criminal background check. The discrimination laws are no joke and being a kind-hearted person doesn’t mean you won’t accidentally discriminate.
Slipping Through the Cracks: "Professional Tenants"
It can be hard to spot a "professional tenant" who will leave you high and dry when the rent comes due. You can catch them during screening if you’re diligent with researching their financial records, background check, proof of income, and rental history. A professional tenant will try to use manipulation to avoid answering questions about any discrepancies in their information. Be mindful of this and contact employers and landlords for verification if you’re uneasy about the answers you get from the candidate. Understanding the dangers of professional tenants and using a good third-party screening service can keep you from dealing with a nightmare!
Bring in Tenant Screening Professionals
Do you know how to quickly spot a professional tenant? Does the idea of correctly investigating tenants sound overwhelming? Let Real Property Management Campanas help screen your prospective tenants legally and efficiently! Contact Real Property Management Campanas today to find the best tenants for your investment property!
If you're taking the DIY landlord approach, you can also download our free tenant screening checklist to help you ensure only the best renters are in your property.