As an independent landlord, it is likely you feel that you do not have the time or resources to conduct comprehensive tenant screenings in the way big corporate rental services do. However, tenant screening is a critical business move as a landlord and should, therefore, be performed with attention to detail. To be a successful landlord, you need to avoid risks such as late payments, non-payments, evictions and property damage. You must conduct a careful tenant screening process to ensure that your property remains safe and desirable.
Asking the right questions and conducting the right background checks can help ensure that you select the best tenant possible. To do so, you need to know how to conduct the screening process, check identification online, and identify troubling signs. You may also need to perform cost calculations such as the rent-income ratio and other key renting metrics. Having a rental criterion suitable for your property is important. In this article, we will walk you through the tenant screening process and provide some tips on how to select the “right” tenant for your properties.
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Establishing a Set of Minimum Criteria
Each landlord should develop a set of minimum criteria to avoid accepting problematic tenants. Not only is setting up this rental checklist encouraged, it is also a mandated law in some cities, including Seattle. As of 2019, this law requires landlords to accept the first qualified applicant who requests a lease. The objective of this law is to ensure non-discriminatory and unbiased measures are used to select rental candidates. Under the Federal Housing Act, a landlord cannot discriminate against the tenants based on protected attributes such as:
- National origin
- Familial Status
In addition, specific state laws may also come into effect – some of which add additional protected attributes to this list. For these reasons, you, as a landlord, must be extra cautious when it comes to how you base your screening criteria on these protected groups; otherwise you risk hefty fines and costly lawsuits. By taking the extra time to prepare a checklist you could be saving yourself thousands of dollars in avoidable costs. You should have consistent requirements for all the tenants and should not prefer or discriminate against a specific tenant or group of tenants. We recommend that income, credit score, tenant history and legal history be included in this checklist.
Related: Rental Criteria Checklist for Screening Prospective Tenants
After establishing a rental checklist, we recommend that you interview the applicant(s) in-person, or at least over the phone. Ask basic questions such as:
- What are the reasons for moving?
- When do you intend to move in?
- Do you consent to all the credit, criminal and eviction checks?
- Do you have pets or intend to have pets?
- Can you meet the rent requirements?
- Can you provide me employment and previous landlord references?
- Do you or anyone who will live with you smoke?
Related: Avail vs Cozy Tenant Screening
Verification For Tenant Screening
The following is a recommended set of rental checklist criteria that you can use to evaluate potential tenants once you’ve asked your pre-screening questions:
We recommend you verify that the applicant has had a stable source of income for the last 3-5 years. Ask for applicant’s last 2 months of pay stubs or bank statements to verify their current income. Check to see if they have kept a stable job for at least a year. If not, check if there is a reasonable explanation why they quit their jobs or changed their employer.
2. Credit Score
A credit score indicates a person’s risk of default. Check to see whether your applicant has a good credit score. We recommend requiring a credit score of 600 or higher. Some people set their criteria lower, around 550, and it’s true that some people with poor credit still make great tenants. Generally, however, the credit report should indicate the health of their payment history as well as how reliably they have met financial obligations to housing providers, utility companies, and other creditors. We believe credit history from the most recent 2-3 years is the most relevant.
That being said, you must remember that if you are running a credit check you have to additionally comply with the Fair Credit Reporting Act and must inform the applicants of their right to a free credit report. Legally, you can reject an applicant based on their credit report. There are several online services that provide credit reports, screen backgrounds and review criminal histories.
3. Tenant History
One of a landlord’s worst nightmares is renting to a “professional tenant’. Professional tenants are the renters who have learned to get around the system and live in a property as long as possible without paying rent. They usually have a high number of evictions. In order to avoid this, you need to screen their tenant history. If provided, you should check the verifiable rental history of an applicant’s last six months as well as their last 3-5 residences. For additional confirmation, you should contact their previous landlords and inquire about the applicant’s late/missed payments, complaints from neighbors, evictions, unpaid utility bills or engagement in any disturbing/illegal activities.
4. Legal History
Depending on your state, you should check to see if you are allowed to take criminal history into consideration. There are a growing number of cities that prohibit landlords from considering criminal records when selecting tenants. Most still allow you to look at whether an applicant is on the sex offender registry. State laws vary and are susceptible to change so you should verify which rules are currently in effect. Many landlords view criminal history as more important than credit history. This is because it directly affects the safety of the landlord and neighborhood. Some of the important things to consider while checking the criminal history of the applicant are:
- Sex offenses
- A conviction for any felony or misdemeanor involving assault, sex-related crimes, drug possession or distribution, property damage, weapons charges, criminal trespassing, or theft
- Any criminal activity that could be considered harmful or threatening to the health and safety of any individual, property, or community.
- Pending charges or outstanding warrants for any of the above
Related: The Best Tenant Screening Service for Small Landlords
We consider contacting employer and landlord references to be an indispensable step in the tenant screening process. You can confirm the employment status, history, income and character by contacting employment references. Landlord references allow you to verify the credibility of the applicant as a tenant. Important questions that can be asked from the previous landlords include rent payment history, complaint history, behavior with neighbors, condition of the property rented at move-out, damage to any property and the applicant’s extent of proper communication with the landlord.
These references should be done diligently and taken seriously. Take your time talking to the references and verify the data the applicant has provided. This will give you a comprehensive picture of how the applicant complied with the terms and conditions of the rental agreement. Equally important, references give the best insight into how effectively and respectfully a person interacts with landlords and people around them.
Landlord Gurus Takeaway For Tenant Screening
In summary, if you are an independent landlord, we strongly recommend taking your time to prepare a detailed rental checklist criteria depending on your property. Significantly, this checklist should not be based on any of the protected classes covered by anti-discrimination laws. This will automatically set up some basic factors for selecting suitable candidates. The rental criteria checklist should include factors such as income, credit score, tenant history and legal history. Do not forget to check and verifying all the information they provided through references. Following this tenant screening procedure will help you find the best tenant.
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