Tenant screening is one of the most important steps in property management.
Without tenant screening, there’s no way to avoid bad tenants and locate the good ones. Screening tenants thoroughly is crucial in saving yourself from a multitude of problems down the road, including costly evictions.
Here are five tenant screening habits all landlords should build:
Use Passive Screening
When you think of tenant screening, you’re probably thinking of active screening. Active screening is the process by which you reject applicants who don’t meet your standards and accept those who do.
Passive screening happens when you market your property. By targeting specific demographics, you can attract the kinds of tenants you want. For example, by including the price of rent on your application, you’ll attract tenants who are looking for a unit in that price range. On the flip side, tenants who know they can’t afford your rent won’t bother to apply in the first place.
By including relevant information such as pet policies, smoking policies, and amenities in your advertising, you’ll be able to weed out tenants before they even apply.
Make a Rental Application
While you may automatically go to credit and background checks when thinking about tenant screening, a rental application can be just as important. An application is your chance to ask tenants questions about themselves directly.
This might include employment and income information, residence history, references, pet ownership, and smoking habits. On your rental application, you can also ask for relevant documents such as pay stubs. The information you gather from a rental application can help you weed out applicants before spending time on background and credit checks.
On your rental application, you should ask applicants to include references. These should be the names and contact information of current and previous landlords and employers. And don’t just ask for the information — actually follow through with it. These references will be able to confirm whether an applicant was being truthful about their residence and employment history.
Furthermore, speaking with an applicant’s previous landlords is a great way to learn how good of a tenant they are. Landlords are in a unique position to tell you whether a tenant pays rent on time and is respectful to property and neighbors.
Be Familiar with Fair Housing Laws
The Federal Fair Housing Act was passed in 1968 to prevent discrimination in the rental market against certain protected classes. These include:
- National Origin
- Familial Status
While these are the classes protected by the Fair Housing Act on the national level, state and local laws may extend to prevent discrimination toward other classes such as age, sexual orientation, citizenship, veteran status, marital status, source of income, etc.
The penalties for breaking fair housing laws can be severe, costing you tens of thousands of dollars. Therefore, being familiar with all the laws that might affect your rental business is essential. You should consult a legal professional in your area to understand what factors local and state laws might play.
Adhere to a Tenant Scoring System
When deciding whether to accept or reject an applicant, you want to create and strictly adhere to a tenant scoring system. Not only does this help you make the most objective decision possible, but it’ll also make sure you’re covered if you get accused of discrimination.
A tenant scoring system consists of a list of criteria that you use to decide whether an applicant meets your standards. These criteria may include information regarding income, credit, eviction history, etc. For every quality an applicant meets, they get a point.
You can weight criteria differently based on their level of importance. The critical thing to remember is that you remain consistent with every single applicant. This ensures that you are objective in determining whether an applicant is qualified or, in the case of multiple applicants, which is the most qualified. Also, make sure to keep records.
Tenant screening is a necessity in the rental business. These days, many landlords choose to use property management software, which provides many of the tools that you’ll need for thorough tenant screening. With that said, it’s up to you to make good tenant screening habits early on so you don’t take shortcuts and end up with low-quality tenants later.