7 Tenant Screening Tips to Avoid Bad Tenants

7 Tenant Screening Tips to Avoid Bad Tenants

Let’s be honest here.

Many of you out there who are interested in investing in rental property cringe at the idea of managing your own rentals.

You’ve heard the horror stories.

Tenants calling at 2 A.M. with a broke toilet…

…or the tenant that calls you to change the light bulb because they can’t seem to do it themselves.

We heard those stories too and actually one of the first questions we get asked when we talk to people about self managing our properties is ‘how do you do it?’.

Don’t you get ridiculous calls from your tenants?

The answer is typically no.  With the exception of some needy college students at our student rental property, we rarely hear from our tenants.

And if we do hear from them, it’s typically something that’s worth hearing from them for.

For example, we got a call from a tenant before because of a sub pump issue.  And this property happened to be one of our out of state rentals.

No sweat.

We called our home warranty company and had them take a look at it and we had the problem fixed and it was covered by our home warranty.

Pretty sweet, huh?

I could go on about this, but this post isn’t focused on home warranties or even general self management.

It’s about tenant screening.

Really, these topics go hand in hand.  Because it all goes back to the horrific calls everyone thinks they are going to get if they choose to be a landlord.

The truth is….a thorough tenant screening process can eliminate those horrific calls over a light bulb.

If done the right way, it can eliminate majority of your tenant problems. It is a very important process that can save you a lot of money and headaches in the future.

If you’re going to slack in areas of your investing journey, don’t slack when it comes to tenant screening.  Go the distance with your due diligence and follow up with everything you ask for in an application.

You Have the Right to Know 

Often times rookie landlords feel like they are asking for too much information when they ask potential tenants for the necessary information.  However, you have the right to ask for things like total debt, employment, past property managers and vehicle information.

Even more, a thorough tenant screening process will include you pulling credit and criminal reports.  The more information you can find out on potential tenants will help you weed out the not so great tenants.

There is no right or wrong or easy way to screen tenants. There are a lot of softwares and websites offering tenant-screening services that you can get your hands on. It is crucial to get all the information you need about your tenants before you make your decision.

Tips to Help You Avoid Bad Tenants 

1. Check employment.

Although this information can be found in the rental application, it would not hurt to follow up with your potential tenant’s boss or supervisor to verify employment, salary, working hours, and your tenant’s capability of keeping the job. This is a huge predictor of your potential tenant’s ability to pay the rent. If they put this information in the application, you have the right to follow up with the contacts they include in the application.  The key is make sure you actually follow up. We once had a potential tenant whose employer told us that he was planning on letting the person go from work.  Had we not followed up then we would have rented to a man who would have lost his job and his income.  This could have played into his ability to pay us his rent.

Moral of the story….pick up the phone and follow up.

2. Run a debt-to-income-qualifying-ratio.

A majority of applications require that tenants disclose their monthly income and expenses. You can use this information to compute your possible tenant’s expenses against their income and check what is left after all the monthly living expenses have been deducted. A good debt-to-income-ratio to set as a qualifier for renting property is 45%.  This is typically what a lot of banks will use as a qualifying ratio for getting a mortgage. 

3. Credit checks

There are a variety of programs that can be used to allow you to have access to your prospect’s credit report. This includes their entire credit history such as credit score, loans, bankruptcy, instances of foreclosure, and other public records. As long as your application includes a place where the potential tenant allows you to pull credit, you may do this.  However, what the report does not include but are also considered expenses are child support and alimony. These should be factored in to the debt-to-income ratio.

4. Eviction report

This report can be obtained from any tenant-screening website or software online. The answer is usually just a yes or no with not much detail on the application.

5. Criminal background checks

This too may sound invasive, but think about it do you want to be renting to a criminal? Some of the tenant screening softwares (i.e. TrueRent) have these reports on their programs.  However, depending on your location, criminal records from court records are considered as public documents and can be accessed locally. You can get assistance from your realtor or the local county courthouse regarding this.

6. Call character references

If your potential tenant has a history of skipping rent or destroying property, you would be able to learn more about it by following up on past landlords or property managers.

7. Pay attention

Be receptive to little clues that give you an idea of what type of person they are. Bring a person or someone you trust to help you get a feel of the potential tenant. We once had a man who was pushing to sign the lease at the showing and was willing to pay us cash at the showing to do the deal.  This made us suspicious and truth be told he was lying about his job. 

 

Beware…

You do have to take into consideration The Fair Housing Act  which is in place to ensure that landlords do not discriminate when it comes to renting their property.  Be sure to check out this and your state’s guidelines to ensure that you are following any and all guidelines. 

 

What to Take Away 

It is critical to take a step back and take a look at the big picture when it comes to screening tenants. I am hoping that the tips mentioned above would be a valuable resource to help you make an informed decision.

 


 

Interested in learning more about self-managing rental property?Self-Managing for Success

Check out our training course 'Self-Manging for Success' that breaks down different tips and strategies for writing listings, attracting tenants and having a good experience as a landlord. In the course we cover:

  • writing listings that attract good potential tenants
  • scheduling showings so you don't get stood up
  • tenant screening tips
  • tenant applications and what you should be asking for
  • what you should include in a lease
  • and more...

 

Click Here to Watch Video #1

 


Leave A Response

* Denotes Required Field