Would you rather deal with a prolonged vacancy or an eviction?
If you are an experienced landlord, you know the answer.
Finding the right tenant for your rental property can be tricky. You want to avoid long periods of vacancy, but you also want to avoid going through the eviction process.
Evictions can be costly and time consuming. They are one of the worst drawbacks to owning investment property.
Vetting potential tenants reduces the likelihood of an eviction, but how thoroughly should you scrutinize prospective renters?
Why You Should Screen Tenants
As already noted, screening helps you avoid the eviction process by weeding out low value tenants or those who are likely to skip out on rent.
But there are other benefits to screening potential residents. A thorough background check can protect your existing tenants and your property from potential crime.
Screening Your Tenants Legally
You want to thoroughly screen your tenants, but also be within the bounds of the law.
Federal and state Fair Housing Laws and the Fair Credit Reporting Act, enacted to protect tenants from discrimination, set restrictions on the types of questions you can ask and set requirements for conducting credit checks.
Unless you’re a real estate lawyer, or are well versed in housing laws, self-screening potential tenants may get you into trouble. It can also be a time-consuming process.
If you are hesitant to screen tenants yourself, work with a property management company that offers standard tenant screening services. This way, you can avoid the headache of the process altogether.
For example, if you own rental properties in Rockville, MD, consider working with a property management company in Montgomery County. The right property manager will be knowledgeable about all federal, state and local laws regarding credit and background checks.
Before You Screen
Before you screen you must set qualifying standards for potential tenants.
Decide beforehand what income level a tenant must have in order to move forward in the process. For instance, a good standard requires that a tenant be able to earn enough money in one week to cover one month’s rent. This means that her monthly income should be 3 to 4 times the rent level.
If you are performing a criminal history background check, decide whether you will deny a tenant because of any convictions, or if you will make exceptions for minor offenses.
Running a credit check is highly recommended, but there are different opinions on what a qualifying credit history should be. Decide early on if you will accept tenants based on their credit scores, or if you will base it on variables that affect those scores.
For example, a tenant may have a lower than desired credit score because he maxed out his credit limit, but he has no records of late payments or delinquencies. Will you deny him because the credit score doesn’t meet your standards, or will you accept him because he has a solid history of making payments on time?
Once you have your standards set, write them down. A written set of standards will expedite your process and ensure that you have a fair screening process.
Pre-Screening: From Marketing to the Application Process
Screening begins with marketing. When you advertise your rental property, include your qualifying standards. Many unqualified candidates will remove themselves from the process, but not all.
You can continue to pre-screen applicants during first contact, usually by phone or through email. When a potential tenant contacts you about a property, there are two actions to take.
First, clearly communicate your qualifying standards. Then ask open-ended questions such as “What can I tell you about this property?” Listen closely to the applicant’s answers, as they may clue you in to some red flags.
Yet, be careful. As stated earlier, there are limits to the type of questions you can legally ask.
Some unqualified tenants still manage to get through this level of pre-screening. That’s why you need to develop and use a standard rental application. Make sure your application asks for the following information:
- Full name
- Social Security number
- Previous addresses and landlord contact information
- Verifiable income level
- Number of occupants
- Release signature
- Last 2 weeks pay stubs
The second to last one, the release signature, is the most important part of the application, as it is legally required to perform any type of criminal background check, credit check and/or employment verification.
You can also ask for additional information on your rental application, including personal references, and if the applicant owns any pets.
In your application process, it is also recommended that you ask for and make a copy of the tenant’s photo ID. This is helpful because it works as proof of identification and contains the tenant’s date of birth as well as driver’s license number, both of which are useful when conducting background checks.
It is also a good idea to be upfront with the terms of your lease, and to offer the applicant a copy of your tenant manual to read.
Credit Check vs. Background Check
It is important to know the difference between a credit check and a background check and the various types of each.
A credit check can be performed either by pulling the applicant’s credit report, or by using credit determination software. Credit checks are a way to determine whether an applicant has a history of responsibly paying bills on time. It is important to know this because having money and spending money wisely are two different things.
A background check verifies the information the tenant has provided on the application. Background checks can pull an applicant’s previous addresses, public records and/or criminal history.
What We Check & Why
At Bay Property Management Group, we take property management in Montgomery County seriously. Less than 1% of all tenants placed by Bay Property Management Group go to eviction proceedings. We screen applicants as thoroughly as possible to ensure that you only rent to qualified tenants. We check public records for previous evictions, liens, judgements and bankruptcies. Our background checks screen the potential tenant’s criminal history, including sexual offenses and terrorist activities.
We verify the income of potential tenants and their credit worthiness, and we are compliant with all federal and state laws. We do the all the legwork so you can rest assured that your properties are leased only to high value tenants.