In the previous two segments, we focused primarily on the financial aspects of choosing a good tenant, including income verification and analyzing credit histories. Today we’ll be looking into the more personal aspects of your prospective tenants: background checks and rental verifications. Both of these activities are meant to help you exclude anyone who might be a danger to your community while also finding a tenant who is more likely to treat your properties well and pay their rent on time. Let’s dig in.
Many tenant screening reports, such as those provided by Experian, supply a person’s background information along with their credit checks. While you don’t have to cross off every prospective tenant with a criminal background, you must take the time to ensure that you’re not leasing to violent criminals, felons, or those with outstanding judgments against them.
There are a variety of reasons for people to become entangled with law enforcement, and many of those reasons will not affect their ability to be a good tenant. However, these are our basic screening standards in terms of background checks:
- Domestic Abuse. No prospective tenant with multiple domestic abuse arrests on their record should be accepted.
- Any prospect with multiple assault charges should be denied.
- No applicant who has been found guilty of a crime should be accepted. The only exception should be DUI.
- Any applicant who has been incarcerated for non-felonies must be out of prison for at least seven years.
- No tenant should have any outstanding judgments against them by a prior landlord. If a tenant has more than one tenant-landlord dispute on their record, even if the dispute has been resolved, we recommend not approving the applicant. In many cases, multiple disputes point to a “professional tenant” who abuses the system to avoid paying rent.
While this is not a complete list of the possible charges and convictions to be mindful of, they are the most important. For any other charges and convictions on a tenant’s record, consider the nature of the charge, whether the person has been convicted or not, and how long ago the event happened. Keep in mind that the Federal Fair Housing Act prohibits the blanket refusal to lease to applicants with a criminal history. But still, you may have a policy in place to deny housing to specific criminal arrests and convictions that could put your property or other tenants at risk.
Rental verifications can be a tricky part of the screening process as there’s plenty of room here for applicants to provide references who end up being a friend or family member rather than their current landlord. You may not want to give as much weight to verification from an individual as you would from a professional management company.
You may also want to take the time to make sure that the provided references are from the owner of the property listed as an applicant’s previous address. Ownership information is public record, so you’ll be able to see who owns the property where the prospective tenant is currently living by checking the tax assessor’s website. If whoever is listed as the property owner does not match who the applicant listed, you may want to ask the tenant for additional information or consider moving on to the next application.
If you’ve been provided with a professional property management company to verify their current landlord, be sure to send a rental verification form to the company. These typically take a few days to be returned but are more likely to be a truthful report. You can learn how the prospect is treating their current residence, the staff of the management company, and their neighbors so you can avoid tenants who are destructive, disruptive to the community, or argumentative with management and staff.
Another benefit of tenants who have a professional management company listed for their current residence is the ability to ask for the tenant’s ledger. All professional management companies should have detailed and current information that starts with the signing of the lease until the current date. You’ll be able to see whether they were ever late on their rent, how often they were late, whether payments bounced or were rejected due to insufficient funds, and the highest unpaid balance the tenant has ever accumulated. An individual homeowner (or friend and family member serving as a stand-in for the real owner) is less likely to have such detailed information—and the financial records to substantiate any negative items should the applicant disagree with anything reported.
Tenant Screening: Difficult, But Necessary
Many factors go into the entire screening process and many steps for property owners to take to get a full picture of a prospective tenant. From credit and work histories to criminal background checks and rental verifications, the process can be complicated and lengthy. Plus, few applications come with no blemishes at all. For that reason, it’s crucial for landlords to do their due diligence when it comes to screening a prospect to live in one of your homes as there’s much at stake for you, and usually, many pros and cons for each applicant to weigh before reaching a decision.
If the process seems too complicated and overwhelming, we can help. At BMG, we are experts at screening tenants, and we’ve seen it all. We know all the red flags (and the green ones!), and we’re experienced with the entire process. That means we can process applications faster, and with results you can trust. Contact us to learn more.