Owning a rental property is a dream for many people looking to diversify their investment portfolio, bring in passive income monthly, and increase their net worth. But the dream of being an investment property owner and operator can become a nightmare if you have bad tenants.
That’s why screening applicants desiring to occupy your rental units is essential. You can’t afford to make the mistake of simply taking someone’s word for anything. It’s vital to follow a strategy to find people who’ll pay their rent on time every month and respect your property.
Here’s a look at five things to remember when screening for quality tenants.
1. Consider the Credit Score
It’s essential to look at the credit scores of people who want to rent out your units. The information you get will help determine the likelihood that the applicants will pay their rent on time. When you get credit scores from applicants, you’ll get information like the following:
- Overall credit score
- Payment history
- Current debts
The last thing you’ll want to do is give the keys to your units to people whose track records demonstrate financial irresponsibility. Depending on where you live, landlord-tenant laws may favor one side over the other. If the laws are tenant-friendly, you’ll want to be even more diligent.
2. Consider Background Checks
It’s also essential to conduct background and eviction checks when screening tenants. By so doing, you can find out if an applicant has a criminal record and if an applicant has ever been evicted from a rental unit. Many applicants won’t be upfront with this information, which is why you need to conduct the proper checks to get the information you need to make good decisions.
One reason it makes sense to hire a property manager like GreenResidential.com to help with things like tenant screening is that such a service provider will conduct the process in line with the laws of the land. There are circumstances where you can’t reject a client based on criminal record history. Do you know the ins and outs of knowing what qualifies as a justifiable reason to reject an applicant? If not, hiring a property manager can spare you the financial and reputational risks of a lawsuit.
3. Consider Work History
You’ll also want to look at work history. That’s one way to determine if applicants can afford to pay rent. You don’t want to approve an applicant and find out later that they’re unemployed.
4. Consider Current Salary
It’s also essential to ensure applicants make enough to afford the rent comfortably. Having a job is one thing — but making enough money to pay rent on time every month is another. You must ask would-be tenants to submit tax returns or check pay stubs as part of the screening process. Applicants should bring in approximately three times what you charge in rent.
5. Consider References From Landlords
Do you want to know how an applicant will treat you as a tenant? Find out how they’ve treated other landlords in the past. It makes sense to ask applicants to submit landlord references so that you can see what landlords have to say about people seeking to rent your units.
If you skip this step, you might regret it. Following up with previous landlords, you can learn if applicants were good tenants elsewhere. Did they pay rent on time? Were they respectful to the landlords and other tenants? Did they take care of their rental units? You’ll want answers to these questions — and you can get these answers by speaking to other landlords.
You must ask these essential questions as part of the tenant screening process. Failing to perform your due diligence might leave you with remorse. Again, hiring a property manager can reduce the odds of bringing aboard problem tenants that are hard to evict. A property manager has screening strategies to help you get high-quality tenants for your units.