OK, you have bought a property that you want to rent out. Fixed all the issues and now it’s ready to rent. This is when most real estate investors let their guard down and don’t do their research on picking the right tenants. That is why I have create this perfect tenant screening guide.
In my opinion picking the right tenant is one of the most important steps if not the most important. The right tenants can make or break your real estate investment.
One of the most important things when renting out a property is tenant screening. Screening tenants and picking the right one will save you a lot of money in the long run, it is a way to protect your investment.
When screening tenants there are many things to look for. The qualities that a good hard-working tenant has are very different from the ones that a lazy destructive tenant has. It is your job to find the good one. I will show you the exact process that I use to find great tenants for my rental properties.
Every landlord should develop a specific screening process, from pre screening to approving a tenant as well as rejecting undesired applicants.
The majority of investors that fail in real estate, that buy their first rental property and call it quits. What do they complain about? Who do they blame? The tenant of course.
Bad Tenants – Horror Stories
If you been doing your research on rental properties and investing your will see a lot of horror stories, most involving bad tenants.
For example, one tenant in Florida had two pet alligators, it took the landlord 4 months to evict the guy, after the eviction the landlord was left with $13,000 worth of damage to the property.
Or the lady that was running a day care out of the rental property. The property was a disaster and left the landlord with thousands in damages.
Many first time investors would not be able to afford such a repair bill, many end up selling the property and quitting all together.
This is why screening tenants should be taken very serious and done correctly. You can reduce the chance of getting a bad tenant by following this guide that I have put together. You will sleep better at night knowing your rental property is in good hands.
This tenant screening guide will help you find great tenants that pay on time, that keep the property in good condition. It will help you weed out the irresponsible tenants that don’t pay and destroy your property.
This step by step screening guide will show you the exact process I go though every time I rent one of my rental properties. This guide has saved me a lot of time, money and headaches.
Some Topic That Will Be Covered In This Guide
- What exactly is Tenant Screening?
- Qualities of a Great Tenant
- Your Expectations – Minimum Requirements
- Pre Screening Tenants
- Face to Face Tenant Screening
- Protected Classes, Discrimination, and Fair Housing Laws
- The Perfect Application – Screening Tool
- Running a Background and Credit Check on Potential Tenants
- Unusual Screening Tip
- Questions To Ask Previous Landlords
- Employment Verification – Good/Bad Job
- Checking Personal References The Right Way
- Failed Screening – Denying Tenant
What exactly is Tenant Screening?
Tenant screening is one of the most important things when renting out a property, it is also overlooked by many new investors. When talking about screening tenants, many investors and landlords do not take the proper steps to find the best suitable tenant.
Screening a tenant requires you to investigate deeper then just reading the information they provided on the application. It is about running background checks, credit scores and face to face interviews to find if they meet the requirements to rent your property.
People can put all kind of BS on an application, it’s your job to distinguish BS from the Truth. Not everybody lies on applications, and you won’t be right 100% of the time. You have to make the best educated decision that you can, it is impossible to predict what the tenant will do when they movie in. As a landlord it is your job to scan the tenants to the best of your abilities and find the perfect one for your property.
FREE RENTAL PROPERTY APPLICATION FORM: Here is a ” FREE Property Rental Application Form” that you can use to pick the best tenant for your rental property. This simple form will increase your success rate and save you a lot of time. You can download it for free in our Resource page, simply click here.
Qualities of an Excellent Tenant
Finding food tenants does not have to be a hard task if you look for these qualities. There is no guarantee that you will find the best tenant but your chances will increase ten fold.
These are the things I look for when screening tenants for my rental properties. Tenants with these qualities help me sleep better at night and also keep a lot of money in my pockets. Stress free tenants are my favorite. Rent to the best qualified tenants.
Are they able to afford the monthly rent payments?
This is the first thing I look for. Verifying income of potential tenants is the first step. I make sure the tenant has a documented income that is 3 times the rent.
For example: Monthly rent is $500, the tenant has to have an income of $1500 or more. If they don’t I do not rent to them.
With out the proper income the tenants will not be able to afford paying rent. If the rent is not paid you the landlord have no option but to evict the tenant.
The eviction can drag on for months, the legal fees, lost rent and damages to the property can cost you thousands of dollars in lost profit.
Many potential tenants think they can afford more than they really can, don’t let them fool you, stick with your requirements.
No Late Payments
Tenants with a history of late payments should be avoided at all costs. A tenant that is late on rent is more likely to stop giving you payments all together.
I like my rent on time. I do not want to be stressed waiting for the tenant to pay.
Stable Job and Good Work History.
A tenant with a good stable job will have no problem paying rent in the long run. I always check employment history to see the patters of work.
Some tenants hop from job to job and have long gaps of time where they are unemployed. These are the same tenants that are likely to leave long gaps in their rent payments.
House Keeping Skills
This is one of the most common issues that landlords face, it’s tenants that do not keep the property clean.
The day-to-day maintenance of the property will keep it in good condition when the tenants decided to move out.
Free Tip – If you get a chance take a look at the car of the potential tenant, see if it’s messy inside. That is an excellent indicator of how clan they will keep your property.
Illegal Activities, Crime and Drugs
This one is very simple, individuals with a criminal records or drug charges will not be renting from me. No exceptions. Tenants who commit crimes or abuse drugs will cause nothing but stress and loss of money.
Stress and Attention
This one is a little tricky, depends on your tolerance level. Some tenants are needy and will call you every day to fix something, to check something, to ask questions….
You will be driving to the property every day just to satisfy them.If you decided to ignore them, they tend to create more problems because they need your attention.
One way I avoid these type of tenants is by a face to face meeting at the property. If they start pointing out stuff they think needs to be changed or fixed, run fast.
The Ultimate Tenant Screening Guide
This ultimate tenant screening guide was built to help you find the best tenants for your rental properties. Not all tenants will be perfect, find one that is best for you and your property.
Tip: If tenants are hard to find, it could be beneficial to rent to someone who does not meet all your requirements. On the other had if there are a lot of tenants to pick from, you can be a lot more picky.
Pre-Screening Potential Tenants
As soon as you put the ” For Rent ” sign in front of your rental property and start advertising, that’s when the fun begins. Don’t wait until the background or credit check, start screening as soon as you meet the person.
At pre-screening, your main goal is to narrow down your potential tenants. Weed out the people who don’t have a chance at qualifying.
Here Are Some Ways To Pre-Screen Tenants
Pre-screening Through Your Advertising
Posting your property for rent on Zillow, Craigslist or any other marketing service will help you weed out unqualified tenants.
Post Address – Weeds out tenants that are not interested in that area.
Post Price – Weeds out tenants that can’t afford the property.
Pre-Screening Through Your First Phone Call
The first phone call is very important. Listen to what potential tenants ask and say. The first couple of questions the potential tenants ask are very important. It will show you what kind of tenants they will be.
Yelling/arguing in the back ground
Ask, How much must I have right now to get the keys?
Can the deposit be split?
Do you allow pets?
How is the neighborhood?
What school district is the property in?
When can I see the inside of the property?
Simple questions like this can tell you a lot about a tenant. Bad tenants that don’t care where they live or how clean the neighborhood is will show signs. Good tenants will ask more questions about the area, the house, schools, parks and so on. I’m not saying every potential tenant will be cut and dry like the examples. Gather as much information as you can.
Tip : State your minimum requirements over the phone. For example income must be 3 times the rent amount and tenants must pass the background and criminal check. Many times the unqualified people will simply hang up the phone. The rest will confirm they will have no problem with it. This will save you a lot of time and headache.
Screening a Tenant In Person
Meeting tenants in person is by far my favorite screening step. Start by showing the property, and then stating your minimum requirements just in case they didn’t understand them over the phone. Leave the floor open to question.
At this time a lot of tenants will admit that they don’t meet your requirements. They will ask if you can work with them. Normally I will tell them that I will need time to think about it. If I know they won’t qualify, I tell them but I also give them an application to apply.
Protected Classes – Discrimination
This is a very touch subject when it comes to real estate investing. It is morally wrong to discriminate against protected classes but it is okay to discriminate against other factors. Here are some examples.
Ok To Discriminate Against
- People that do not pay rent.
- People with violent criminal records.
Not Ok To Discriminate Against
- National origin
- Family Status
You can find all the laws on protected classes at the US Department of Housing and Urban Development’s Fair Housing website.
Tip 1 – Do not ask questions about race, color, religion or any of the protected classes. Save your self time, money and legal trouble by simply not asking.
Tip 2 – Also check your state laws regarding fair housing.
The Application: Six Must-Include Sections for Proper Tenant Screening
The application is your best tool, make sure it covers all the important areas. Ask all the important question that will be required to run background checks, references and so on.
Some Questions To Ask On Application
1. Name, address, phone number, driver’s license number.
2. Social security number and date of birth.
3. Current and past landlords with contact info.
4. Employer and job details with contact info.
5. Have they ever had an eviction filed upon them or broken a lease?
6. Release of information signature form
Tip: Instead of asking “ have you ever been evicted? “ Ask “ how many evictions have been filed against you? “
Other Questions to Ask
* Requested move in date?
* How many animals do you have and what kind?
* What may interrupt your ability to pay rent?
* Are you on Section 8?
* How much money do you have?
* How many felonies do you have?
* Do you have enough cash to pay the first month’s rent and security deposit?
* What kind of car do you drive?
* Do you have a checking account? Savings Account?
* How many people will be living here?
* Emergency contacts?
* How is your credit? Explain…
* How did you hear about this listing?
How to Run a Background and Credit Check
Running the background and credit check must be done correctly.
A background check shows you the criminal record of the tenant, it shows past evictions, fraud, violent crimes, and deception.
A credit check shows if the tenant paid the bills on time and how well they manage debts and their obligations.
Both the background check as well as the credit report will tell you a lot about the tenant. The background check will tell you if the tenant has a criminal history, evictions, violent crimes or fraud. The background check will let you know if you want to rent to that person.
The credit report has a lot of good information as well. A credit report will include a full list of all the potential tenant’s credit cards, car loan payments, monetary judgments, late payments, things that went into collections and more.
Tip 1 : Match past addresses on applications to dresses on credit report. Look for vehicle repossession, loans/bills that went to collections. Also ask a lot questions.
Tip 2 : According to the Fair Credit Reporting Act – If you use a credit report to deny an applicant you must provide the applicant with the agencies Name, Address and Phone Number.
Other Cool Ways To Screen Tenants
Social Media Screening
Social media is a very powerful tool, it is great at screening tenants. Almost everybody has a Facebook, Twitter or Instagram and they post a lot of information on their profiles. This information can be used to your advantage. For example lets say you’re renting a small apartment that does not allow pet. A young lady applies and everything checks out. You then check her Facebook page and find out that she has a cat. She lied on the application and tried to hide the cat. Small things like this are some of the benefits of social media screening.
Drop By – Surprise Visit
I have done this a couple of times. If I have two good tenants and I can’t decided who to pick, I give them both a surprise visit. All you have to do is stop by their current residence unexpectedly and ask them to sign a form that you forgot to give them at the showing. This will allow you to scan their current residents and see if they are taking care of the place. This can help you decide if you want to rent them.
Calling Previous Landlords
This is by far one of the most important steps. Calling the previous landlords will tell you how the tenant has behaved in the past, this is a good indicator of how the tenant will behave in the future. Call all previous landlords, the most resent one might tell you everything you want to hear just to get rid of the tenants.
Tip : Sometimes the tenants will give a phone number from a close friend or relative to try to trick you. Watch out for this. When I find tenants that do this I DENIED them immediately.
When talking with their landlords, there are a few questions you might want to ask, such as:
* What is the time frame that the tenant occupied your property?
* Did the tenant pay rent on time?
* Did the tenant cause any problems or damage to the property?
* Did the tenant give you proper notice to vacate?
* Was the tenant evicted?
* Would you rent to this tenant again?
It is very important to verify tenants income ( how much they earn). Employers will likely ask for a “ release of information form “ this allows you to properly verify the tenants employment and income. You can find this form on our Resource page.
Tip 1 : Make sure to speak with some from the HR or a Manager.
Tip 2 : Ask how long the person has been employed and are they part-time or full-time.
Tip 3 : Also ask if they come to work on time.
Self Employed Tenants – Must be able to provide tax returns for the last 2 to 3 years.
Calling Personal References
Calling the personal references the tenant has listed is also a good idea. These personal references are mostly family to friends of the tenant. They will most likely tell you what you want to hear. Sometimes they will be honest and tell you the bad stuff. If a close friend or family member of the potential tenant does not recommend them, then you have to question what kind of tenant they will be.
Denying an Applicant
After you have done all the steps listed above you should have a good tenant ready to movie into your rental property. Make sure to document why the applicants was denied. This way you protect your self from being accused of discrimination. This is where your list of standards that a tenant must meet comes in very handy.
Make sure to be polite and on point when denying applicants. I use a simple check box form that I send out to people who got denied. You can download this forum in our Resources page.
Use this tenant screening guide to help you pick the best tenants. You can add more things to this guide that are beneficial in your area and market. Make sure not to cut corners and stick with your standards. If you need forms such as the Release of Information Form or The Denied Form please check out our Resource Page for these forms and a lot more.