Today we are talking about tenant screening. The first thing you want to do is to have a good application. We recommend you go online and look at all the applications out there. Choose one that has the questions you want and make sure that it also acts as a contract for you, so if you get money for the property you can use that money when it’s needed.
To ensure you’re getting the most thorough screening possible, we suggest using a screening company. If you check out the National Association of Residential Property Managers at NARPM.org, you will find a lot of affiliates serving this particular need for owners and property management companies.
Once you get the application back from the screening company, there is a particular hierarchy that you have to consider when you’re looking at all the information.
First, look at past rental experience. As a property manager, this is the most important part of the screening and it will provide you with the best red flags. Look at where the tenant lived previously; did the tenant give you the number of a family member or friend? If so, that’s probably not the most reliable information. If there are gaps in the residency, that’s also a concern. It might indicate that your applicant is lying and you’ll be uncertain of where he or she lived previously. Stick with certainty in the form of reliable information.
Dispossessory and Collections
If your applicants went to court with someone else, they’ll probably go to court with you. If they left others will collections, they’ll probably leave you with a collection. That’s how it tends to go, so be sure to look at any financial problems or unpaid debts.
Debt to Income
Take a look at what your applicants earn and what they owe. The rent should require no more than 30 percent of the total income percentage. If you start to get above that, you’re putting them in a bad situation and leading them to failure. Open bankruptcies are also something to look for. Avoid these because there are different rules in bankruptcy that will affect your collection rights. Removing a tenant who has an open bankruptcy case could be difficult.
The credit score is big deal but it can also be misleading. There may be medical situations that hurt a tenant’s credit score, for example, but that doesn’t mean the person will be a bad renter. Look for other red flags like unpaid utility bills or cable bills that are late. You don’t want someone who is not taking care of financial responsibilities and you don’t want unpaid bills left behind at your own house.
Always check out a tenant’s length of employment. You don’t want an employment record that looks choppy. A tenant who changes from job to job to job will leave you in the cold eventually. It’s usually okay if a tenant is doing the same thing or is getting promoted within company. Just make sure employment is stable.
When you’re looking at a criminal history, it’s important to establish how you’re going to handle a criminal record and then you have to be consistent across the board. Decide if you’re going to allow misdemeanors or drug charges and treat tenants with those offenses the same.
If you have any questions about screening tenants, please contact us at Solutions Realty Network and we’d be happy to tell you more.