Finding the right lessee for your rental property can be challenging. However, it's essential if you want to avoid future evictions and legal problems. Therefore, as a landlord, one of your main responsibilities is to screen prospective tenants.
Screening a tenant can help you make a long-term profit while avoiding monetary losses due to unpaid rent and court battles.
Also, you can get the peace of mind you deserve if you can predict if an applicant will be a good tenant.
If you want to rent out a property but need to find the right person, you've come to the right place! Here's a comprehensive guide on tenant screening. Read on!
The Ideal Tenant
Do you have a rental property? The success of your business depends on finding a reliable and responsible tenant, but what do they look like?
This is what a good tenant does:
- Pay rent on time and in full as required: If you have a rental property, you don't want to deal with disputes every time the due date approaches, right? The best tenants always make each payment when and as they should!
- Communicate respectfully and responsibly: The best tenants can proactively communicate with landlords and are always respectful and courteous.
- Keep the property in good condition: As a landlord, you don't want your property to be damaged. Therefore, the best tenants follow the rules and terms set out in the rental agreement, clean the unit constantly, avoid breaking things, and always inform the landlord about repairs.
- Stay in the rental property for a long time: If you find a tenant who meets these criteria, you won't want them to vacate the property for a long time.
What Is a Bad Tenant?
Unfortunately, not all tenants are good or meet the profile you are looking for. Some can even cause stress, loss of money, and headaches.
Overall, a bad tenant does the following:
- Don't pay rent or pay it late
- Vacate the property without giving proper notice
- Miss rent payments constantly
- Fail to keep the property in good condition
- Destroy or damage the rental unit
- Break the rules set in the lease term, such as no pets or smoking
- Don't maintain landscaping
If you sign a rental agreement with the wrong tenant, you can face the two worst scenarios for a landlord: vacancy and eviction.
Evicting a tenant is the best course of action in some cases. However, this process can cost anywhere from $3,000 to $10,000 on average, as you must cover court and lawyers' costs and potential property damage.
Also, having a vacated property means you'll lose money. In 2022, rent prices increased to over $2,000 on average. If a bad tenant leaves the unit without notice and you don't find a new one, you can lose over $5,000 in less than three months.
How to Find the Right Tenant
Considering what a good and a bad renter look like, how can you find the right one? This is where tenant screening comes in.
If you want to rent out a property, you'll likely find multiple applicants. However, you shouldn't choose the one who calls you first or those offering the highest rent payment.
Screening applicants can help you find a reliable tenant who will take care of your property as you would. Therefore, in order to determine if they're trustworthy, you must follow these steps:
Steps to Screen a Tenant
- Ask key questions on the application
- Collect prospective tenant's information and consent
- Check applicants' criminal and credit history
- Gather their full rental history
- Contact the prospective tenant's references
- Review and analyze all the information collected once again
- Interview applicants
- Decide on a tenant
#1 Ask Key Questions On the Application
The screening process allows landlords to collect data on prospective tenants in order to predict if they will make good renters.
In order to save time and make the process more straightforward, you should start with the application. You can draft one and ask all the questions you need to know if a person can be the right tenant.
Remember that the application can help you filter out unqualified applicants and spot those who meet the minimum standards. Moreover, it allows you to compare the data you have already collected with prospective lessees' answers.
Some of the questions you can use during the application process include the following:
- Have you ever filed for bankruptcy?
- Do you smoke?
- What is your credit score?
- How much is your gross monthly income?
- How many people will live in the rental unit?
- How many adults and children will live on the property?
- Have you ever been evicted from another property?
- How much do you pay per month in debt payments?
- Do you have pets?
- Are you able to pay one month's rent and a security deposit?
- How many vehicles will you keep on the property?
Remember to clarify that you'll verify this information during the screening process to find the right tenant.
#2 Collect Prospective Tenants' Information and Consent
Besides asking questions and analyzing answers, you must also collect certain information about the applicants. It includes personal data and contact details, such as the following:
- Date of birth
- Current address
- Current employer
- Phone number of the current employer
- Phone number of previous or current landlords
- Social security number (in some cases)
- 2-4 personal references
Why Is the Social Security Number Optional?
Although the social security number or SSN was one of the most important pieces of information collected during the tenant screening process, it isn't necessary or mandatory in all cases.
Now, most landlords only need to know applicants' names, dates of birth, and addresses.
Some property owners still ask prospective tenants to disclose their social security numbers as part of the identity verification process. However, you can screen applicants without an SSN.
Moreover, it's important to note that landlords have the right to require SSNs in most scenarios.
Collecting the Applicant's Consent
Besides collecting the prospective tenant's personal information and social security number, if applicable, you must also get their consent. It's essential to gather more information about applicants.
If you don't have the applicant's consent, most referrals won't talk to you. In addition, you could break the regulations set by the Federal Housing Administration (FHA) and Health Insurance Portability and Accountability Act (HIPAA).
Essentially, you must ask tenants to fill out a consent form where you explain all the ways you plan to gather their information, including the following:
- Contacting personal references
- Using a tenant screening company to obtain credit and criminal background reports
- Contacting current or previous employers
- Contacting current or previous landlords
- Requiring additional personal references upon request
- Requiring additional credit information upon request
If you need help understanding federal and state laws regarding consent, don't hesitate to contact an expert or seek legal advice.
#3 Check Applicants' Criminal and Credit History
In this step, landlords often begin to collect in-depth information about potential tenants, specifically about their credit or criminal history.
When you review an applicant's criminal history, you can learn if they have faced misdemeanor or felony charges during the last seven years.
However, you should be careful, as asking tenants to disclose arrest information may be illegal. Also, if you come across it, don't use these details to support your decision.
Generally, landlords use tenant screening services to gather applicants' criminal histories. These are the most common reports you can get:
- State and nationwide crimes: This report covers a person's nationwide crimes. A great example is the Tenant Multicrim Criminal Background Check service.
- State-only crimes: Instead of covering nationwide crimes, this report only considers those that occurred at the state level. However, it isn't the best option.
- Full criminal, credit, eviction, and income history: tenant screening reports may also include a comprehensive document with the tenant's credit, income, and eviction history.
There are other options if you don't want to pay for tenant screening services. Each state has criminal records available to the public on its websites.
However, you should keep in mind that these records are not official or comprehensive. Also, some states charge for pulling this data.
Landlords must also review applicants' credit history to know if they will be able to pay rent in full and on time. This report includes tenants' financial history, with records collected over the past seven years.
A tenant's credit history may include a list of all creditors, history of payments, amounts owned, judgments, bankruptcies, collection accounts, liens, and more.
Additionally, landlords may also consider tenants' credit scores. It's the credit history but summarized in a single number and indicates how likely applicants are to fulfill their financial obligations.
Most landlords review potential tenants' credit history and scores in order to determine if they can establish a good lease relationship.
Pulling this information can also be done through a tenant screening service. These are the two options usually available:
- A la carte credit history
- Credit history or score included in a comprehensive tenant screening report
Property owners can also pull credit reports for free through the main credit bureaus.
Landlords may also ask applicants to pull their own credit report and submit it as part of the screening process.
#4 Gather Prospective Tenants' Full Rental History
In order to determine if an applicant may be a good prospective tenant, you must also gather their full rental history. These reports usually include previous landlords' contact information, evictions, dates and addresses of residences, broken leases, and late or missed payments.
Some rental histories also include the rules the tenant broke in previous lease agreements and recommendations from previous landlords.
However, although these reports often include information on missed payments, landlords aren't required to report them.
In addition, those that are reported to credit bureaus appear only after 30 days. Therefore, applicants' rental histories may not include them.
If you want more information about the applicant's previous lease relationship, you should contact previous landlords. This step is essential, as it allows you to do a thorough screening. You'll talk to someone who already rented to the prospective tenant.
Here are some questions you can ask previous landlords to make sure the applicant you're screening is the right one:
- Did they pay rent on time each month during the lease term?
- Would you rent them again?
- Did they give proper notice before vacating the property?
- Did they keep the rental unit in good repair?
- Did they break the rules set in the lease agreement?
- Did they smoke while on the property?
- Did they get their full security deposit back?
However, remember that you should not ask questions that could be considered discriminatory, as this could violate the Fair Housing Act (FHA).
#5 Contact Prospective Tenants References
After contacting previous landlords, you can also contact applicants' references and employers.
Why Should You Contact the Applicant's Employee?
Contacting the applicant's employee can help you verify their income and find out if they're financially able to pay rent in full.
You can also ask questions to find out how long the applicant has worked for that employer. This information shows you that they're valued in the company and they're committed to their jobs.
Here are some questions you may consider:
- What is their job title?
- What is their annual pay?
- Did they have a history of disciplinary issues?
- How long have they worked here?
Contact Personal References
While personal references are usually quite positive for applicants, you can ask a few questions to get the answers you need to know they're honest.
With open-ended questions, you can know other people's feelings for the applicant. Also, pay attention to the answers. If they're generic, they're likely telling the truth!
These are some of the questions you can ask applicants' personal references:
- Would you rent to them?
- Do they have a history of financial trouble?
- Do they smoke?
- Do they have any pets?
- Can you describe their character?
- How long have you known them?
#6 Review and Analyze All the Information Collected Once Again
As a landlord, you'll review and analyze applicants' information at each stage of the screening process. However, you should review it again to make sure you're choosing the right tenant.
You don't want to waste time and money, do you? If you find evictions on applicants' rental history, don't move forward with them. Applications with subpar qualifications should also be rejected.
During this phase, you can also analyze their rent-to-income ratio. If they can't pay rent, you shouldn't choose them. You can use online calculators to help determine this ratio.
However, if you look at their rent-to-income ratio, you can tell if they make enough money to pay rent each month or if you should consider another potential tenant. Landlords and property managers may request an income insights report to do this.
You can also analyze their credit history again but try to dig deeper into individual items. Most landlords look for tenants with a minimum 650-670 credit score to make sure they'll be able to pay rent on time.
If some people have serious infractions in their history, you should consider others or check if they have rebuilt their scores over time.
This step will also help you analyze their criminal records. Criminal background checks are essential if you don't want to deal with legal issues in the future or want to avoid problems with a tenant.
If you can't find this information on your state's website, remember that most tenant screening services offer it.
#7 Interview Applicants
After reviewing their histories again, the next step is to interview them. At this point, most landlords have reviewed all applications, so there is already a prospective tenant standing out above the rest.
Essentially, interviewing applicants is having a conversation with them. Therefore, it's important to think about clarifying questions before the meeting.
This interview will allow you to confirm the information you obtained during the data-gathering process. These are some of the questions you can use:
- I see you have an eviction record in your rental history. Can you tell me more about that?
- Would you mind telling me the circumstances behind your bankruptcy?
- Could you tell me why you went six months between your jobs?
With this interview, you can round out the tenant screening process and ensure you have all the information you need to make a good decision.
#8 Decide on a Tenant
Finally, the last step in the tenant screening process is deciding on an applicant. If you want to choose the right one, consider those with lower debt and higher income, better rental history, better criminal background, more stable job situation, and higher credit scores.
Depending on the rules you want to set, you should also consider applicants who don't have pets and don't smoke, have fewer cars, and have a better communication style.
After picking the best applications, landlords usually choose the person who applied first. This practice is generally accepted and doesn't bring legal issues, as some applicants can claim they were qualified but were rejected for discriminatory reasons if they applied first.
What to Do If You Want to Reject Applicants
Unfortunately, the tenant screening process doesn't end when you choose the right applicant.
As a landlord, you must also reject the other prospective tenants. However, it should be handled correctly to avoid court battles.
Pursuant to the Fair Housing Act, landlords cannot reject applications based on race, religion, color, familial status, sex or gender identity, disability, or national origin.
Some landlords may unintentionally break discrimination laws. Therefore, you must be careful when advertising your vacant unit, interviewing prospective tenants, and rejecting applicants.
Also, it is important to know why you can and cannot reject a tenant.
Reasons Why You Can Reject an Applicant
You may have legitimate reasons to reject tenants, including the following:
- Poor credit history
- High debt-to-income ratio
- A bankruptcy on applicants' records
- Unverifiable income
- Prior evictions
- Late payments history
- Illegal activity
- Tenants who smoke or have pets
- Refusal to consent to provide eviction, criminal, credit, or rental history
- Prior convictions
- False information on the application
Reasons You Can't Reject an Applicant
However, according to federal law, you can't reject a tenant for the seven groups set by the FHA and the following:
- Marital status
- Family size
- Primary language spoken at home
- Arbitrary discrimination, including rejecting someone with tattoos
- Participation in subsidized programs, such as Section 8
Final Thoughts: Should I Use Tenant Screening Services?
Most states allow landlords to charge an application fee to cover tenant screening costs, but is it wise to use those services?
Using the best tenant screening services can help you save time and choose an excellent applicant. Therefore, even if you pay for them, they're worth it.
However, you can do the tenant screening yourself or seek help from a real estate expert before you start. It's up to you!
Doorloop Is Here to Help!
Do you need help understanding each state's rental laws to avoid legal problems during the tenant screening? Have you found the right tenant, and are you ready to rent out your property? Doorloop is here for you. We have all the free forms you need and more