You want your property to be a success and pull in profits.
But finding the right tenants– great tenants– isn't exactly easy.
You need to select the best tenants for each vacant unit you manage. Unfortunately, it’s impossible to know with 100% certainty whether a tenant is a good choice when they sign on a lease’s dotted line.
That said, there are ways in which you can improve the tenant selection process.
These ways help you choose the right tenants for your managed properties, boosting your profits and minimizing headaches.
Let's talk about them now.
9 Ways to Improve Your Tenant Selection Process
Whether you're a solo landlord or a property management company with complex processes in place, everyone can benefit from making small improvements in their screening process.
Read on for more information on improvements you can make to your tenant selection process:
1. Make a rental criteria checklist
Start your tenant selection process with a rental criteria checklist.
A basic checklist, included with a rental application or with an advertisement for a rental property, does a lot to minimize confusion and to make sure the right tenants apply to your vacant units.
For example, make a tenant selection criteria checklist with:
- Rent minimums
- Income minimums
- Credit score minimums
- Expectations of tenants regarding noise, pets, etc.
Put that information on a flyer, online ad, or other advertising material. Tenants have no excuse not to know what you expect if they apply to one of your rental properties.
This is one of the easiest and cheapest ways to weed out bad tenants who apply to properties randomly or sporadically.
2. Advertise to the right tenants
Your rental advertisements do a lot to attract a specific kind of tenant.
Advertising to the right tenants minimizes headaches and the time you spend sifting through endless applications from less-than-stellar prospects.
Put your advertisements in the right spots, such as online listing sites or around town via posters. But also place your advertisements strategically so they are more likely to be seen by your target tenants.
Say that you wish to attract graduate students to your rental properties, as these college students are more responsible than undergraduates.
Putting your rental property ads around the graduate school of business instead of the overall college campus might be wise.
3. Be clear about policies
As touched on above, property management companies must be clear about rental policies for future tenants.
State the rules and restrictions of vacant properties to prospective tenants upfront; that way, no one wastes any time, and tenants know exactly what is expected of them.
For example, outline clear policies regarding subletting and people staying over at a rental unit. If you are okay with a tenant’s friends staying over, state so.
If you’ve had bad experiences in the past and want to restrict people from staying over, state that instead.
In either case, being clear about your policy helps tenants know whether your rental units are right for them and vice versa.
Be clear about reiterating rental policies when a tenant submits their application and when you hand over the keys.
If the tenant displays confusion about rental policies, consider retracting the application or seeking clarification.
4. Require a security deposit
A security deposit acts as a financial barrier for prospective tenants, forcing applicants to have saved up a certain amount of money beforehand.
A security deposit, therefore, is a good way to weed out applicants that don’t have consistent income or enough savings for them to be worth the hassle of onboarding and leasing a unit.
This is a way to “discriminate” wisely against prospective tenants without being unfair or violating the Fair Housing Act.
Furthermore, a security deposit protects you from having to pay for property repairs or damages out-of-pocket.
It’s a good way to size up a prospective tenant and make sure they are committed to treating your property right.
After all, if the tenant doesn’t cause any damage, you can return the security deposit funds to them once their lease expires.
First & last months’ rent
It's also usually wise to require both the first and last months' rent from new tenants.
Again, this serves as a financial barrier that ensures you only receive tenant applications from tenants who can consistently afford to live at your properties.
5. Meet tenants before offering a rental
Make it a mission to meet any prospective tenant before offering a rental lease.
Great property managers know that they need to meet prospective tenants before giving them a contract, as it’s an opportunity to meet the new tenant and make sure they are a good addition to the property.
Plus, meeting tenants before offering a rental lease gives those tenants a chance to check out a rental property in person.
Most tenants want to do this to make sure that a property meets their needs before signing a lease and forking over a lot of money.
Thus, insisting on meeting tenants before offering a rental is advantageous to both parties.
6. Watch for good tenant traits
The best tenants typically share a series of positive traits that make them excellent options.
Watch for good tenant traits during the tenant selection process, including but not limited to:
- Consistent income
- A respectful, professional attitude during the in-person meeting
- A willingness to ask and answer questions
- A stable employment history
- A handful of references for you to investigate later
The best tenants are calm, easygoing, and not cagey when asked questions.
Trust your gut when selecting new tenants and watch for the best traits to identify the most likely stellar tenants out of a new batch of applications.
Generational differences between tenants
Keep in mind generational differences between tenants.
Typically, younger tenants from Gen Z are harder to manage and are less likely to treat properties with respect.
Older tenants from Gen X or the Millennial generation are more likely to showcase some of the positive signs described above.
7. Look for red flags on tenant applications
Similarly, look for red flags on tenant applications that tell you to pass over a prospective tenant in favor of another one.
Some of the most common red flags you may encounter during tenant selection include:
- Incomplete information
- References to previous landlords who were related to the tenant (identifiable by looking for the same last name)
- Refusal of or pushback against background checks
- False information
- An incomplete or sketchy work history
- Frequent relocations, which indicates that the tenant doesn’t stay in the same rental unit for very long
Plan to deny tenant applications that have many red flags. The tenants who submit those applications are not usually worth your time. While you can ignore some red flags, it’s not advised.
For example, an otherwise innocuous red flag like incomplete application information tells you that the applicant doesn’t pay a lot of attention to official paperwork at best.
At worst, it indicates that the applicant is trying to hide information from you, which is never a good sign.
8. Always do background checks
Background checks are vital parts of the tenant screening process.
Use a third-party company or do some background check investigation work yourself to determine things like the applicant's:
- Employment history – is it the same as what they stated on their application?
- References – can you contact those references easily?
- Credit score
Credit screening is arguably the most important part of the background check.
A credit screening provides you with information such as prior evictions, lawsuits, bankruptcies, or outstanding debt.
All of this information is valuable when determining whether a tenant is worth your time and worth extending a lease to.
Furthermore, a background check of an applicant's credit gives you a chance to see whether the applicant was honest about their credit score.
If an applicant's credit score is roughly the same as what they stated on their application, that's okay – credit scores can change by a few points unexpectedly.
9. Check applicant references
Lastly, always check applicant references to shore up the tenant screening process.
Applicant references should be easy to reach and include key information, such as whether the applicant was a good tenant at their previous rental location, whether they paid rent on time, etc.
If previous landlords or employers have less than stellar is for you, consider moving on to another tenant instead.
However, applicants with landlords who sing their praises and who state that they are consistent in rent payments are very worthwhile.
Streamline your tenant screening with DoorLoop
Ultimately, these tenant selection process tips go a long way toward helping property managers pick the right tenants for the right units each and every time.
Good tenant selection minimizes how much time you have to spend responding to complaints, chasing down late rent, and dealing with tenant turnover to keep the money flowing in.
There’s more than one way to boost the tenant selection process, though.
DoorLoop is a one-stop shop for all your property management needs.
It makes your life easier by not only helping you collect rent on time but:
- Manage tenant complaints and requests
- Tackling your entire property accounting
- Keeping clean property management records, and
- Much more