How Tenant Screening Works and the Things You Must Look At

One of the best ways to diminish vacancy and turnover rates is through proper tenant screening. While first impressions can tell you a lot, you need more than a brief meeting to determine who you’re dealing with. It’s imperative that you perform a comprehensive evaluation of every tenant you consider.

The Disastrous Effects of Bad Tenants

Before getting into how you can find and screen the right tenants, it’s important to understand why you want to secure the right ones at the start. It has less to do with why good tenants are so great, and more to do with how awful bad tenants can be.

Bad tenants can destroy everything you’ve worked so hard to build. They can tear up a property, break your contract, likely won’t pay rent on time, and can be difficult to get rid of. Aside from the financial headache bad tenants can be, they also come with emotional baggage. Dealing with bad tenants can leave you stressed out, anxious, and even depressed. Instead of benefiting from the extra cash flow that a rental property provides, you’re constantly left putting out fires.

Why Good Tenants Matter

By understanding the negatives of bad tenants, you can easily see the positives of good tenants. They take care of your property, abide by the rules, and deliver a rent check on time at the beginning of each month. Not only does your bottom line thank you, but you’ll also spend less time being stressed out and worried. While good tenants would be in abundance in an ideal world, this isn’t such. Instead, you’ll be forced to weed through bad tenants in order to find promising ones.

Have Standards in Place

The biggest issue for many landlords is they don’t know what they’re looking for, and wind up settling for whoever offers to sign a lease. You can’t follow this pattern; instead you need to have pre-established standards in place that dictate who you work with. Most landlords have a list that looks something like this:

• Spotless background. The prospective tenant should have a clean record. This means absolutely no criminal charges, felonies, or other negative activities.

• Reliable references. The prospective tenant should be able to provide three good references, with at least two being from previous landlords.

• No evictions. The prospective tenant should have absolutely no evictions, period.

• Steady income. The prospective tenant should be able to provide a verified pay stub that proves their income is at least three times the monthly rent.

Other stipulations can certainly be added to this list, but these four should be included at a bare minimum. You’ll be surprised at how many prospective tenants you can cross of your list with these simple checks.

How the Process Should Work

In just a minute we will discuss some of the major factors you’ll want to look at, but first let’s take a look at the overall process. This should give you an idea of how to proceed:

• Pre-screen. For the pre-screen stage, you simply need to ask prospective tenants whether they meet your criteria. This will immediately eliminate some individuals, while others may attempt to lie. Regardless, it lets them know where you stand and can prevent wasting time.

• Application. If they claim they meet your standard criteria, ask them to fill out an application. Here you can ask for personal information, a social security number, employer details, references, and a signed release of information.

• Verification. Now is the time where you verify whether the prospective tenant was telling the truth during the pre-screen. Check their employer information, contact their references, and run a background check.

• Negotiation. If they pass the verification, discuss the lease agreement with them and negotiate any details that you’re comfortable with.

• Approval. If all goes well, the tenant is approved and you can have them sign a lease agreement, with agreed upon terms and conditions.

Tips for Screening Prospective Tenants

While you may know what you’re looking for, here are some tips on how to actually get that information:

• Ask references the right questions. Don’t be afraid to ask their references tough questions. If they are a landlord, they will understand where you’re coming from and won’t be afraid to speak honestly about the tenant. Some questions to ask include: Does the tenant owe you an outstanding debt? Does the tenant have a history of late payments? Did the neighbors ever have an issue with the tenant? Would you rent another one of your properties to the tenant in the future?
• Directly contact the employer. As long as the tenant has signed a release of information, it isn’t out of line for you to contact their employer; in fact, you should. The employer should be able to verify their earnings, or at the very least verify that they are a current employee.

• Avoid discrimination. While you have every right to deny a prospective tenant if they don’t appear to be safe and responsible, you can’t discriminate based on race, age, gender, disability, or other similar factors. Keep this in mind and verify that you’re in line with the Fair Housing Act.

Let Green Residential Screen Your Tenants

For some landlords, the process of screening tenants sounds risky and complicated. While it’s not impossible, it certainly takes some time and effort. For landlords that don’t want to deal with the screening process, you can let Green Residential handle it for you. At Green Residential, we’ve been working with Houston landlords for more than 30 years and have developed one of the top reputations in the industry. For more information, please contact us today.