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In order to consistently generate rental income, it is essential to find quality tenants for your properties. While it may be tempting to trust prospective renters based on a good first impression, failing to thoroughly investigate your tenant’s background could lead to some undesirable consequences. Here are nine tips for screening prospective tenants for your rental properties.
While having a written rental application may seem like an obvious first step, it is essential to make sure your application is robust and covers you from potential liability. You will want information regarding the prospective tenant’s credit, banking details, and employment information. If you make notes on applications, ensure that they strictly relate to your formal criteria (ex. “Monthly income of $2,500 insufficient for rental” or “Credit score of 430 falls below minimum applicant score”). Avoid comments pertaining to any factors outside of your written criteria, as these comments could potentially be used against you in court (ex. “Aging tenant may not be able to adequately care for home” or “Concerned about possible damage from young children”). Be sure to check your state requirements for how long you need to keep rental applications on file.
Another essential part of the screening process is developing and documenting your qualification criteria. Documenting criteria that are gender-neutral, race-neutral, and disability-neutral can help protect you from legal liability if a rejected applicant decided to sue.
You should always run background checks on all prospective adult renters. This can help uncover any potential illegal activities conducted by an applicant. Additionally, a background check will provide information regarding the renter’s employment history, which can be helpful in evaluating the risk of a potential tenant.
A credit check is another essential part of a thorough screening process, as it will give you a better idea of the tenant’s actual payment history. While a charming tenant with great provable income may sound perfect, it is important to verify that the person has a history of timely and complete payments.
While the rental application should ask the applicant to state their income, it is important to back this up with actual documentation. Though pay stubs can be a great starting point for verifying income, consider also requesting 2-3 months of bank statements in order to fully verify the applicant’s income.
Once you have verified all of the applicant’s information, consider contacting their direct supervisor at work. While some applicants may resist giving you this information on your application, someone who is a great employee is unlikely to withhold their boss’s contact information. See if you can get a feel for what type of employee the applicant is, as a good employee is more likely to be a good tenant.
Another great source of information on prospective tenants would be their previous landlords. Keep in mind that previous landlords may have positive or negative biases towards their previous renters, so be sure to contact at least two previous landlords to get a more neutral perspective.
Once you have completed all of your research, the final step is interviewing your tenants in person. Use a combination of your judgment and the research you have conducted to determine if the tenant is right for your property.
The reality is that screening tenants can be a tricky process. Failing to thoroughly screen prospective renters can result in lost revenue and damage to your property. If you want to take the headache out of renting, hire a team of professionals to handle the heavy lifting. For the best property management team in Middle Tennessee, look no further than MMC. With services including tenant screening, a full-time maintenance team, and licensed realtors ready to help your next investment property, MMC can manage your rental so that you can focus on what matters most to you. Call MMC today to see how we can help you!