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How To Screen Potential Tenants: The Benefit of a Disciplined Approach

As a homeowner, finding potential tenants for your rental property can be a challenging process. Finding a good fit for your property goes beyond finding someone who can pay the rent on time. If you’re looking to figure out how to screen tenants, you can find out all the details and more in this article.

Article at a Glance:

The process of screening potential tenants is up to you. As the homeowner, you should overlook this step of the rental application process. To conduct a thorough screening, you must:

  • Conduct a verified credit check
  • Find out their rental history
  • Verify their monthly income
  • Perform a criminal background check

Can I Pick the Tenant That Goes Into My Home?


It is a logical question to ask whether you can pick the tenant that will go into your home. After all, you want to know who’s going into the house that you’ve lived in, and you want to make sure that it’s a good tenant.

If you are planning to use professional property management, generally, you cannot pick your tenants. Property management companies are careful to abide by federal fair housing laws. When you work with them, you ensure the legality of their decision to pick a well-suited tenant for your home.

Reasons You Need to Screen Your Tenants

 

Unfortunately, it takes more than a gut feeling to find the best fit for your home when it comes to finding good tenants. Here are three reasons you need to screen your tenants.

Keep Your House and the Neighborhood Safe

Properly screening your potential tenants helps you to keep not only your house but also the entire neighborhood safe. You’re not alone in not wanting bad tenants around. Your neighbors likely don’t want to deal with them either.

And so, you have a duty to the neighborhood to make sure that you’re putting good people in the home and then, also to protect the house. Not only could a bad tenant be dangerous but they could also destroy your house, costing you a significant amount.

Mitigate the Risk of Eviction

Evictions are lengthy, and emotionally draining, and very expensive. The idea is to do a good job of underwriting that application to ensure that this person hasn’t done this before.

There are all sorts of ways you can find out if they’ve ever been evicted before. You want to make sure they do not have prior evictions because you don’t want to become the next victim.

Identify Professional Residents or Professional Tenants

There are professional residents out there or professional tenants, who have no intention of paying the rent. They look for people that own one rental home because they know that it’s very taxing on you to screen your resident. As a result, they assume that more likely, you’re not going to do it.

It’s imperative for you to know that these people are out there and to screen the tenants, too, because they’re looking for you.

How to Screen Tenants?

There are a lot of different methods and approaches you can take to screening potential tenants. Here are four essentials you’ll want to cover in your application process.

1. Credit Check

The first thing you want to take a look at is their credit score. Some property managers might say it is unnecessary, but it is essentially a score of someone’s ability to pay their bills. Consider those huge companies that use credit scores to deem someone as qualified to receive mortgages or car loans.

A reasonable property price-point split has proven to be an effective method for a credit check on rental applicants. Generally speaking, you can look for the following credit scores, depending on your monthly rent:

  • Homes above $800/month in rent = average tenant credit score of 580+
  • Homes less than $800/month in rent = average tenant credit score of 520+

Having a tiered credit threshold allows you to offer opportunities to a broad range of prospective tenants in your area.

The detail of a credit report also allows you to look back at the applicant’s past payment responsibility. Check for alarming reports versus misfortune, like many unlawful detainers versus medical bills.

A decline in credit score continues to be seen as the most common reason we can’t allow an applicant to rent one of our owner’s houses. It’s also the most efficient way to judge an applicant’s willingness and ability to pay future rent.

2. Rental History

A residential rent history will also give you keen insight into what kind of tenant the applicant may be in your home. Following a positive credit check, you will then reach out to past landlords to hear about their experience with the applicant.

The applicant’s current or most recent landlord is an excellent source of information that you won’t be able to find through a credit check. A borderline credit score with rave reviews from their current landlord may have you reconsidering an applicant.

Here are a few things to ask previous landlords during a rental history check:

  • Past evictions
  • History of late payments
  • NSF checks
  • Balance owed/damage responsibility upon move out
  • Lease responsibility
  • “Would you rent to this tenant again?”

If a current landlord reports a high number of late payments, do not take on that risk. Late payments can include a balance owed, bounced checks, or damage to the property.

You’ll also want to find out if this person has ever been evicted. In some circumstances, you might allow someone to have one eviction in their history if they paid off everything. Also, it’s worth remembering that sometimes things happen in people’s lives, so it’s worth at least having a conversation.

As a rule of thumb, two evictions is a no-no. One eviction without justified reasoning or paying it off is also a no-no.

3. Income Verification

You want to make sure that that person makes enough money to be able to afford your rent. Typically, you want to look for three times the gross monthly rent for monthly income. There are some caveats to that, too, though. 

You reserve the right to change the parameters if the person has many other significant financial commitments. For example, child support, huge car loans, or excessive car loans, might cause you to ask for a higher gross monthly income.

To have ‘verified’ rent, you should require that income be supported by the following:

  • Multiple pay stubs
  • Past three month’s bank statements
  • Previous year’s tax return
  • Confirmation with an employer (when applicable)

Added time waiting for an applicant to provide their income documents can become frustrating to both you and the applicant. But, if an applicant is confident then they will find a way to persuade their employer to respond to an underwriter’s fax or call.

You may adjust income requirements in certain circumstances to mitigate extra risks. If an applicant has filed for bankruptcy in the past, make sure it was more than a year ago. Additionally, you can consider approval if the verified income is four times the monthly rent amount of the home applied for.

4. Background Check

The last essential thing you want to look at is their criminal background check. You don’t want this person to be a threat to the people that live around the house in the neighborhood, and we don’t want this person to be a threat to the property.

You would be surprised how many property managers or landlords don’t make the extra effort to pull a criminal background check. But, conducting a background check helps give you detail on an applicant’s past.

As a standard, you should have a strict criminal background policy. You should not allow felonies, violent misdemeanors, or multiple misdemeanors. If an applicant does have a felony charge that is over ten years old you may consider further underwriting if it is a non-violent charge.

Wrap Up

Although it might seem like a burdensome task, screening potential tenants is an essential part of being a rental property owner that should not be overlooked. Now, you no longer have to wonder how to screen tenants, as you can follow this step-by-step guide.