Expert Tips for Screening Potential Tenants

Posted by Diane Franklin on June 8, 2016

In your role as owner of residential investment property, there are many paths to success. There’s also one almost certain road to failure, and that’s doing an inadequate job of screening your tenants.

Diligent screening is the best way to end up with tenants who pay their rent on time and take good care of your property. Letting an undesirable tenant slip through the cracks will cost you significant earnings, which is why it’s important for even the most experienced landlords to sharpen their screening strategies.

“One of the things that I recommend to landlords is to start with their ads,” says Bill Biko, also known as “The Educated Landlord,” whose website is filled with information for both new and veteran landlords alike. “Make sure your ads are pretty explicit about what the property has to offer so you can attract people who are a good fit. I start screening right in my ad by mentioning that I require a credit check, a background check, and a reference check. That helps dissuade a lot of less-than-stellar applicants with bad credit from even bothering to apply.”

An important caveat from Biko as you write your ad: Make sure you understand all local rules for tenants’ rights, especially those related to discrimination. A four-bedroom home may be great for a large family, but if you boast that in your ad, in some markets this could be interpreted as discriminatory.

Biko has dealt with about 1,500 tenants during his 10-plus years as a landlord, which has enabled him to fine-tune some tried-and-true screening tactics. “Here’s an incredibly valuable tip that I use all the time,” he says. “If I’ve set up a meeting with a potential tenant to show them the property, my rule is that they have to either call or text me an hour before we’re supposed to meet.”

Not only does this help Biko avoid wasting his time when a potential tenant fails to show up, but it also allows him to gauge how well applicants follow his rules, and gives him an indication of how responsible they might be as a tenant.

Ask Key Questions

An important part of tenant screening is to ask key questions to help determine whether the tenant is well-suited to your property (again, making sure not to run afoul of discrimination laws). Among the questions that Biko asks are: When do you need to move in? How long have you been at your current address? Have you already given your current landlord notice?

“I like to run through this series of questions when I have the prospective tenant on the phone,” Biko says. “It gives me a feel for who they are. If they answer your questions satisfactorily, my suggestion is to schedule a showing and run through that same set of questions again. What you’re looking for is consistency. If they answer a question one way on the phone and a different way in person, it might raise legitimate concerns about what else has changed since you first talked to them.”

Checking Them Out

The ultimate determination of whether you should accept a tenant will likely depend on the information you gather from checking their credit, current employment situation, and references. In particular, you’ll want to make sure the prospective tenant has a solid history of paying rent. Biko’s advice here is not to check with the prospect’s current landlord, but with the landlord prior to that.

“The current landlord may desperately want the tenant out and will not have much incentive to tell the truth,” Biko says. “It’s the previous landlord who will give you the lowdown. They have no skin in the game anymore, and they will let you know exactly what type of tenants they were.”

Credit checks are usually pretty straightforward in revealing a prospect’s ability to pay. However, you don’t necessarily have to let older credit problems eliminate a person who is an otherwise good prospect.

“I sometimes hear stories of ‘I had a bankruptcy five years ago when my company went under.’ So, I’ll focus on the credit history from the last three years, when I know the person was diligently working to rebuild their credit,” says Biko.

Tenant screenings take time, which is why some landlords opt to use a screening service. “If you’re busy with a full-time job, as well as two or three rentals, the $50 or $100 charge may be worth it to save you time and effort,” Biko says. “Screening companies have proven systems in place, so if you’ve gone through a string of two or three bad tenants and just can’t seem to figure out this screening thing because you like people and are too trusting, then please hand off that responsibility to someone else.”

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