Most landlords and property managers screen prospective tenants carefully. But if you’re new to landlording, you may be wondering if it’s necessary or worth the trouble.
The answer is yes! Running credit checks on every lease applicant will give you the peace of mind of knowing your business and livelihood are protected. Here are the basics of tenant credit checks, so you can know what to expect.
- The Fair Credit Reporting Act (FCRA) requires credit reporting agencies and credit report users to follow strict guidelines. To increase accuracy and prevent identity theft, Congress made changes in 2004 to restrict who may access credit information. Rental businesses must comply with rules such as operating a separate, secure business office, holding a business license and submitting to an on-site inspection.
- Landlords who don’t meet these standards may not obtain an individual’s actual credit score. Instead, they may obtain a comprehensive report regarding the applicant’s publicly available information, such as liens, judgments, bankruptcies, social security validation, and criminal records search.
- In addition, landlords must obtain the applicant’s consent to release credit-related information, and the applicant must confirm his or her information (name, SSN, date of birth and address) before the landlord receives the report.
- It’s easy and quick to verify a prospective tenant’s identity and credit worthiness. With E-Renter.com, you’ll receive a background report within an hour Monday through Friday, and same day if ordering on the weekend.
- For property management companies, full tenant credit files, business credit reports and criminal background checks are available immediately online, 24/7.
- Any credit information landlords receive on individuals must be held in the strictest confidence. If credit information is used to reject an applicant, the FCRA requires that he or she be advised in writing.
Using a reliable, experienced tenant screening service is the best way to ensure you are in compliance with all federal and state regulations.
Landlords, how closely do you monitor your property managers? Do you allow them to run your properties however they see fit, or do you run a tighter ship? When you realize that a property owner is often liable for the actions taken by those acting on his or her behalf, you may want to consider keeping a closer eye on your manager.
For example, one rental property owner was surprised to hear that her long-time property manager had been “protecting the property” by rejecting lease applicants with children. This action is in violation of federal fair housing laws, which prohibit discrimination against applicants on the basis of race, color, national origin, religion, sex, familial status or handicap. Even through the property manager was acting on her own, the building owner still has the responsibility to supervise her staff and prevent any discriminatory actions from taking place.
In a related case, an apartment property manager was found to be turning on the lawn sprinklers whenever children who lived in the complex were playing outside. By his actions, he was creating a hostile environment for the families with children, who were forced to keep the kids inside. If a tenant complained to the local fair housing agency, the landlord could end up as the target of an investigation.
A third example is the property owner who received a letter from a tenant, complaining about the resident manager. The tenant said the male manager was too friendly with her teenage daughter, and was frequently seen near the apartment when the girl was home alone. This behavior, which also creates a hostile environment is often classified as sexual harassment—and is also illegal under the federal Fair Housing Act. Even though no actual inappropriate actions had yet been taken, the daughter’s discomfort is significant enough to warrant action by the property owner.
In many cases, rental property owners are just a complaint away from a discrimination lawsuit—whether or not they are aware of the illegal activities of their property managers. The best bet is to keep a close eye on what’s going on at your properties. Remember, you are ultimately responsible for every decision or action by a property manager that affects your tenants.
It seems that the news is full of reports of break-ins at empty houses. Thieves are going after anything they can sell, from brass chandeliers to copper pipes, to aluminum siding.
If you’re a landlord with a vacant rental property, or are remodeling a property to prepare it for leasing, you may be concerned about break-ins.
Here are a ten tips to keep thieves or drug users out of your vacant property:
- Install an alarm system. Some landlords sign contracts with alarm companies, and then adjust the rent to include the monthly service fee. If you have an alarm system, be sure to lock the electric meter box. Otherwise, criminals could turn off the power and enter the house after the back up battery dies. Some systems work only off of batteries and cell networks, so there are no electrical wires to worry about.
- Do-it-yourself surveillance systems with several cameras and motion detection are available for less than $500. They feature Internet and smartphone monitoring and will alert you through email or text of any activity at your property.
- Post signs that the property is under camera surveillance. Whether you use cameras or not, it may encourage thieves to move on to another property and leave yours alone.
- Your first floor is most at risk. Try installing “Protected by Security System” window stickers and exterior signs near the doors that mimic alarm company signs.
- Savvy criminals may not fall for the fake signs, but many would probably not risk it.
- Install sturdy solid wood or steel-wrapped wood entry doors. If the door has a window, install double cylinder deadbolt locks—the type that require a key to open or lock them on both sides. Be sure to check local ordinances, however—for safety reasons. A door that requires a key to open from the inside could be dangerous during a fire or emergency. You can always switch to single cylinder lock after your tenants move in.
- Buy a “FakeTV,” a small device that mimics the changing light and colors of a television. From outside, it looks like a television is on. Just plug it in and set the timer.
- Leave a radio on. Make sure it’s loud enough to hear from exterior doors and windows. You may wish to put it on a timer and set it to switch on for several hours and then switch off late at night.
- Leave some lights on. Buy a timer and have them come on in the evening, and turn off around midnight or so. Install motion-detector floodlights that cover the front, back and sides of the house. Not only will the sudden light startle would-be thieves, it will also warn neighbors that someone is outside your vacant rental property.
- If you know any of the neighbors, ask if they would like to use your driveway for one of their vehicles. They will probably appreciate your efforts to ward off thieves.
Another tip for vacant homes: turn off the water meter at the street, in case thieves do break in and steal pipes, valves or fittings.
No property is 100% theft-proof, but the more deterrents you put in front of criminals, the better chance you’ll have of encouraging them to leave your vacant rental property alone.
Protect your rental property and assets through tenant background checks. Proper tenant screening will ensure you are leasing to the best possible tenants.
The rental market is seeing some new faces. Rental property investors now include people who, a few years back, may not have ever considered becoming landlords. Income tax records show 9.3 million taxpayers who claimed rental income in 2009, which is up from 8.3 million in 2003.
Several factors are contributing to this trend:
- The rental market is strong, and it keeps growing. More people are choosing to rent rather than buy homes, due to job instability, poor credit, stringent lending standards and insecurity about housing prices.
- Home prices are staying low. Prices have been falling since the bubble burst, and although experts have said we’ve reached the bottom more than once, the numbers indicate otherwise.
- Interest rates are staying low. Near-historic low rates mean taking on a mortgage makes sense for good credit risks.
- Investment returns are lousy lately. U.S. stock funds lost an average of 2.9% in 2011, and safer investments, such as bank CDs are returning rates of 1% or 2%. Investors view real estate as a better opportunity.
- People see tax benefits in owning rental property. According to Reuters, in 2009, those 9.3 million income tax filers claimed about $267 billion in rental income. However, they claimed more than that in depreciation and expenses, for a total loss of $11 billion.
Of course, things can change quickly. Housing prices will eventually recover. The jobs picture will improve at some point. Interest rates will creep back up. And rents will level off. Landlords who enter the business now when demand is high, tenants are plentiful and rents are healthy may find themselves ill equipped to deal with any downturns that will surely come.
The Fair Housing Act (FHA) requires owners of rental properties to make reasonable exceptions in policies and operations to provide equal housing opportunities to persons with disabilities. If you don’t normally allow pets, you may be required to make an exception to accommodate a service or companion animal for any tenants with disabilities.
But what if the companion animal poses a threat to your other tenants—or to you? Do you have to accommodate an aggressive animal under the FHA?
Probably not. While you must make reasonable accommodations for tenants with disabilities, they have responsibilities, too. If you request it, tenants with disabilities must provide documentation that the service animal is required from a physician or other healthcare professional. However, as a landlord, you are within your rights to require that every service animal be vaccinated, trained and non-threatening to other residents and the public.
The FHA does not protect tenants who create a nuisance or direct threat to the health and safety of others. If a tenant’s aggressive dog creates a direct threat, then you could be justified in requiring the tenant to take corrective action or remove it.
However, taking action based on speculation about a dog’s breed or appearance is not advisable. Rather, make an objective evaluation based on observation and available data. Does the dog have a history of aggression? Has it ever bitten or harmed anyone? Does it bark excessively? Could putting a muzzle on the dog when it’s outside the rental unit solve the problem?
If you have a tenant with disabilities who has a companion or service animal that is noisy, aggressive or a nuisance, keep the communication open and look for ways to come to a solution.