We all know the importance of tenant screening. It provides benefits to you as well as to your other tenants, including:
- Peace of mind
- Quality tenants
- Fewer evictions
While a tenant credit check will tell you whether an applicant meets your qualifications, and a tenant background check will inform you about an applicant’s criminal history, you should do a little more digging before signing that lease.
Every landlord should look at every prospective tenant’s current employment, employment history and rental history. Here are a few tips:
- Call the tenant’s current landlord, as well as at least one previous landlord. More is better. The current landlord might just be anxious to get rid of the tenant, so don’t accept a glowing report as the truth. But, if two or three previous landlords—who have nothing to lose—also say great things, you might have a gem of a tenant! On the contrary, if previous landlords say he was a problem tenant, but the current landlord says he’s great, it’s possible that he cleaned up his act, but can you be sure?
- Ask whether the applicant was current on rent, took care of the property, were courteous to the landlord and fellow tenants, and followed the rules of the lease.
- Check on the applicant’s current employment situation. Make sure you are talking to someone at the company who is authorized to verify employment. Often, applicants will provide the phone number to a friend or co-worker who is coached to give the right answers.
- Check to see if the actually applicant worked at the previous jobs listed on the application. Unless you check it out, you’ll never know if she has decided to stretch the truth or make up a job she never actually held.
When screening tenants, do a little digging of your own to provide a complete picture of each prospect. You’ll make a more informed decision about whom to accept as your new tenants!
Rental property owners have the responsibility to provide their tenants with safe and habitable housing. Not only is it the law, but focusing on safety can prevent accidents and other problems that can lead to crime on your rental property, injuries for tenants and visitors, and lawsuits for landlords.
Here are some safety guidelines for every landlord and property manager:
- Conduct regular property safety inspections. Check for leaking pipes, broken windows, broken or rotted stair treads, and damaged wood on railings, balusters and decks. Inspect electrical wiring and make sure smoke and CO2 detectors are installed according to building codes and are in operating order.
- Perform preventative maintenance. Fix what needs to be fixed, especially things that cause a safety hazard, like tripping hazards, broken locks or unsafe railings.
- Provide fire extinguishers for each rental unit. Educate tenants on escape routes in case of a fire.
- Take care of broken tree limbs, snow and ice immediately. Clean up piles of fallen leaves, especially on the stairs, where they can cause slipping.
Preventing crime is everyone’s responsibility. To discourage criminal activity, tenants should:
- Keep vehicles locked and avoid leaving items in them in plain sight.
- Never leave valuables in vehicles.
- Observe their surroundings and report any suspicious activity, persons or vehicles.
- Remind tenants that they are responsible for the actions and behavior of all their guests.
- Never copy keys.
- Not allow strangers into a building with controlled access doors. Have them contact the person they are visiting.
Landlords and property managers should:
- Keep parking areas, sidewalks, common areas and stairwells well lit. Ask tenants to inform you of any burned-out lights.
- Provide properly locking doors and windows.
- Trim shrubs and trees around windows.
- Communicate with tenants. Ask about any potential crime or safety problems.
- Regularly inspect properties for signs of potential criminal activity.
- Include a clause in the lease that states tenants will be evicted for dealing, selling or manufacturing drugs on the property, or for allowing such activity by others.
- Screen all prospective tenants. Run a criminal background check on each applicant, so you know that they are who they say they are. Tenant screening will help keep violent criminals or sex offenders out of your rental property, and will help keep everyone safer.
If you have rental units to fill, you might want to put yourself in your potential tenants’ shoes, and give them what they want. So what do people look for when searching through apartment or rental home ads?
Photos: You can’t have too many photos of your rental. Exterior and interior photos are a must for attracting the right tenant. And be sure the photos are done well. Use good lighting or bright, natural light. Be sure to show features like closets, dishwashers, laundry rooms, garages, patios and any attractive views.
Neighborhood: Describe the neighborhood, including the distance to grocery stores, pizza places, coffee shops and schools. If you’re close to a high-end neighborhood, but your rent doesn’t reflect it, say so.
Pets: More people have pets these days, and consider them part of the family. If you accept pets, say so right off the bat. Specify any limitations, such as size or type of pet (cats or reptiles, for instance), and whether you require pet references. And if you don’t allow pets, you should let people know that, too. Save phone calls, emails and headaches all around with complete information.
Rules: You can weed out less-than-desirable prospects by stating any application requirements in your ad, like fees, proof of income, credit and tenant screening checks, and references.
Just be sure to treat all applicants equally and fairly to avoid any question of discrimination. The Fair Housing Act prohibits discrimination in housing on the basis of race, color, national origin, religion, gender, family status or handicap.
Landlords, have you ever been the victim of a scam pulled off by a “professional tenant?” There are always a few lurking around in the shadows. We’ve heard a few stories lately about landlords who have suffered losses because they unknowingly fell victim to a pro.
Jeff is a new landlord who recently arranged with a couple to lease a rental unit he owns. They wrote a check for the first month’s rent and security deposit, which Jeff deposited into his account. A week later, they cancelled the lease because their employer was transferring them out of state. They asked for a refund. Jeff refunded the full amount, only to discover the original check was written on a non-existent account. It was counterfeit. The couple flew the coop and Jeff is out nearly $1300.
Banks don’t typically place holds on every check, so Jeff assumed it had cleared the bank with no problem.
One way to avoid this scam: Ask for the first month’s rent and security deposit in cash. That would have sent these two packing.
A better solution: Run a thorough tenant screening on every applicant. Check their credit history and criminal history. Call previous landlords and their current employer. Remember: scammers do their best work when no questions are asked.
Another story is about a famous scam where the tenant moves into an apartment and proceeds to trash the place. Or he just stops paying rent. He then waits for the eviction notice or sues the landlord for unsafe housing. He’s an expert at stretching out the judicial process though filing complaints, asking for judge recusals and causing postponements. In the meantime, landlords are racking up massive attorney’s fees, he’s living rent-free for months or years, and usually the court decides in his favor.
The only way to avoid this type of tenant scam is through tenant screening. One of the victims of this scammer admitted she didn’t check with any of his previous landlords before renting him an apartment.
Protect yourself, your business and your wallet by keeping your guard up, trusting no one you don’t know, and running a tenant background check on every prospective tenant.
The rental market is going strong in most areas of the country, as more folks are renting instead of buying. While many landlords are enjoying high vacancy rates, they still need to be cautious; the economy has really hurt the credit scores and bill-paying ability of millions of Americans.
Every landlord has a different standard for accepting new tenants, but the importance of conducting thorough credit checks and tenant background checks is clear. This is the one area that experienced landlords will tell you not to skimp on, because if you do, you will more than likely regret it!
Tenant credit checks and background screening doesn’t take long, and can be inexpensive. Most landlords pass the fee on to the prospective tenant, and most tenants are accustomed to paying the fee. If you have an applicant who has a problem with paying the fee or signing the authorization to conduct a background screening, then you probably don’t want them as a tenant, do you?
The screening process begins with the lease application, where you may ask questions about the applicant’s address history, work history and credit history, and obtain contact information for previous landlords and personal references. You may ask if the applicant has ever broken a lease, if they paid rent on time, why they are moving now, and about their income.
You may not ask a potential tenant about race, religion, family status, disability, or any other information that might indicate a breach of the Fair Housing Act.
Be sure to obtain the applicant’s signature on a separate notice that informs him or her that you will be running a credit check and background screening, based on their name, date of birth and Social Security Number.
Most experienced landlords will also phone references and previous landlords. Be careful how you phrase your conversation, because too many tenant applicants will provide the phone numbers of friends who have agreed to pose as a landlord or employer. Simply identify yourself and ask the person on the other line, “How do you know Joe?” The correct answer may be “I’m his landlord,” or “He used to work for me.” If Joe gave you Tom’s name as a previous landlord, and Tom answers, “Joe and I are on a bowling team together,” you may have spotted an inconsistency in Joe’s story. Be on the lookout for more of them!
Finally, you should run a thorough tenant screening credit check to find out how the applicant pays bills, if they’ve filed for bankruptcy, and what their credit score is. A criminal background screening will reveal whether or not you have a convicted felon or sex offender applying to live in your rental property.
Don’t forget to trust your gut when screening tenants. You don’t have to give a reason for rejecting a tenant in most areas (check your state and local laws)—but do be careful and apply the same criteria to every applicant, or you could be accused of discrimination. You can’t reject an applicant solely for the color of their skin, but you can reject one because their credit score did not meet your minimum requirements—along with the bad feeling they gave you when you met them!
Tenant screening is a several-step process. It begins with the lease application, where you obtain the lease applicant’s signature to run a background and credit check. It ends with phone calls and other verifications to check employers, previous landlords and other references listed by the tenant.
In between is the professional tenant background check, which should include:
- SSN Validation
- OFAC/Patriot Act Search
- Liens & Judgments
- Criminal Records Search
- Sex offender Search
- Credit Check
- Name and Address Validation
Skipping any of these necessary steps is usually a mistake – just ask landlords who have! You might be tempted to forget about calling previous landlords if the credit check comes out clean. You might be tempted to skip the tenant background screening if the applicant tells you up front that he had a drug conviction five years ago. When tenant applicants are so honest up front, they must have nothing else to hide, right? Maybe. Maybe not.
When your gut tells you someone is honest and deserves a chance, don’t listen! Do your due diligence and find out for sure if they can be trusted to live in your rental property, take care of it properly, and pay rent on time every single month.
Conducting due diligence on a potential tenant takes a little time and effort on your part. Experienced landlords will tell you to listen for clues when you’re talking to references and former landlords to determine whether you need to dig any further.
- Clue #1: Former landlord says that applicant was never any trouble and paid rent on time. Would happily rent to them again and again.
- Ask: Why are they moving? How long have you owned the property? How do you spell your name? What is the legal address of the rental property?
- Double-Check: Tax records to make sure the person you are talking to is indeed the owner of the property in question. Potential tenants have friends pose as landlords. How do you know you’re talking to the landlord? Hint: When calling the number, ask “how do you know John Doe?”
- Clue #2: Employer says applicant was never any trouble, makes enough money to cover rent and is still gainfully employed.
- Ask: What is your name and position at the company? Ask even if the name is on the application in front of you. Potential tenants have friends pose as supervisors.
- Double-Check: Google the company name, address, phone number. Call the business and ask for the person you were speaking to – don’t just call the number you were given.
- Clue #3: Tenant applicant cannot provide paystubs.
- Ask: For W2s or tax returns. If you don’t get them, move on to the next applicant.
Verifying tenant references is as important as formal tenant screening. Don’t base important decisions on your gut. Verify, then trust!
Short-term leases are becoming more popular in some areas of the country. One trend is that homeowners who sell a home are less willing to buy right away, so while they wait and see what the market will bring, they rent for a while. Another factor is the toll the economic crisis took on renters’ credit scores. Landlords are less willing to take chances on one-year leases, so often a month-to month or six-month lease is a great option.
When the economy and job market are both doing well, the ideal situation for a landlord is a one-year lease with a strong tenant. But even though the rental markets across the country are starting to show improvement, many landlords are far from the ideal—and they still need to fill rental units.
When credit scores are less than perfect, and home sellers are knocking on your door, looking for short-term leases, it makes sense to adjust your lease terms from one-year to six-month or month-to-month.
Month-to-month leases mean that at the end of any month, the tenant can simply move—or the landlord can end the lease. Most leases require notice on each side, but if neither side ends the lease, it continues for another month.
7 Advantages of Short-term Leases:
- Your rental units could be occupied instead of empty
- Improved cash flow
- Possibility of higher rent negotiation
- Easier transition between tenants (less clean-up and maintenance)
- Larger pool of possible tenants
- You can get rid of a bad tenant more quickly
- For month-to-month leases, the rent can be adjusted at any time
Remember, no matter what the length of the lease, proper tenant screening is the most important step you can take prior to signing it. Conduct a thorough tenant credit check and background check and you’ll feel better about offering a lease to short-term tenants.
As we all wait for the economy to fully recover from recession, we’ve heard reports of landlords skipping over essential steps in the tenant screening process. Thorough tenant screening is one of the best investments a landlord can ever make—some suggest that it can help you avoid about 99% of the problems landlords have with their tenants. When prescreening tenants, don’t skip over two essential pieces of background checks: verifying tenant income and employment. 3 Reasons to Verify Every Tenant’s Employment and Income 1. Not all tenants tell the truth. Tenants reflect the whole of our society, and your potential tenants are a mix of honest, dishonest, professional liars and ex-cons. When they tell you where they work and how much money they earn, they might be telling the truth—or they might not. Verifying employment and income is the only way to know for sure. Landlord Tip: Be wary if the tenant insists you talk to a certain person at their place of employment—they could be directing you to a friend who is posing as the employer. 2. Having money doesn’t equal having a job. A nice car, expensive clothes and shoes and armfuls of jewelry can all be purchased on credit. A landlord we know was conned by a nicely-dressed applicant and signed a lease with her. Later, she found out that she had been laid off six months earlier from the employer she listed on the lease application. Making a quick telephone call to the employer would have avoided this situation. Landlord Tip: Look up employer telephone numbers yourself, either online or in the phone book. Some tenants will provide false information. 3. Keep your tenants safe from harm and your business safe from risk. Verifying income and employment helps you avoid renting to tenants involved in criminal activities. It’s easy to be impressed by a tenant with cash in hand to pay your security deposit and rent. But failure to verify a tenant’s source of income—with paycheck stubs, income tax returns (in the case of self-employed applicants) and phone calls to his or her employer—is almost asking for trouble to move into your rental property. Landlords who fail to screen properly have been held liable for harm suffered by neighbors or other tenants. Landlord Tip: Be prepared to submit a written request for information. Many employers will not provide salary info over the telephone. Don’t be in such a hurry that you can’t invest the time necessary to obtain complete information. Prescreen Tenants for Complete Peace of Mind The best way to be sure you’re renting to a qualified tenant is to prescreen all rental applicants. 100% online tenant screening is easier than ever — and it can reduce your risk!
Steering Clear of Problem Tenants
Managing rental property is no easy task. Why make it harder than it already is? After all, your properties are only as easy to manage as the tenants who live in them. Employing best practices consistently on each and every rental is the key to managing income property smoothly—and avoiding discrimination issues, too. One way to avoid trouble is to check potential tenants’ credit and criminal history.
Is it Legal to Check a Tenant’s Credit History?
Absolutely. Renting property brings monetary and legal risks to the property owner. You need to mitigate risk wherever you can, and checking credit history is a great way to do so. As part of the rental application, your prospective tenant can agree to a credit check with a signature. You’ll know for sure if the applicant is a good risk—or one to stay away from. Even a tenant with a great credit history can miss paying rent on time—but again, the idea is to lessen that risk by choosing the best possible tenant.
Remember that all information you learn from a credit report must be held in strictest confidence, and never shared with third parties. Your applicant may have a right to the report—check your state’s guidelines and the Fair Credit Reporting Act (FCRA) to be sure you are compliant. If you reject an applicant for credit reasons, you must advise them in writing. Consider having a reputable, professional tenant screening service handle your background screening to ensure you are within the guidelines of the FCRA.
What Will a Tenant Screening Credit Check Tell Me?
The credit check will reveal how promptly the applicant pays credit cards and loans, plus any outstanding judgments or bankruptcy filings. Look for a good record of responsible finances, and see if the applicant appears to be living beyond their means. Conservative spenders will be more likely to survive an emergency or job loss without major upheaval—like breaking your lease agreement.
The credit check will also reveal previous addresses—compare these with the application and investigate any inconsistencies. There could be a simple explanation—or the prospective tenant could be hiding something.
Is it Legal to Check a Tenant’s Credit History?
While you don’t have a legal duty or obligation to do so, you may certainly include criminal history in your tenant screening process. Keeping your property, other tenants, and yourself safe from potential damage is well worth it. These reports typically cover records at the county or national level; different reports are available in different states. Check with a professional tenant screening company for details.
The important thing to remember is to be consistent: screen all applicants in the same way, each time. Making an exception could be reinterpreted as discriminatory—and it could literally open your doors to potential problem tenants. A clear policy of running criminal background checks on all applicants is the best protection for you, your other tenants, and the community.
Next Post: Renewing Leases
Verify Before You Hand Over the Keys to a New Tenant
As Landlord, You’re in Control
As a landlord, you know only too well that you cannot control your tenants’ behavior, or that of their guests. You can’t control the occasional damaging wind storm or unexpected tree limb on the roof. But in the beginning, at least, of the landlord/tenant relationship, you are in complete control: as long as you comply with all applicable housing laws, you alone decide who is approved to rent your property. There are a number of factors you may use to decide whether to reject an applicant. Today we’ll look at employment and income.
Smart Landlords Verify
The rental application should contain the following information that you must confirm prior to approving the applicant: current and previous addresses, current and previous employment, income, Social Security and driver’s license numbers, plus personal and rental references. You can do this yourself or with a professional tenant screening service.
Verifying Employment and Income
You can simply call the employers listed on the rental application; however, many employers are hesitant or have policies against releasing information over the phone. You may need to request verification in writing. It’s not a bad idea to have this information in writing as a matter of procedure. You want to be sure your prospective tenant is currently employed, and has a reliable work history.
You can also ask the applicant to provide proof of employment and income, such as pay stubs. Don’t neglect to verify these with the source of the income to be certain they have not been falsified—or even fabricated completely. For sales or commission-based income, review at least six months worth of paystubs, or have the applicant supply you a copy of their previous year’s tax return. Ask for verification of any other sources of income to be used toward rent payments, such as child support or alimony. If any stated income cannot be verified, you do not have to include it when determining minimum income requirements.
When to Be Suspicious
Be wary of business phone numbers supplied by the applicant if they don’t sound like legitimate businesses when you call. Likewise, be suspicious if the applicant insists you speak only to a certain person—they could be a real HR clerk, or they could be a friend who will supply false information. Certainly, legitimate businesses don’t always answer the phone properly, but let your intuition be your guide—it will tell you whether you need to dig a little further.
You should also be on guard if your prospective tenant has plenty of cash for security deposits and first month’s rent, but no verifiable sources of income. If income is inconsistent with obvious spending patterns, be cautious. Cash without proof of income, or extreme spending on a low income could indicate illegal activity. You don’t want to have problems down the road with either a tenant who can’t pay rent regularly or with criminal activity on your property.
Prescreen Tenants for Complete Peace of Mind
The best way to be sure you’re renting to a qualified tenant is to prescreen rental applicants. It’s easier than you think to do this online —plus, you’ll reduce your risk and your stress level!
Next Post: Checking Tenant Credit and Criminal History