Do You Screen Prospective Tenants?
If you are a buy and hold investor who manages their own properties, screening prospective tenants is the most important thing you can do. You can find the perfect rental property in a great location, but bad tenants can ruin it all in an instant. There are many landlords who are happy to have anyone interested in their property. They end up renting to the first semi-qualified tenant that comes their way. What they find is that taking on a bad tenant is far worse than waiting an extra few weeks to find a more qualified one. Whether you have one property or ten, you need to screen any and all applicants that come your way. If not, you may be setting yourself up for disaster. Here are some things you should look for when screening your next tenant:
1. Detailed application: Choosing the best tenant should be treated the same way that you would hire someone for a job. Would you hire the first person that wants the job? Probably not. You would most likely go through a series of applications to see who is the most qualified. Everything starts with the application. One of the mistakes that new landlords make is going in with generic leases and applications. This is your chance to find out about your tenant before you commit to them. The application should include everything you want to find out about a prospective tenant. Name, address, employment, income and previous addresses are the minimum items you should ask for. If your tenant balks at providing you with any of these items, you know you should move on. If they proceed to give you all of the items you ask for, you can move on to the follow up phase.
2. Follow up: It does you no good to have your tenant fill out an application if you are not going to follow up with it. This may be hard to believe, but some tenants lie on their application. Unless you call and follow up, you have no way of finding out. All it takes is a two minute call to the employer listed on the application to confirm employment. In addition to employment, you need to reach out to current and previous landlords. This may be the most important piece of information you can get from the application. Previous landlords will give you a good indication of what kind of tenant they really are. You never know who had a grudge or if something happened at the end of the lease, so you never want to entirely base your decision based on just one piece of information. That being said, there is a lot that can be derived from follow up, not only with past landlords, but anyone listed on the application.
3. Financial history: One of the things you can do along with the application is pull the credit report. There are ways you can do this so you don’t have to endure the expense every time. Either way you should have something that can show a payment history. Rental history does not show up on a credit report. Credit cards, car payments and student loans are the main items that will appear. If your tenant has minimal payment history ask for a copy of a current bill. Something as small as a cell phone bill can give you an idea of how they value paying items on time. Before you let your tenant live in your property you should have some evidence of their payment history
4. Set firm times and dates: You can tell the tenants that really want to live in your property by the urgency which they act. If everything checks out with the application and you want to take the next step set a firm time and date to go over the lease. If they show up late it could be red flag that they may not value punctuality as much as you do. This will be reflected by when they decide to send their rent checks in every month. Additionally you should set up a date on when you will receive the security deposit check. Anyone that has rented before knows that they will need at least the first and last month’s rent up front. Not having this or making an excuse should be an indicator that there could be financial issues. It can be very tempting to allow yourself to be persuaded by a tenant that you personally like very much. Never lose fact that you are running a business and need to treat it as such.
5. Expectations and Responsibilities: If you have made it through the application and reviewed the lease together you are pretty much a go. All that is left is for you to hand off the key and receive a security check. If you can you should do this at the property. Go through the condition of the property and more importantly what you expect out of them. If there are designated places to park make them known before you go any further. Along with their responsibilities as a tenant make it clear as to what the consequences will be if the lease is broken. It is never too late to back out of an agreement before they move in. If you get a bad feeling or if they start to ask questions about using the property that makes you uncomfortable walk away. There will be other tenants that are interested in your property.
Finding a good tenant takes time and effort on your part. Once you start to assume that every tenant will be a good one is when you will have trouble. Screening is an important part of being a landlord. Take the time and do it right on every new lease