11 Tenant Screening Mistakes to Avoid
Renters Warehouse Blog
For landlords, one of the most important aspects of property management is ensuring that you find the right tenants for your rental.
Finding qualified tenants is crucial to your success with rental investments. Finding great tenants who will pay the rent on time (every time!) and follow the terms of the lease is important for your cash flow and returns.
Unfortunately though, for many landlords, filling vacancies can also be one of the most challenging aspects of rental management. After all, tenant sourcing and screening can be time-consuming and creating a screening policy along with a screening questionnaire also takes time. It can also be frustrating –there’s nothing quite like screening three or four potential candidates, and spending time running background and credit checks, only to come up empty handed at the end of it all.
In some cases, landlords are often tempted to compromise on the screening process, cutting back on the background and reference checks, or being very lenient for tenants with a sketchy rental history. In other cases, landlords may even skip over most of the tenant screening process altogether, in hopes of filling a vacancy faster. But don’t be fooled. By compromising, you could easily end up with an applicant who’s not qualified, and ends up unable to pay the rent or fails to abide by the terms of the lease. Worse still, by allowing an unscreened tenant into your rental, you could end up with someone who causes a great deal of damage, something that can easily set you back thousands of dollars.
You wouldn’t let a stranger into your home. The same rules apply when it comes to your rental property. Make sure your applicant is a good candidate for your property –before you hand over the keys to your rental. With this in mind, here are some tenant screening mistakes that landlords often make –along with some things you’ll want to do instead.
See also: Tips for Filling Vacancies Faster
Mistake #1: Skipping the Tenant Screening Process Entirely
First up, one of the biggest mistakes that a landlord can make is skipping the tenant screening process altogether. But regardless of how quickly you’d like to fill your unit, it’s important to remember that a bad tenant could end up costing you a lot more than a few extra weeks of vacancy time would. Even for tenants who come to you highly recommended by other tenants or people that you know, you’ll still want to make sure each applicant is run through the same screening process to ensure that only qualified candidates make it through.
Mistake #2: Not Having a Rental Application (Or Prescreening Questions)
Casting a net that’s too wide can lead to problems. There’s no point in having 30 applicants that you’ll need to interview. That’s too many candidates, which means a great deal of extra work for you. Instead, it’s best to take a more targeted approach. By implementing prescreening questions that applicants can answer, you can help to save time by ensuring that only qualified candidates make it through to the next stages. Avoid showing your rental to everyone who calls up to inquire about it. Instead, direct them to the rental application form first, complete with a prescreening questionnaire.
Here are some questions you’ll want to ask on your application:
- What is your name/email/phone number?
The basics, but vitally important information that you’ll need when screening applicants.
- Are you employed/have verifiable sources of income?
A tenant who does not work, or has no income is a warning sign.
- When are you looking to move?
This is a good question to ask during prescreening, as anything longer than four weeks out is likely to be a bad fit for your situation.
- Are you okay with us doing a background/credit check?
A “yes” is necessary to proceed further.
Mistake #3: Not Checking Their Credit Report
It’s also important to do a credit check on your prospective tenant. This is a good indicator of how well they’ve been paying their bills and debts. Red flags to look out for include late payments, unpaid debts, or a poor credit score.
Mistake #4: Skipping the Background Check
Another common mistake? Forgoing the background check. Many landlords assume that a credit check will show them everything they need to know and that a background check is overboard. However, a background check can be important as it will show you whether or not an applicant has a criminal record.
However, keep in mind that HUD guidance states that landlords should avoid having blanket policies against renting to anyone with a criminal record. That’s because this could be seen as discriminatory. Instead, it’s better to approach each situation on a case-by-case basis when making your decision. See the HUD guidelines.
Note: Feeling overwhelmed at the thought of running all of these checks? Don’t worry. Fortunately, there are tenant screening services available that combine everything from a background check to credit report and eviction history. They usually cost between $25 and $40 and are worth every penny.
Mistake #5: Failing to Verify Their Identity
While you’re running background and credit checks, make sure you verify your candidate’s identity as well. Make sure you ask for photo ID and then keep it on file for the duration of their tenancy. If an applicant is unwilling to verify their identity, that could be a warning sign.
Mistake #6: Not Interviewing Candidates
Once a candidate has submitted their application and made it past the initial preliminary screening questions, a phone interview is a good next step.
Here are a few good questions that you’ll want to consider asking:
- How long have you lived in your current location?
- Why are you moving?
- Do you smoke?
- Do you have pets?
- How many people will be occupying the rental?
- Have you ever been evicted?
- Are you able to provide references from your previous landlord?
- When are you looking to move?
- How long of a lease are you looking for?
By asking these questions, you give yourself a better idea of what your tenants are looking for and help save yourself from showing your rental to an applicant who won’t be a good fit. For instance, if your tenant is looking for a short-term place to live and you are looking for a long-term lease, you know that this particular tenant is not for you.
Mistake #7: Not Requiring Proof of Income
Another common mistake you will want to avoid is not requesting proof of income. Proof of income is important to help determine that your tenants will be able to make rent every month. Requesting proof of income can save you the headache of finding out that the tenant you selected, is unable to cover the rent afterall.
Pay stubs, a bank account statement, or a letter from their employer can all be used as proof of income.
While you’re at it, you’ll also want to check their employment history. Take note of how long they’ve been employed for, and their salary, to ensure they meet the minimum income requirements. In most cases, you’ll want to ensure that their income is three times the rent.
Mistake #8: Failing to Check References
Asking for references is important, but if you don’t follow up on them, they won’t do any good. The reason that landlords request references is so they can contact them to verify that the information that the applicant is giving is correct.
Employment references and references from previous landlords are both important. Be sure to request references from their two most recent previous landlords. Specifying that the most recent landlords are used as a reference will help you to ensure that you get the most up-to-date information on the tenant.
Mistake #9: Not Having a Consistent Screening Process
Often, landlords are tempted to go with their gut when it comes to tenant screening. But this can be a dangerous strategy. There’s nothing wrong with allowing your gut feelings to guide you, but you should always back up those hunches with clear, concrete evidence. One of the problems with a lack of a documented screening process is that you could end up running different tenants through different screening processes –which means unqualified tenants could end up getting approved. An inconsistent process could also put you at risk of harmful accusations of discrimination.
Mistake #10: Asking Discriminatory Questions
In addition to ensuring you ask each applicant the same questions, you should also ensure that you steer clear from any practices or questions that could be considered discriminatory. Make sure you familiarize yourself with Fair Housing Laws, which state that landlords should never discriminate against tenants or applicants because of race, color, religion, sex, disability, familial status, or national origin. Make sure you give each applicant a fair and equal chance.
Note: Keep in mind that landlords should make reasonable accommodation for people with disabilities as well. This includes allowing service dogs for tenants who require them.
Mistake #11: Failing to Outsource (When It Makes Sense To)
Finally, many first-time landlords think that finding and screening tenants is easy. But there’s a great deal of background work that happens behind the scenes. From following up on applications to familiarizing yourself with best screening practices, there’s a lot to learn about and plenty to keep you busy when it comes to tenant screening. For time-crunched landlords, it often makes sense to outsource rental management, along with tenant sourcing and screening, to a good property manager.
Tenant screening matters, so don’t be tempted to skip this process or compromise just to find a tenant. An airtight tenant screening policy can help you to ensure that you end up with the best candidate for your rental –helping you to save time and money, and maximize your returns in the long run.
See also: Things to Look for When Screening Tenants.
Thinking of investing in rental property? Be sure to download your FREE guide: A Look at the Housing Market As We Enter 2022. See what the experts are calling for this year, along with tips for investing any time.
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