As a property investor new to landlording, your biggest worry is having spooky tenants from hell who don’t pay their rent, or worse, trash your property- escape them with a rigorous tenant screening process. That’s right – tenant screening – (not tenant screaming!)
What is a good tenant screening process?
A thorough tenant screening process involves 8 steps:
2. The showing
3. A detailed application form
4. Employment References
5. Work References
6. Social Media checks
7. A credit report
1. Pre-Qualifying/Tenant Screening
The first step in tenant screening is the phone call. When people call to view your property, ask them 6 short questions before committing to a showing. If you advertise a 2-bedroom condo with no pets, there is no point in showing it to a family of 5 with 2 cats. Screen tenants in advance and you won’t be wasting both your time and theirs. Keep these 6 questions handy by your phone so that when they call you can easily pre-screen:
- Do you have any pets? If so what breed, weight, age?
- How many people will be living in the property?
- When do you want to move in?
- What length of lease will you sign? (6 months, 12 months etc.)
- Why are you moving?
- Can you verify your income level?
Can potential tenants verify an income? If not, it’s fair to ask, how will you pay your rent? Inheritance, alimony or a trust fund, can be credible sources of income. Once you’ve assessed whether they are good candidates for your property, send them a text confirming the time, date and location. Let them know that you are expecting them to text/call you 1 hour prior to the appointment to confirm their appoinment. If you don’t receive a call or text, you will not be driving down to meet them. This will save you a lot of time and mileage weeding out no shows.
2. Tenant Screening During The Showing
Pre-Screen in person during the actual showing. Ask the same 6 tenant screening questions you asked in the pre-screen. Typically, when people see you in person, they will provide you with more information about where they work, etc. This is your chance to check the consistency of their answers and to form your impression of them. If you like them and believe you would be comfortable working with them long-term, ask for the sale. Ask them if they’d like to complete an application.
3. The Tenant Screening Application
• Full legal name/s of applicant/s
• Birth date (month/date/year)
• Present address, postal code
• Telephone number
• Email address
• Drivers license
• Make and model of car/s
• Occupancy request date
• Names of all people who will occupy the unit
• Copy of government issued identification (i.e. driver’s license, government id with a photo)
• Previous addresses (3-5 years)
• Rental references (3-5 years)
• Employment information of current employer and previous employers 3-5 years; include supervisor’s first and last name and a job title, company name, telephone number, contact information
• 2 work references with address, phone and email address
• Monthly income from employment and other sources
• 2 Relatives or friends who can be contracted in case of emergency
Authorization to Run a Credit Report
A statement affirming all information provided on the application is true, and that the potential tenant authorizes you to complete a credit check. This must be signed by the applicant and returned to you.
4. Employment References
Run social media checks on all your tenant’s work references (to verify identity and place of work). For work references, don’t use the number on the application. Instead, find the company phone number and ask to speak to the person listed. This way you can verify that the work reference actually works with the named employer.
Ask the references 4 simple questions. Remember to let the employer do the talking, your role is to listen. Remaining silent also makes people feel uncomfortable, which makes them talk more to fill in the space. The more they say, the more you will learn:
- How long have you known him/her?
- What can you tell me about him/her? (look for themes, patterns of behaviour – i.e., reliability, dependability, ability to get work done when promised)
- How does he/she handle conflict
- If you were a landlord would you rent to her, why?
Again, run a social media check on the landlord – if possible. If it’s a property management company or apartment building, its easy to obtain a reference. What about the private landlords who own 1-2 properties and self-manage? There are a couple ways to verify. Title searches reveal the identity of the property owner. This way you can see if the name on the title search matches the name of the landlord provided to you. I’ve busted a number of potential scammers using this technique.
Another method is to call the private landlord and ask if they have a suite for rent. If they say, no I don’t rent suites – busted! When they tell you yes, I do. Then you can say, actually, this is a landlord reference, could you please verify the address of where Jane Tenant rented from you? Can they easily rattle off the address? Great. Or are they stumbling, take note, that’s not a good sign. After you’ve verified they are indeed a landlord at the listed property, you can ask them the following 5 questions:
- How long did they rent from you?
- Was their rent paid on time every month?
- Have you received any complaints?
- Did they damage the property?
- Would you rent to them again?
6.Using Social Media Checks For Tenant Screening
Run a Social Media Check on All People Listed on the Application. Social media checks have become the norm in tenant screening, work and personal reference checks and even dating. You can verify work information on platforms such as Linkedin. Personal information can be verified on FaceBook. Social media is a great indicator. It’ll show you how they speak to people, what types of activities they participate in, whether or not they have pets, and who is in their social network. All of this can be cross referenced with their application.
7.Always Run a Credit Report Fort Tenant Screening
Credit checks are tremendously important and should always be included in your tenant screening process. Your local residential tenant association will have a listing of credit bureaus available for members at (often) reduced rates. There are also some online programs that can be utilized by landlords for free. Once a member, you can run a credit report online in several minutes. These reports provide a wealth of information about your future tenants.
Credit reports supply; present and past addresses (cross reference this with the application), past payment history, and a credit rating (a numeric and letter grade is assigned to each application). They also show the entire credit history including liens, collections and bankruptcies.
It’s a good idea to run the credit checks first, if the credit rating is good, proceed with the employer and landlord references. If the credit rating is very poor, and or the addresses don’t match the ones listed on the application, don’t proceed.
In my experience, people with a chronic history of bad credit do not place a value on paying bills and should be avoided at all costs. A bankruptcy is a different matter. Many times people who filed for bankruptcy had a good credit history but had one incident (death, illness, job loss, failed business) that ruined their credit. They should still be able to provide you with proof they are rebuilding their credit and are paying their bills on time every month.
8. Documentation That Supports Tenant Screening
Verify employment, income, and identification. Employment can be verified with a recent, 30-day pay stub, or a letter of employment. If they are not employed, verify income or savings from their accountant or from a bank manager. Are they self-employed? Run a business credit check. Verify identification with a driver’s license or passport, ensure it is government issued.
Choose to spend your time on the front end, screening tenants rather than on the back end, evicting nightmare tenants
At this point you might be saying – are you kidding?! This is a crazy involved process. Yes, processing applications is time-consuming and involved.. The process ensures you are handing over your investment to a tenant who values paying bills on time every month, treats people respectfully, and takes good care of your property.
When you rent out your property, you are running a business. Think of your tenants as employees who are either an asset or liability to your business and set yourself up for success by only taking the best people. In the end, the time, effort and expense of eviction and repairing property damage, and the anxiety, is far more time consuming and expensive than the time you will spend with a thorough screening process.
A rigorous screening process is your best offense in setting yourself up for consistently renting your investment property to quality tenants. By using this 8-step screening process you can bypass most of the spooky tenants and nightmare tenancies by setting yourself up for success.
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