What Should Landlords Look for in a Tenant Background Check?

tenantriskverification October 28, 2014 0

Michael Klazema

The tenant screening process is, in many ways, as complicated as interviewing for a job. Indeed, there are numerous commonalities between the two processes, from filling out an application to going through an in-person interview, all the way to reference checks and background checks.

If you’re above college age, chances are you’ve gone through this process at least once and know what it’s like. However, if you are changing sides of the table and taking on a landlord role for the first time, you need to understand why the tenant screening process is so complicated and what you should be looking for in the people you interview. With that in mind, here are just a few of the background items that should be on your checklist as you search for your first tenant.

Financial Stability

In many tenant screening processes, the landlord is looking for one thing above all else: a tenant who can reliably pay rent on time every month. There are numerous ways that you, as the landlord, can find this information. The first and most obvious is a credit check. You are looking for someone without a lot of debt, or at least for someone who does pay his or her few creditors on time without fail. A person who can’t stay on top of their credit card or car loan payments probably won’t be able to handle rent—especially if your rental rates are high, as they are in most big cities.

Landlords will also assess financial stability by making sure that their tenants have a stable source of income with which to pay the rent. Always ask your tenants to provide pay stubs or some other proof of income. The generally accepted rule says that rent costs should account for no more than 30 percent of a tenant’s monthly income. You don’t have to take that rule as gospel, but if your tenant only makes two times the rental costs in a given month, then you might consider rejecting them for insufficient income—especially if the tenant’s credit check indicates a lot of other monthly payments.

Criminal History

Every smart landlord makes a point of running criminal background checks on their tenants. You can learn a lot from these checks. For instance, if a tenant has a history of violent crimes, then they could pose a threat to the safety of you, your neighbors, or your other tenants. Meanwhile, a tenant who has been convicted in the past for dealing drugs could be looking to turn your property into his or her new base of operations—absolutely not a headache you want to have to deal with.

Not all instances of criminal history need to result in an outright rejection of a tenant’s application, though.For instance, if you are interviewing a tenant with a single old conviction for property damage, you could still give them a chance, but could use the crime as a reason to require a heftier security deposit from them.

Generally, criminal background screenings—as well as credit checks—are covered by a tenant’s application fee.

Quality References

You can use credit history to make assumptions about how good a tenant would be about paying rent on time, or you can use criminal history to assess whether or not a tenant would be a threat to your property or the other people living in the area. However, when you call up a landlord who has dealt with your prospective tenant in the past, you don’t have to make assumptions because you are speaking to someone who knows the answers to your questions firsthand.

In other words, the renter references part of a tenant screening process is vital. Make sure your rental application includes a section where prospective tenants can list his or her past housing information. Then, as you run background and credit checks on each tenant, take the time to make phone calls to their old landlords or apartment complexes.

You will be able to ask how good the tenant was about making payments on time, whether or not they fulfilled all of the obligations of the lease, if they left any property damage in their wake, and if they had any serious altercations with the landlord or other tenants. You can also ask about evictions, bounced checks, broken leases, and other typical landlord nightmares. The answers to your questions should help to significantly demystify a tenant’s renting habits.

Their Overall Demeanor

There’s no substitute for the kinds of screening checks laid out above. However, it is still true that you can learn an awful lot about a person by meeting with them face-to-face, asking a few questions, and paying attention to their overall demeanor. Sure, tenants—like job hunters—are always trying to present the best versions of themselves in interviews, which means you might not actually see the real tenant until later. However, you will get a sense for their personality and whether or not you are comfortable with them.

Make no mistake – a tenant-landlord relationship involves a fair amount of interaction. From paying rent to troubleshooting maintenance issues, you want to find a tenant with whom you can have a friendly, comfortable, and professional relationship. If a tenant you are interviewing makes you uneasy for any reason, trust your gut. The last thing you want is to sign a lease with a person who puts you on edge, only later to discover that your gut was—for one reason or another—completely right.

There’s a lot to consider when taking on the landlord and screening potential tenants. From credit and criminal history to income stability, all the way to previous housing history and references, you need to look at each tenant you consider from multiple angles. Doing this can be frustrating, repetitive, and convoluted, especially after you’ve gone through a dozen applicants and keep striking out. Ultimately, though, the screening process is worth the considerable effort to make sure you end up with a tenant who is safe, reliable, trustworthy, and friendly.

Source: nuwireinvestor

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