Screening tenants is one of the most important tasks when it comes to renting your investment property and it should not be a stressful process. The key is to have set tenant selection criteria and to screen all applicants against that criteria. Having low risk tenants can result in higher return on investment. Your selection criteria should cover income, credit score, criminal background and eviction verification.
When it comes to income, most will ask for three times the amount of rent. Compromising on three times the amount of rent can lead to eviction. Tenants should be able to afford the rent. If their income is not enough, they may pay late and fall behind and eventually lead to eviction. Tenant’s income is directly correlated to their ability to pay.
In today’s market, credit score is not weighed heavily. Many believe because there was a recession, then most renters do not have good credit scores. A tenant’s credit score is an indication of the tenant’s desire to pay rent. It could be looked at as a personal responsibility score. Yet, don’t just looked at the number, take your time to read the credit report. The report will provide the back story as to what might have gone wrong.
Conducting a county level criminal check will let you know if a person has been convicted. One should never discriminate against those who have paid their debt to society. However, you do not want to rent to someone who has multiple convictions for similar crimes. If a person does not follow societal rules, chances are they won’t follow your leasing rules.
Always call the previous landlord for references. It is okay to be a little tricky. When calling previous landlords, ask them to provide the house number after giving them the name of the tenant and the street name of the prospect’s previous residence. All landlords will provide the house number or correct you if you provide the wrong address. However, if the prospect put down someone they know to act as a surrogate landlord, they won’t have the detailed information you are looking for and they won’t ask you to send them a signed authorization to release information. Always ask if the tenant’s full security deposit was returned and if they would ever rent to them again. The yes or no answer is very telling as to the kind of tenants you are about to accept. Ask if the tenants gave proper notice prior to moving out and if the terms of the lease were met.
Other screening tips include looking for number of moves and employers in a 5 year period or if the tenant is eager to move in right away or is currently living in a motel. These are some things that should be scrutinized when screening a prospective tenants. If you have questions or want us to handle your property management needs, please contact us at New Bridge Management.