Being a property manager is a very demanding, yet lucrative career. Property managers are responsible for a wide range of property management tasks including liaising with rental property owners, finding tenants, handling lease documents, collecting rent, and maintaining the property. However, one of the most important property management skills is tenant screening. Being able to screen for good tenants is crucial for resident retention when managing rental properties. It will be a skill your property management clients will be looking for.
So, What Is Tenant Screening?
Tenant screening is the process of checking a potential tenant’s background to find out who they really are. A tenancy application can easily be falsified or manipulated by prospective tenants. Screening potential renters as a property manager involves verifying the information they have provided, as well as looking for as many additional details as possible. Tenant screening will help property managers get a good idea of the kind of tenant they are likely to be. Though no tenant can be 100% perfect, screening tenants and finding a good one will make your work easier and reduce your stress levels as a property manager.
For good property management, you must know how to screen tenants. Here are some great tenant screening tips for property managers:
1. Pre-screen potential tenants
Tenant screening begins with pre-screening potential renters. When you start advertising your rental properties, you will begin getting calls and emails from potential renters. Contrary to popular opinion, pre-screening does not start with an application or background check. It starts with the initial contact. Since screening is a process that takes a lot of time, you don’t want to waste time on everyone that shows interest in your rental property. This is why pre-screening is very crucial for narrowing down the pool of potential tenants.
Pre-screening begins with your advertisement. Whether you market your rental property using Zillow, Craigslist, or the newspaper, the information in your ad should help eliminate time wasters. For instance, by mentioning the location in your ad, people who are looking for rentals in other locations will be automatically screened out. In addition, putting the rent required in the ad will discourage those that cannot afford it from calling.
The initial phone call by property managers can also be used for pre-screening candidates. Here are some questions potential renters are likely to ask on a phone call:
- What is the address?
- Is the rent negotiable?
- Do you accept pets?
- Can I view the rental property?
The questions asked will give you a good indication of what kind of tenant you are dealing with. Are they rude or polite? Are they making unreasonable demands? During the initial phone call, be sure to mention that potential tenants will undergo a full criminal and background check. This statement by itself will weed out many bad tenants who would have wasted your time.
2. Request an application
Once you have shortlisted a few potential tenants, the next step of tenant screening is getting them to fill out an application. Here are some of the sections that must be included in your application form:
- Name, phone number, address, and driver’s license number
- Date of birth and social security number
- Past and current landlords with contact details
- Job and employer details with contact details
- Eviction history
- Release of information signature
A good tactic to apply in tenant screening is not to ask ‘have you’ but ‘when’ or ‘how many’. This will make it difficult for a potential renter to lie. For instance, instead of ‘have you been evicted’, ask ‘how many eviction notices have you received’.
3. Run a background and credit check
A background check looks at the potential renter’s eviction history and criminal record, as well as checking for deception and fraud. Getting a tenant that has a clean criminal record will ensure that your rental property and other tenants and neighbors are protected. If the background check reveals something minor like a traffic offense, you could overlook it. However, a murder or drug conviction should be handled with the seriousness it deserves.
A credit check looks at the potential renter’s ability to pay their obligations and bills responsibly. Candidates should be asked to submit a credit report alongside their application. This report will reveal a wide range of details including the tenant’s closed or open credit cards, late payments, monetary judgments, car payment, and more. As a property manager, you could establish a minimum credit score that tenants need to have to qualify. Having financially stable tenants means a high occupancy rate and better cash flow. Ultimately, this will lead to a better return on investment (ROI) for your clients, which should be your #1 goal.
4. Check the employment status
During tenant screening, you need to verify if the employment details provided in the application are truthful. Talk to the workplace references provided when conducting employment verification. Here are some of the questions you could ask:
- How long has the person worked at your company?
- Is his/her position part-time or full-time?
- How much do they earn?
- Is the position permanent or temporary?
To make the process easier, you could ask the potential tenant to submit recent payslips with their application.
If the tenant is self-employed, you can verify their income by asking for copies of their tax returns for the previous two years.
5. Talk to previous landlords
One of the most important steps in tenant screening is the previous landlord verification. Ask questions such as:
- When and how long did the tenant live in your rental property?
- Did they always pay rent on time?
- Did the tenant ever cause damage or trouble?
- Have you ever given the tenant an eviction notice?
- Would you rent to this person again?
6. Understand the law
Tenant screening is a very important part of property management duties. However, according to Federal Fair Housing Laws, it is illegal to discriminate against someone in the following protected classes:
- National origin
- Familial status
This means property managers cannot ask potential tenants how many children they have, what their race is, whether they are married or not, or what religion they subscribe to. A property manager’s advertising should also not discriminate against people based on the classes mentioned above.
If you don’t have the time or skill to conduct tenant screening yourself, consider hiring professional tenant screening services. Such companies use tenant screening software to screen potential tenants, and will even generate a tenant screening report for your property management company.
Looking for ways to boost your property management career? Check this out.