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If you’ve decided to be a DIY landlord, check out our complete guide to successfully manage rental property as a DIY landlord before you read our guide to Tenant screening.
Tenant screening might just be the most important step to being a DIY landlord because it has long-term consequences. It can single-handedly decide what kind of tenant will be living in your home.
That’s why you should know everything about it. Here’s a summary of what we’ll cover in this article, and we highly recommend you go through it all.
- What Is Tenant Screening
- Why Tenant Screening Is So Important For You
- A Detailed List Of Everything You Need To Perform A Tenant Background Check
- The Best Online Tools For Tenant Screening
What is Tenant Screening
In its most basic sense, you’re just checking out a potential tenant and deciding whether they’re a good fit for your building.
Although we’re going to provide a list of actions you can take for a thorough screening, there’s no cookie-cutter solution to tenant screening. It’s about whatever you can do to make sure that you have a good idea as to what your tenancy candidate is like. Do you think they’re able to pay you consistent rent on time? Do you think they’re well-to-do and will treat your property and the surrounding neighborhood with care and respect?
Everything you can do to find this information out and screen your tenant based on your standards is called tenant screening. It all begins with setting your standards. What sort of tenants are you looking for? Only you know what the perfect tenant for your property is.
Why Tenant Screening Is So Important for You
It’s very simple. Not every tenant out there is going to end up in a positive and profitable mutual experience. A lot of tenants cause trouble, and you don’t want that. Here’s a list of uncomfortable situations that arise on a daily basis for DIY landlords all over the country.
Tenants Not Paying Rent
Sometimes, tenants refuse to pay rent. That’s a bit of a rut because the main reason why you’re becoming a DIY landlord is so you can raise consistent, passive income for yourself. That becomes impossible when the tenant isn’t paying their dues on time. It’s a very difficult experience to chase tenants for rent.
When tenants refuse to pay their monthly dues, it most often results in evictions, which in themselves are unwanted and uneasy experiences. In addition to that, they’re very costly and time-consuming too.
Tenants Damaging Your Property
Here’s another big reason that you want to do a tenant check before signing a lease agreement. As a homeowner, you’d expect everyone who lives in it to treat it with the same care that you would. Unfortunately, that’s not always the case.
KEEP IN MIND that wear and tear is a normal occurrence. If the carpet needs washing or if there are some minor repairs to be done after the tenancy is over, that’s not really an issue and you shouldn’t make one out of it. In most states, normal wear and tear should be paid for by the landlord. However, negligent behavior on the part of your tenants may result in damage beyond normal wear and tear. Significant damage to the property is costly and leads to legal battles which you don’t want to be spending your valuable time or money on.
In addition to this, the wrong type of tenant will also neglect the property, leading to all sorts of damages, like water-related ones, which could threaten the longevity of the building itself.
Tenants Leading to Reputation Issues
Thirdly, a background check for tenants could help you avoid any reputation damage in the future. Tenants who don’t care about your property probably won’t care about their surroundings either. You don’t want your rental property to become notorious for housing tenants who are a nuisance, or worse yet, a threat to the public. If any illegal activities take place in your rental property, it just might lead to long term consequences which could make it difficult for you to find any law-abiding and proper tenants in the future.
With all that being said, it should be apparent why a tenant background search is imperative for a positive DIY landlord experience. Don’t worry, though. We’ve got a detailed tenant screening checklist that will show you how to do a background check for tenants.
A Detailed List of Everything You Need for A Tenant Background Check
So what does a rental background check consist of? Here are the basic steps that you’ll need to take for a thorough background check for renters:
Tenant Credit Check
It’s pretty easy to learn how to run a credit check on a tenant. All you need is some basic information like their name, address, and social security or ITIN. You can get your credit check from any of the three main credit bureaus in the country:
They all provide credit checks for tenants and you’re unlikely to run into any issues. They even have their own tenant screening programs if you’re interested.
If you are unsure whether you are in compliance with the requirements regarding the collection of sensitive information like a tenant’s social security number, you can also use third-party services like TurboTenant. All you will need to do is create an account with them, and they will guide your tenant through the rest.
You’re within your rights to ask your tenancy candidates to pay for their credit checks. It could actually get a little costly if you pay for it yourself since … well, a credit check can cost up to $40 a pop. Sometimes, tenants will have printed out their credit checks in advance, but it’s entirely up to you if you want to get a fresh credit check.
Once you have the credit check, the main identifier you need is the tenant’s credit score. It’s common for property managers, for instance, to accept applicants with a score higher than 500, and as a general rule, the higher the score is, the better.
Tenant Criminal Background Check
Next, you’ll want to go over any criminal background that your tenant has. However, a word of notice is in place here. It is illegal in some states to discriminate on grounds of criminal history. Furthermore, it is also illegal to run a background check on a tenant applicant without their signed consent.
If you decide to run a criminal background check on your applicants, please make sure to obtain written consent beforehand. Many (but not all) rental applications have the verbiage through which the applicant gives permission for a background check. That being said, we recommend caution and careful consideration of tenant applications, in order not to discriminate against applicants based on criminal history.
As for providers, you can get a criminal background check from various services, like the American Apartments Owners Association, or TransUnion’s SmartMove. In most states, you should have your results immediately, although you might be required to pay in some.
Tenant Income Verification
It’s important to make sure that the tenant actually holds the job that they jotted down on their application. You NEED to make sure that they’ll be able to pay their rent on time, of course.
First off, you should have a rough estimate of how much your tenant must be making each month to qualify for your property. If they have at least 2-3 times the monthly rent they’ll pay, then they should be a good match.
Here’s what you can do to verify your tenant’s income:
- Ask them to provide several pay stubs in order to attest to a steady income. This should have most of the information you need.
- A W2 Tax form is good to have and will confirm what your tenant has to say.
- A quick phone call to the tenant’s employer is all you need to seal the deal.
Once you’ve taken care of the tenant’s credit and background check and verified their income, there’s little more to worry about. You should be ready to welcome your shortlisted candidate into your home!
Set yourself up for success with the HomeVault Tenant Screening Checklist, an easy to follow, step-by-step process of everything you need to do when searching for a tenant, from receiving applications to selecting the perfect tenant and signing up the property management agreement.Download
The Best Online Tools for Tenant Screening
Finally, we’ll brush over which online tools you can use to perform tenant screening. It becomes an absolute chore if you do it manually — it’s almost impossible to screen lots of tenants by yourself.
We have a separate blog post on the best tools you can use for tenant background checks, so make sure you read it. We’ve reviewed and listed them for your convenience. In the meanwhile, here’s a short summary of our favourite tenant screening tools:
- Rentberry: The most attractive feature of Rentberry is that they provide free credit checks. They also have lots of other features that landlords can find attractive like rent collection and negotiation. Rentberry gets reports from Experian.
- Rentme: Like Rentberry, Rentme offers free credit checks. We know that a lot of landlords would rather not spend money on these checks as they’re not looking for anything too extensive and don’t want additional features. Rentme works with TransUnion to provide reports.
- RentPrep: This company doesn’t use software for its background checks, but rather employs professionals who do their research manually. This allows for a LOT more accuracy. Basic checks cost $18.95. It’s worthwhile to note that RentPrep offers lots of discounts for landlords with over 50 properties.
- SmartMove: TransUnion has its own tenant screening program, and a basic check costs $25. It’s a great resource for landlords who want a quick background check. However, SmartMove background checks aren’t available in some states, like Delaware, Washington D.C., and Hawaii. It does make delegation of these background checks very simple, though.
- First Advantage: Basic background checks by First Advantage cost $25, and they have a wide array of features that would definitely make the lives of paying landlords a lot easier.
If you want a detailed comparison of these tools, visit our blog post where we discuss their pros and cons, features and benefits, and recommend them based on your personal needs. Also, if you’re interested in online tools that could help you manage your rental property in general, we’ve reviewed some great products here.
Tenant Screening for DIY Landlords
It’s not easy to do a manual tenant screening, but not all aspects of it can be automated. It can be time taking, and inexperienced DIY landlords are likely to make mistakes.
That’s why we offer tenant screening in our property management packages. We screen tenants for you automatically and select the best ones to reside in your rental properties. You don’t have to worry about the process. Feel free to visit our website to check out our property management offers.
Here’s A Short Summary
- Tenant screening is performing background checks of potential tenants to make sure they fit your standards for tenants who can live in your rental property.
- It’s important to screen tenants as not doing so can result in troublesome tenants who can cause legal issues, monetary losses, and a bad reputation for your property.
- Tenant screening comprises credit checks, criminal checks, and income verification.
- Some good online tools for tenant screening are Rentberry, Rentme, RentPrep, SmartMove, and First Advantage.