Investment properties can earn property owners a lot of money. It can also cost them a lot of money if they choose the wrong tenants. For this reason, it is important to properly screen every potential renter.
Choosing not to perform tenant screening reviews often leads down a road that can be financially and legally troublesome. Removing someone from your property isn’t as simple as placing a notice on the door or changing the locks. Tenants have protections under the law, and a bad one is well-versed on what they are.
While you’re trying to evict someone they could be living rent-free and causing extensive damage.
Are you about to market a rental property? Keep reading for nine warning signs on how to screen a tenant properly.
Why Tenant Screening Reviews are Important
Tenant screening reviews is the process of thoroughly reviewing prospective renters. It is important that property owners are consistent in their review process. Each applicant must go through the same questioning and complete the same application.
There are various state and national laws that govern rental properties. Housing discrimination laws prohibit denying access based on race, nationality, gender, religious or sexual preferences.
Before venturing into property management take some time to consult with a real estate attorney. They can review your application, rental, and eviction processes to ensure you are operating within legal guidelines.
1. Criminal Record
Having a criminal record is not always a precursor that someone will turn out to be a bad tenant. People go through periods in their lives that may land them in trouble. Many serve their time and return to society to become upstanding citizens.
What you want to look for is the reason someone rent to prison. Was it a one-time thing or have they reoffended on numerous occasions?
The length of time someone has spent in prison versus how long they have been out is also a key factor. Renting to someone who spent five years in jail for drug offense 20 years ago is different than someone released five months ago after serving 20 years for armed burglary.
It is not illegal to deny a rental opportunity to someone who has been convicted of a crime. However, there are pros and cons for landlords to consider.
2. Poor Credit
Does a person with poor credit mean they don’t pay their rent on time? Not necessarily, but it is a red flag that should not be overlooked. One thing you can do is set a threshold on what is the minimum score a person can have and still be considered for a rental opportunity.
Bad credit is considered any score in the low 600s or lower.
Remember you must be consistent with all renters to protect yourself. Pull a credit report on all applicants. Immediately deny any applicant that does not reach the threshold that you have set.
You have the right to request someone with questionable credit have a co-signer. This person will be financially and legally responsible if the tenant defaults.
If you are someone who is easily manipulated by a sad story, consider hiring a management property firm. They can screen your applicants and send you screening reports of the best candidates.
3. Prior Evictions
Past behavior is a good indicator of future behavior. If you learn an applicant has been evicted in the past, tread carefully. Investigate to find out how many evictions and how long ago.
Chances are a person with multiple evictions and a recent eviction is not going to be a good tenant. However, unpaid rent is not the only reason someone could be evicted. When considering someone with evictions on their record, it is important to understand the reason why.
Here are some examples of different situations.
- It was a roommate situation and the roommate failed to pay
- The person was evicted as the result of a failed relationship
- The person violated tenant rules by having a pet
- The eviction was due to unpaid utilities
- The property owner was foreclosed on and didn’t notify the tenant.
4. Previous Foreclosures with a Bankruptcy
This could be a blessing or a curse when it comes to tenant screening reviews. A foreclosure differs from eviction in that the person once owned the property they were legally forced to relinquish.
Foreclosure is almost always about financial problems. However, those financial problems could be situational problems that occurred in a person’s life. These can include divorce, a health crisis, the death of a spouse, or a job loss.
Someone who experienced multiple foreclosures probably does not manage money well. If the person is going into foreclosures or filing bankruptcy to cancel debt this is a serious red flag.
Check to see when the last filings were made. A person can file for personal bankruptcy more than one time and some people make a career of it. In personal bankruptcy cases, the maximum time between filings is 8 years in Chapter 7. However, it can be as little as 4 years between a discharged Chapter 7 and a new Chapter 13, or 2 years between Chapter 13 filings.
5. Unsteady Work History
A person with an unsteady work history may have trouble paying rent or paying rent on time. Trying to evict someone like this is difficult because by the time the case reaches a judge they have gotten caught up on the rent. This will make it harder for the judge to side with you.
Carefully review their work history to determine if the issue is beyond their control. Someone laid off because of last hired first fired is a real thing, but not in a good economy. Look at the type of work they perform and their employment longevity in the past two years.
Charging a sliding late fee could be a solution to your troubles. A person late five days pays a set fee. The late fee increases each day thereafter.
6. Need to Move in Quickly
Tips for screening a tenant include future behavior. If someone says he or she needs to move as soon as possible it could be a sign that they are about to be evicted from their current location. You do not want to inherit another landlord’s problem tenant.
In this instance, you want to speak with the last property management company or property owner to get a reference.
There could be other issues resulting in someone needing to move quickly. It is important to get verifiable details. You do not want someone bringing problems to your location.
7. Asks You to Forgo a Formal Screening
The biggest red flag to come up in tenant screening reviews is the person who wants you to forgo a formal screening. This is a clear sign there is something that will come up in their background or credit check.
It can also mean the person isn’t who they are purporting to be. Let the applicant know that under no terms can you allow them to have the property without providing government-issued identification. Nor can you bypass a criminal and credit background check.
You also do not want to get into a situation where someone is attempting to get a rental in someone else’s name. This is different from having a co-signer. With a co-signer, both applicants undergo the review process.
Allowing someone to move into your property without doing a proper screening can potentially leave you legally liable if something bad happens.
8. Doesn’t Have References
References are good to have in cases where an applicant doesn’t have perfect credit or a solid work and rental history. Tips for screening tenants include getting at least three references. These should include at least one professional and one personal reference.
If you’re lucky it can include their past landlord.
A person who cannot get at least one person to be a character reference is like pulling up to a red light. You need to stop immediately. The refusal to perform such a simple task means the person has some serious flaws.
Keep in mind that you’re not just renting a place to an individual. You’re also bringing this person into close proximity to other tenants or neighbors.
9. Can Only Pay in Cash
In today’s technologically driven society leasing offices are moving away from receiving cash payments from tenants. They have online systems in place that allows renters to pay online.
Having someone say they are unable to pay in any form except cash is cause for concern. Employers are even moving towards paperless payroll and requiring direct deposit or electronic funds transfers to a debit card.
Someone demanding to only pay in cash could possibly be living under the radar and shirking other legal or financial responsibilities
Carefully Screen New Tenants
Finding the perfect tenant doesn’t have to be a prolonged procedure when you know the red flags to look for in the tenant screening reviews process. Utilizing a reputable screening service is the way to go when you’re serious about the selection process.