September 11, 2018
If a property management company has marketed a property effectively, they will soon have a stack of applications to review and a number of potential tenants. From the list, a professional property manager will begin the tenant screening process to assess the likelihood that a tenant will fulfill the terms of the lease agreement and take care of the rental property. There are four basic questions that need to be answered about a prospective tenant in order to determine if they are a good fit for the property. Using a thorough tenant screening process, property managers reduce the risk of property damage, lost income, or eviction.
A thorough tenant screening process will answer the following four questions about a prospective tenant:
1. IS THE APPLICANT WHO THEY SAY THEY ARE?
The screening process begins with identifying and confirming who the applicant is with the prospective tenant’s:
Government Issued Identification
Social Security Number Verification
Not only does an ID confirm the most basic information about a tenant and help prove who they are, but the information it provides also builds a foundation for the rest of the screening process. After all, if their ID and SSN are fake or incorrect, no other information about the person can be relied on as accurate.
2. DOES THE APPLICANT HAVE A HISTORY OF PAYING THEIR BILLS?
Past behavior is the best predictor of future behavior and if an applicant has a history of late or unpaid rent they are a financial liability. Good property owners are wary when background checks display a pattern of reckless behavior and difficulty honoring financial commitments. A few things property management professionals like to check to verify financial history and make sure the tenant does not have a history of unpaid debt, missed rent, or eviction include:
TeleCheck Check Verification
Previous Address Tenant History
Public Records Search
National Eviction Search
3. CAN THE APPLICANT AFFORD THIS PROPERTY?
Whether a property is affordable or not depends on the resources available to the renter. Property managers want to make sure tenants have some kind of stable income so they can make rent a part of their regular budget. As a rule of thumb, rent should not exceed roughly a third of a tenant’s income. Admitting tenants who do not meet this criteria increases risks of missing rent and eviction. To verify income, property managers will want to run these tests:
Pre-screening Income Qualification
4. WILL THE APPLICANT BE A GOOD RESIDENT AND TAKE CARE OF THE PROPERTY?
Beyond financial standing, property managers will look into a tenant’s rental and legal history. The following sources provide essential information, such as criminal history, needed to assess any potential risk associated with placing an individual in a rental property.
Previous Landlord Verification
National Criminal Search
National Sex Offender Search
International Terrorism Database Search
TENANT SCREENING THAT COVERS EVERY ANGLE
A wise property manager will always be sure to meet applicants in person before signing any lease agreements. Meeting in person completes the picture of the tenant the property manager has been building throughout the screening process, gives both parties an opportunity to ask questions, and even reduces tenant fraud since rental scam artists want to avoid meeting their marks in person.
It is important that property owners understand that federal law requires property managers to follow the Fair Housing Guidelines when accepting and denying applicants for rental properties. These federal guidelines mandate that all applications are processed without regard to the race, color, religion, sex, handicap, familial status or national origin of the applicant. A property manager that violates fair housing law out of disregard or ignorance is placing themselves and their clients at risk of a lawsuit.
To find out more about how effective tenant screening protects your investment contact your local PMI property manager.
If the property manager is satisfied with the results of their screening process and ready to move forward with lease signing, that doesn’t mean every detail has been resolved. Collecting rent is a factor all its own, and the decisions an owner and property manager make about rent collection will affect them and their tenants throughout their partnership.