By Tracey March
If you want to minimize the risk in your property investment business, you should understand that a key to your success isn’t just buying the right investment property–it’s finding the right property management–whether that’s you, or someone you hire. And a critical component of property management is finding the right tenant for your real estate investment property, which means tenant screening should be at the top of your priority list. Here are five things you can do to ensure that your tenant screening process helps you identify the best tenants and weed out the bad ones.
1. Let applicants know that tenant screening is mandatory. Just hearing the words “screening process” will make some potentially bad renters self-filter and save you time.
2. Use your tenant screening process consistently. A systematic and comprehensive screening process that you apply objectively to every applicant will protect you if someone claims you violated the Fair Housing Act. It will also help you to screen out bad renters.
3. Decide what your minimum qualifications will be, and stick to them. Will you have income requirements so you have some assurance that your tenants can make their rental payments? Will you accept tenants with criminal records? What if they haven’t had any arrests for more than ten years and a steady job? Think about these issues, make a decision, and apply them consistently.
4. Run a credit check. Credit checks are critical. You can find out applicants’ debt-to-income ratios and whether they pay their bills on time. Learn how to read a credit report. And never accept a credit report that a potential renter brings to you; get them directly from a credit reporting company.
5. Check references. Always call present and past landlords. A present landlord may give a good reference to get rid of a bad tenant; a past landlord may be more forthcoming. Ask about evictions, complaints from other tenants, pets, major maintenance issues, if rent was paid on time, and if the landlord would rent to the tenant again. Also consider getting and checking employment and personal references.
If you don’t have the time or the desire to do tenant screening, don’t cut corners–consider hiring a property manager to help you. Alternatively, All Property Management has partnered with leading businesses, including TransUnion, to offer services to our clients. TransUnion offers a tenant screening service called MySmartMove that provides credit and criminal records checks, leasing recommendations, and suggested deposit amounts to independent property managers and residential real estate investors.
Have you screened tenants before? What methods did you use? Have you used social media sites, such as Facebook and Twitter. Do you think that’s a good idea?