Screening to Get the Best Tenants for Your Rental Property
The tenant you put into your property will directly impact the type of rental experience you have as a landlord.
That's why tenant screening is so important.
If you don't screen thoroughly, you could end up with a resident who doesn't pay rent, who damages your property, and makes you confront the real costs of eviction. You could find yourself with a bad tenant who refuses to follow the terms of the lease or engages in an illegal or disruptive activity on your property.
Who are the Best Tenants?
The best tenants are responsible, consistent, and reliable.
They pay rent when it's due, they communicate when maintenance or repairs are needed, and they meet all of the expectations outlined in your lease agreement.
They stay in place for a long time, and they treat your property as if it is their own.
How do you find these tenants?
You establish a great tenant screening process.
Familiarize Yourself with the Fair Housing Act
As a property owner, you should be familiar with the federal fair housing laws. The Fair Housing Act mandates that we don't discriminate against tenants or any rental applicant. As you may know, the law establishes seven protected classes.
You cannot deny housing to anyone based on:
- National origin
- Familial status
State and local laws are sometimes even stronger than the federal fair housing laws, so make sure you get to know any additional requirements in your specific market. Violating fair housing laws is extremely costly.
If a tenant or a prospective tenant files a fair housing claim against you, there will be a lengthy investigation process, and if you're found to have violated the law, you could be fined several thousands of dollars.
It's hard to recover from that type of mistake. So make sure your tenant screening process is compliant. We recommend that you document it in writing and follow it consistently every time.
Fair Chance Housing Ordinances
You should see if your city has a fair chance housing ordinance. Oakland's Fair Chance Housing Ordinance, for example, prohibits landlords and property managers from using criminal background checks as a way of eliminating potential applicants. This makes sense considering that many people are arrested and convicted for crimes unfairly and that having a criminal history doesn't mean you'll be a bad tenant.
Crime is a surprising landlord liability for many real estate investors. If you don't take adequate steps to protect your community or tenants from crime, you could be sued. To provide yourself extra protection, make it clear in your lease agreement that participating in illegal activity is grounds for early termination.
Include Qualifying Information in Your Listing
Writing a great listing ad is the first step of the tenant screening process. You want to be clear about your rental criteria so that only people who think they're eligible to apply.
- Always include the rental amount in your listing because you want to make sure you're only hearing from people who can afford the rent.
- State whether pets are allowed in your rental
- Make your income and credit standards clear
- Specify the move-in dates
- Make explicit the length of the lease agreement
When you include as much information as possible in your listing, you’re more likely to have the right tenant apply.
Emotional Support and Service Animals
While pet policies are essential to make clear in your rental listing ad, those policies do not apply to emotional support and service animals. These are working animals rather than pets, so they cannot be prohibited for any reason, and you cannot charge your tenants a fee for having them.
Digitizing and Automating the Tenant Screening Process
At Mynd Property Management, we take fair housing seriously, and we've implemented some processes that make it impossible to discriminate unintentionally.
Our screening process is entirely digital.
This is helpful and safe because it removes the human element, including bias, from the application process.
What Documentation Should Be Requested?
When tenants want to rent one of our properties, we ask for a current government-issued form of identification and two verifiable documents that prove income. We also ask for social security numbers to run our background and credit checks.
In many parts of the country, we get tenants who are foreign nationals. They often don't have the necessary documentation, but they do have employment letters or verifiable income that's quite high.
American companies often hire these individuals to work for them, and they're paid very well. Thus, they meet the screening standards we have in place.
Screening and Notifying Tenants
When we have the completed application and all the supporting documentation, we screen tenants and notify them of the results. This process completely avoids any bias and keeps our landlords safe from fair housing claims.
When an application is submitted and screened, there is no human interaction, so it's difficult to discriminate. Your own bias, whatever that may be, cannot slip in and impact the decision-making process when it comes to choosing a tenant.
You're looking for someone who qualifies, and this process accomplishes that.
Accepting and Declining Tenants Based on Screening Results
Our system runs a tenant credit and a criminal check through Transunion.
It also does a nationwide eviction check.
The results will prove whether the applicant meets our criteria, and we can let the applicant know that they are approved for the property they want or whether we have to decline them.
Sometimes, it's straightforward. But sometimes, there are varying degrees of results. An applicant's results may fall somewhere between a tenant we'd accept and a tenant we'd decline. So, we have the option of making a conditional offer.
What a Credit Check Tells You
A credit score check is an indispensable part of adequately screening your tenants.
- Credit reports tell you if your potential renter consistently repays their debts.
- Using a credit report, you can determine how much debt your tenant already has and compare it to their income. Using their debt-to-income ratio, you can determine how challenging it would be for your tenant to regularly make their payments.
- When you verify your applicant's income, you need to account for any discrepancies you discover. It may reveal that some of their income comes from illicit sources or may even be made-up. On average, monthly income should be 2.5 times greater than their rent and utilities.
Asking for Higher Security Deposits
If something on the applicant's credit history makes us nervous, we will ask for a higher security deposit. They get a chance to live in the property they want, and our property owners are covered in case the tenant does not perform the way we expect.
There are often cases where a person simply does not fit into the cookie-cutter formula where they can just hand over the required documents and then sign the application with a photo ID. Not every application is straightforward and easy to screen.
Integrating the Human Element in Tenant Screening
That's where the human element has to come into play. At Mynd Property Management, we have many people working in the leasing department, and we do a great job of balancing the digital element with the human element.
With our well-staffed and talented screening department, we can connect with prospects and work with them on anything that might differ in their situation. No matter what type of situation the prospective tenant is facing, we can help make things a little bit easier. With our team, many eyes will look at information and analyze data to decide if someone will be a good resident.
Sometimes, we have to be creative about collecting the required information and documentation. It might require more paperwork, and it may mean we have to make a few extra phone calls. But, it puts us in a position of being customer service oriented.
We can provide a lot of value to our tenants and our rental property owners. We don't shy away from putting extra effort into the screening process. We know it's critical, and we won't cut corners.
Cutting Down the Fraud Risk in the Screening Process
Fraud and scams are growing more and more common when it comes to rental properties. We always hear about dishonest people advertising properties that aren't theirs and then collecting money from unsuspecting potential tenants who will never get access to the property.
We also hear about tenants deceiving landlords, moving into a home under pretenses, and then staying until the sheriff has to escort them out months later.
The automated process we use can also easily spot fraud because more eyes are looking at the application. When you don't have a person trying to charm you on the other end, fraud is easy to spot. It's a digital interaction, and there are no emotions or attachments involved. The process isn't going to feel bad for someone with a story. There are no far-fetched stories about why the ID looks weird or why there's a number scratched out on the social security card.
Either something is accepted, or it isn't.
A tenant who wants to get away with something will have a much harder time doing that with our digital presence.
If something doesn't look right on the application or a blatant lie is uncovered, we move on. We don't allow potential tenants to sweet-talk us into allowing incomplete or incorrect information to be considered. We focus on the data, and we trust it.
Potential Tenant Communication Options
Usually, the tenants interested in renting one of our properties won't make a phone call. They'll text us or email us or send us some kind of message.
Then, we allow them to go through our checks and balances to ensure we only place well-qualified tenants. This reduces our eviction rate dramatically and cuts down the amount of time we spend managing bad tenants.
Keep the Tenants You Have
Every landlord has to budget for vacancies and have six months of rent saved for emergencies, but it's still best to hold onto good tenants rather than have to search for new ones. So, practice gestures that show tenant appreciation to encourage lease renewals.
- When someone moves in, have a gift basket for them. If possible, assemble it out of goods sold by local businesses. This will help connect them to their neighborhood right away.
- Find out important dates in the lives of your tenants, like birthdays and anniversaries, and send them a gift card for dinner at a local eatery. This will help them appreciate their community.
- You can make many upgrades to attract quality tenants, but you don't have to wait for a vacancy to make them! If you install new floors, renovate the bathrooms, or buy new appliances, do it while your tenants are still there to encourage them to stay longer.
- Respect tenant privacy!
- Be a responsive property manager! When tenants need things fixed, respond quickly so that they feel valued. And so that they have fewer complaints!
- Use an online portal for rent collection, communication, and announcements. This way, lost checks aren't an issue, tenants don't have to worry about their bank accounts taking a surprise dip based on when their landlords deposit their checks, and tenants can pay their rent in increments. You can also prioritize tasks and delegate responsibility more efficiently, which is invaluable for dealing with tenant requests.
- Ask tenants for feedback and make concessions when it's worth it.
Speedy Rental Tenant Turnover
No matter how well you screen your tenants or how many tips to get your tenants to renew their lease you may follow, you're likely to face a vacancy. So, make your rental tenant turnover easy with these tricks.
- Don't use carpet! It's expensive to clean. Replace it with any other type of flooring.
- Have a cleaning team you know well enough to operate without your consultation.
- Consider LED lights. They last much longer. That means there's less of a chance for your tenants to have to replace the lights themselves and damage something in the process.
- Advertise after cleaning and repairs--you always want to put your best foot forward!
Bottom Line on Screening to Get the Best Tenant
Transunion is an excellent resource for background checks and credit history. Self-managing landlords can quickly help evaluate any rental application during the leasing process.
Once we have successfully screened a tenant, we're happy to notify the tenant that the property is theirs. We welcome them into the Mynd family of tenants, and we begin to develop a respectful and positive professional relationship.
This is an overview of what we know about the application process and good tenant screening service. Remember that legal compliance is critical, so no matter how you screen your tenants, be sure you're following every applicable fair housing law for your state and city.
We look forward to working with you.
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