How to Effectively Screen Tenants

How to Effectively Screen Tenants

According to the Pew Research Center, renters make up about 36% of the nation’s 122.8 million households as of 2019. That’s over 44 million households that rent.

As a landlord looking for new tenants, you may have a large tenant pool to choose from—especially now that we’re in the least affordable homeownership market in nearly four decades.

To ensure you choose the best tenants and keep your cash flow strong, it’s important to have a robust tenant screening process in place. Otherwise, you may end up with problem tenants or need to process an eviction later down the line.

Whether you perform the screening process yourself or hire a property manager to do it for you, it should include these steps:

1. Understand fair housing laws

Before you start denying tenant applicants, you need to have a good understanding of fair housing laws.

For example, according to the federal Fair Housing Act, landlords are not allowed to discriminate against tenants based on their race, color, national origin, religion, disability, sex, or familial status.

Your state and city may have further prohibitions against discrimination. So do your homework to make sure you don’t accidentally violate the law.

2. Set minimum applicant requirements

With a sound understanding of fair housing laws, you can set minimum requirements that you want your tenant applicants to meet.

For example, you could require a certain household income level. The federal government generally defines affordable housing as housing for which an occupant pays no more than 30% of their income on housing costs, including utilities. So if you charge $1,000 for rent, you may want to require that applicants make at least $3,000 per month.

You may also want to require a minimum credit score. Credit scores range from 300 to 850, and most landlords require tenant applicants to have a score somewhere above 600.

In addition, you should think about requiring a security deposit. This is money given to you upfront to demonstrate the applicant’s intent. It can be refundable or non-refundable and may also be used to pay for any damages or lost property caused by the tenant. Just make sure you follow your state and local security deposit laws.

Similarly, you can also choose to require the first month’s rent upfront.

Other minimum requirements you can consider are bans on pets or smoking. Both represent extra risk of damage to your property and may annoy neighboring tenants. If you do allow them, consider charging more for rent.

Ultimately, setting minimum applicant requirements helps set expectations upfront. Just know that the stricter your requirements are, the fewer qualified applicants you may get.

3. Prescreen tenants with your rental listing and application

Next, create a rental listing and a tenant application with information about the property as well as your tenant requirements. That way, applicants who don’t meet your criteria or don’t want to abide by your policies will know not to apply.

Make sure to include the monthly rent, security deposit amount, and any application, credit report, and background check fees.

In the application, ask for basic contact information, employment history, gross income, previous addresses and landlord contact information, personal references, and information about roommates and pets. The more information you have, the better.

4. Run a credit, rental history, and background check

Once you receive a completed rental application, check it to ensure that the applicant meets all your requirements.

From there, you can run a credit check (with the applicant’s consent). This indicates how financially responsible the applicant is. The higher the credit score, the better. Don’t forget to look at past financial problems on the credit report as well. These could include past bankruptcies, debts, and late payments.

You can also check an applicant’s rental history to figure out how long they typically stay in one place and if they tend to hop around a lot.

A background check can also reveal a tenant’s criminal record and whether they’ve ever been in jail or convicted.

5. Speak with the applicant’s current employer and landlord

It’s also a good idea to speak with the applicant’s current employer and landlord. This is a great way to verify that the information on the application is correct and to get their opinion about the applicant.

When speaking with the landlord, ask whether they would rent to the tenant again, if the tenant ever paid rent late, if they took good care of the property, and if they have any complaints about the tenant overall.

When speaking with the employer, ask about the applicant’s work ethic, reliability, and whether they would recommend them as a tenant.

6. Interview the applicant

At this point, it’s time to meet the applicant. While an in-person interview is ideal, a phone interview also works. During the interview, verify the information provided on the application, discuss any discrepancies, and allow the applicant to ask questions.

Be careful not to ask questions that would violate fair housing laws, such as where they are from or how many children they have. Instead, ask why they are moving, when they would like to move in, how long they plan to stay, and any other relevant questions that can help you get a better sense of the applicant.

7. Review all applicants and make a decision

Now it’s time to make a decision. Choose a qualified applicant who meets all of your minimum requirements. If you have more than one eligible applicant, consider following a first-come, first-served policy.

Whatever you do, don’t settle for a bad tenant. Stick to your original requirements, and don’t be afraid to deny an applicant if they fail to meet your standards. Just make sure that if you deny an applicant, you follow the Fair Credit Reporting Act (FCRA) laws.

That’s it! By the time you finish the above screening process, you’re more likely to find the right tenant for your rental. It may take some patience, but it’s definitely worth it.