10/06/2016
Tenant Screening 101
The best way to handle horrible tenants is to make sure they never move in.
This guide will show you how to screen tenants effectively.
Time is limited, and you want to balance screening properly VS speed.
You don’t want to spend weeks amassing every detail on a potential tenant and lose out to another landlord with a more efficient process.
The most important thing you’re looking for is “Is the applicant able (and willing) to pay rent”
Hence the following 3 criteria:
Their income is 2-3x Monthly Rent. If they have a lot of debt, 3x is preferable.
Steady Job or Income. If the applicant doesn’t have a steady stream of income, you’ll need to have a qualified co-signer.
Are they responsible. AKA Will they blow their paycheck on the latest iphone before they pay rent?
The Screening Process
1. Phone/Email Interview
Try to have an initial discussion with an applicant first via phone or email. This can save you both time if you spot any red flags.
Things like “Can you waive the deposit or can I go month to month” are deal breakers.
Ask the following questions:
Why are you moving?
Do you have a job?
What is your monthly income?
When is your ideal move-in date?
How many people will be living in the unit with you?
Do you have any pets?
Will you be able to provide the security deposit when we sign a lease?
Can you provide references from your two former landlords?
Will consent to a credit and/or background check?
Have you ever been evicted?
If things sound good up to this point, you can setup a viewing.
2. Viewing The Property
This is a good opportunity to meet the tenant and get a feel for them.
Let them do most of the talking.
Asking open ended questions (and giving them plenty of space to respond) will reveal a lot of info.
You can ask some of the same questions from the phone/email interview and see if there’s any contradictions.
Furthermore, you can ask them “What they think about their current employment” to see if they’re about to quit their job (and put you in a tough spot)
If everything looks good, time for the potential tenant to submit an application.
3. Applications & Verifying ID
Paper application forms are still the norm, but software like Cazaloop.com make it super simple to collect & manage application forms electronically. (AKA no paper, just online forms!)
You can just bring an ipad and have the tenant fill it out on the spot.
You always want to check the photo ID of the applicant (government issued preferably). You want to make sure the person applying is who they say they are.
Check their social media. Facebook can reveal if they are a party animal, have 8 cats that are clearly theirs (when they say they have no pets) etc.
Also check LinkedIn (tends to have employer, job title and timeline). You can also do a Google Search, but beware, many people can have the same name.
You don’t want to assume, so you need to confront the applicant with the newfound information.
Also, any lies submitted via your application allows you to disqualify that applicant.
4. Ask for Proof of Income/Employment
Ask for the two most recent pay stubs in order to verify income and place of employment.
You’ll get the following info out of it:
Applicant Name
Their Address
Employer’s Name
Income (Monthly)
YTD Earnings
They can scan it and email it to you.
With this info, you can ensure that the income is 2-3x.
You can also email their work email to see if it’s valid.
5. Check Landlord References
You want to ask the following questions with the two previous landlords. (Two landlords since the current one can’t answer some of the questions)
Were there any late or partial payments? If this happened more than once, I would deny the application.
Were there any noise complaints? Are they party animals or upstanding members of society.
What were the start and end dates of the lease? This esnures you’re talking to the landlord and not the person’s brother. It allows you to spot any discrepancies.
In what condition did they leave the property? If they demolished the last place, guess what will happen to yours?
Did they threaten or try to sue you? If the tenant took them to court when, say, the deposit was rightfully withheld, you might want to pass on them.
Would you rent to them again? This single question sums it up. If it’s anything but a resounding “Yes!” then beware.
6. Credit Report & Background Check
Assuming everything is good up to this point, you want to review a recent credit report and scan for red flags when you compare it to what they said on their application.
You can use sites like Equifax to run a credit check . It will cost you a fee, which you can pass on to the applicant (make sure you state this upfront in the initial conversation).
Here are the criteria you’re looking for:
No Evictions, period. If they lost an eviction case, it means they remained illegally in possession of the property. That’s bad business.
Credit score above 650+
Income is 2-3x income
No or low credit card debt
No violent/destructive crimes ever
Recent convictions must be reviewed
Also, check the S*x Offender Registry.
Depending on your country/state/province, check the appropriate website or office. You do not want a ra**st in your unit, it’s bad for business.
Business
Sometimes, you might have only risky applicants to choose from.
In that scenario, you might want to require a larger deposit, have automatic payments setup, require a co-signer or even require a lump sum payment of all the rent (more applicable if it’s a short term lease, like 4 months)
At the end of the day, it’s a business decision.
