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Comprehensive Tenant Screening - HOWTO Guide

One of the most important steps a landlord can take to protect their property, cash flow, and sanity is to properly screen tenants prior to placement. Failing to properly screen a tenant can result in any or all of the following problems, all of which are far more costly than a tenant screening report. Be warned, this is a meaty document; it's not your typical "3 simple steps" report, but it is a comprehensive guide to making the best possible screening policies. The two minutes it takes to read and understand it are well worth the time for serious property managers and landlords.

Problem 1: Tenant has had past evictions, and run landlords through the court system numerous times costing landlords thousands, to tens of thousands of dollars in lost rent. Generally a tenant frequently delinquent on rent if uncollectable, so the landlord who takes this tenant stands to lose a great deal of money both in lost rent and legal fees.

Problem 2: Criminal activity. Criminal activity in a rental property can lead to significant damage to the property, irritated or irate neighbors, case civil suits from neighbors or renters for landlord neglect. Worst case would be liability which can extend in to the hundreds of thousands of dollars, perhaps even more if somebody gets hurt, for an action by your tenant which could have been prevented with proper screening.

Problem 3: A history of poor credit decisions and late payments can indicate how a prospective tenant may treat you, their new landlord, with the same late payments, bounced checks, and other financial woes. Many landlords count on the rent arriving and clearing in order to pay the mortgage payment. Statistics show that renters with past delinquencies are significantly higher risk to have future delinquencies than those with better credit.

You can protect yourself from these common problems by taking a few simple steps to verify the eligibility of the tenant prior to placing them in your property. This is a guide explaining best practices with resources to get you started today.



Step 1. When you have a vacant property or unit the first step is to get the word out through whichever means you find works best. To some this is the local classified, craigslist, or other online rental databases. When placing the ad, provided you are not limited by wording it is best to keep those who would not qualify from calling in the first place. This is done by announcing within the ad the qualifications and screening process. This often costs nothing and can save you quite a lot of time showing the property to unqualified applicants. It can be very simple and those who know they would fail any of the listed criteria won't call in the first place saving you quite a bit of time. Here is an example message following an ad:

Tenant references, background, and eviction history will be verified.



Step 2. Be sure your application packet includes wording to give you permission to verify the information they provided. The FCRA stipulates you must have permission from a prospective tenant in order to run a background check on them. The best permission is written permission. Be sure to check with your local state guidelines and verify the application form you provide meets any local regulations. Most states allow the collection of an application fee to cover your reasonable cost in processing their application, including your costs to run background checks. Reasonable costs vary from state to state, but generally range from $25 to $65. Check to see what other local property management companies charge, and set your rate near there's to be safe.



Click here to download a sample application form.



Step 3. Credit, state and national criminal, and nationwide eviction records are best obtained from a trusted source and all can be returned instantly. The simplest way to obtain these are via an online source which can take your order, query the necessary databases, and return the results to you right away on your computer screen. Your cost for a credit report should be no more than $15.00, nationwide criminal, around $10, and eviction searches also around $10. For reference, as of December 2010, Rentec Direct's tenant screening division offers the following discounted rates to members:

  • TransUnion Credit Report: $8.95
  • Nationwide Criminal Search: $8.75
  • Statewide Criminal Search: $6.00
  • Eviction Search: $8.50

Rentec Direct provides these products as a service to property managers and landlords near cost to ensure the success and well being of landlords within our care.

Step 4. Verify references. Tenants who have created problems for past landlords generally do not get good references. Taking 10-15 minutes to verify references is always a worthwhile effort. Previous landlord references are generally far more valuable than personal references. Always require the tenant provide previous landlord contact information. If there is a gap in periods of time, it probably means there is a landlord they do not want to list and that is important to follow-up on. If the tenant is of age 22 or older and claims to not have had a previous landlord, be sure to verify that fact with the parents.

Step 5. If it's within reasonable distance, drive by their current address and observe the current condition of the property they rent today. The state of that property is going to be very similar to how your property is treated. Likewise, when showing them the property, take a look inside their car to get an idea of how well they take care of their possessions. Generally speaking a renter will take better care of the car they own, than the property they rent. If the inside of the car is a mess, you can be sure your property will look the same or worse very soon.

Step 6. Be fair and treat everyone equally. Virtually every state requires landlords to maintain equal criteria regardless of age, race, religion, or any other status. Set your criteria in advance on what you are willing and not willing to accept for your rental and use that same criteria throughout the applicant process. Any unfair actions by treating one person differently from another are often against the law.

Step 7. Finally, before the tenant moves in, take pictures or video of the condition of the property. Even the best screened tenants have accidents, or visitors who can cause damage. It is vital that you have a permanent backed up record of the condition of the property prior to move-in. It's best to store this data in a safe location such as online secure file storage to ensure they are never lost and readily available if needed.

If you have any questions about these steps, best practices for screening tenants, or anything else related to property management, feel free to contact the property management experts at Rentec Direct for answers or pointers whether you are a customer or not. If we aren't able to directly answer or help, we'll point you to somebody that can.

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The author is a founding member of Rentec Direct. Rentec Direct ¬†provides which includes ach for landlords, tenant screening, and online documentation and file storage. While the above article may speak of products we offer or use screenshots from a product we offer, we encourage landlords to do their research and make up their own minds when selecting a new product. That said, we of course welcome ActiveRain members with open arms.

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